Skip to main content

Convenience at a Cost



The convenience of selling your home without the hassle of getting it ready, putting it on the market, showings, open houses, negotiations and repairs comes at a cost ... a significant part of your equity. 

The companies, referred to as iBuyers, that buy homes from sellers are for-profit organizations.  They expect to make a profit from sellers who are willing to discount the proceeds they'll realize as an alternative to the conventional method of selling a home for people who need a quick sale.

The promotions for these companies generally state that you can receive a cash offer in a few minutes after putting your address online.  The discount can be between 10 to 18% compared to normal selling costs from 6 to 9%.   The cost to a person with a $100,000 equity could be as much as ten thousand dollars.

Even after you have accepted an offer, there can be contingencies in the contract that allow the company to inspect the home to discover the condition and reassess the offer to possibly make even more deductions.  If the seller isn't willing to accept them, the buyer can withdraw from the sale without penalty.

This appears on the surface to be a friendly, accommodating service but it can be an adversarial situation.  The seller wants to maximize their proceeds and the buyer wants to buy it as cheap as possible.

Compare this to working directly with a real estate professional acting as your agent.  They have to put your interests above their own.  They have a fiduciary duty of care, integrity, honesty and loyalty in their dealings with you.  Other duties include confidentiality, disclosure, obedience and accounting to the seller.

In this traditional model, your agent will provide you with the facts of what homes have sold for in the area and their opinion and recommendations on what the most likely sales price will be.  Your agent will provide you an estimate of the sales expenses based on different sales possibilities. 

They can advise you on work to be done prior to putting the home on the market, staging so your home will show at its best and estimate the time it will be on the market.  Based on low inventories in some price ranges, it could be surprisingly short.

As an owner, you made an investment in your home in cash and maintenance.  You are entitled to maximize your proceeds based on the risk taken to purchase a home instead of renting.  The convenience of a quick offer has a cost to it.  You need to compare the two alternatives to see which one benefits you the most based on your individual situation.

For more information, download the Sellers Guide.

Comments

Post a Comment

Popular posts from this blog

Make Your Home Offer the Most Appealing

Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot.   The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago. "Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�. It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.   The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation. Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.   Include the written pre-approval letter along ...
Post a Comment
Read more

Cash-Out Refinance

With the rapid appreciation that homes have had in the last two years, most homeowners have equity.   A common way to release part of the equity is to cash-out refinance but some homeowners may not be eligible currently. This type of loan replaces the current mortgage by paying it off and an additional amount of cash for the owner.   Generally, lenders will consider a new mortgage up to a total of 80% of the current value. Typically, the rate on a cash-out refinance will be slightly higher than a traditional purchase money mortgage.   As is in any lending situation, the rate depends on the borrower's credit and income.   The best interest rates are available to borrowers with higher credit scores, usually over 740. Loan-to-value can affect the rate a borrower pays also.   A 70% loan-to-value mortgage could be expected to have a lower interest rate than an 80% LTV because there is a larger amount of equity remaining in the property and therefore, less risk ...
Post a Comment
Read more

Getting Comfortable with the New Normal Mortgage Rates

The biggest shock to homebuyers is the soaring mortgage rates of 2022 that doubled in one year resulting in approximately 15 million mortgage ready buyers displaced from the market due to affordability issues. As of February 23, 2023, the 30-year fixed rate mortgage was at 6.5%.   While that is twice as high as it was on January 6, 2022, it is still lower than the 7.75% average rate since April 2, 1971, according to the Freddie Mac Primary Mortgage Market Survey. When rates increase at a rapid pace like this, it takes time for the public to adjust and begin to accept it as the new normal. Prior to the housing bust that led to the Great Recession, the normal for mortgage rates was in the 6% range and existing home sales were over 6.5 million for three years.   From 2007 to 2014, home sales were closer to 5 million with 2008-2011 at just above 4 million annually. From January 17, 2008 to March 5, 2020, mortgage rates averaged 4.32%.   In this 12-year period...
Post a Comment
Read more