During the last half-decade or so, the real estate industry has seen the emergence of many transaction options. One of the most popular new choices is the “cash offer” or “iBuyer” model, which makes almost immediate offers to home sellers, offering them less stress and more ease.
The past five years or so has seen the emergence of new and innovate ways to buy, sell, rent and invest in real estate properties. Often times referred to as “disruptors”, a plethora of real estate/tech start-ups and dot-coms has taken the industry by storm. Of these, the cash offer option for home sellers is experiencing rapid growth.
Also referred to as “iBuyers” or “direct home buyers”, these companies specialize in giving home sellers a quick and easy option to sell their property.
How Cash Offers Work
Most cash offer business models operate along these lines: the consumer fills out and submits info about their home online, and then the company replies to them within 24-48 hours with an offer (based on neighborhood comps and property tax records). If the seller agrees, the closing date is set and the deal is done—easy peasy!
There are other details, of course, but the main benefit for sellers is the absence of middlemen (agents and their commissions), with a focus on less hassle and headaches, and more timeliness and convenience. Think of it as the CarMax of real estate sales.
Of course, much like CarMax, the trade-off for all the speed and ease and lack of Realtor involvement is receiving a bit less than market value for your home, and there is also a customer experience fee tacked on. These companies aren’t non-profits, folks!
However, a growing number of consumers find the convenience of not dealing with home prep, stagings, and walkthroughs to be well worth the small percentage of home value they are surrendering.
Take our Home Seller Quiz and we’ll help determine what option is best for you and your situation.
Here’s a closer look at each of the major players, in alphabetical order, in the iBuyer/cash offer real estate space…
Knock hit the tech/real estate scene in 2015, garnering lots of buzz because the businesses co-founders are made up of Trulia and Yahoo Real Estate founders. Those are some major industry credentials, to say the least!
Knock is a bit unique when compared to some of the other cash offer companies. Their major point of differentiation is the ability for a consumer to move to a new house, BEFORE selling their current house.
Described by themselves as “a radically better way to buy and sell real estate”, Knock flips the traditional real estate process on its head. They help you buy your new home, and then you begin the process of selling your previous home. Being empty at that point, your old home is easier to repair and show, plus there’s no need for staging. And if either your new or your old home needs repairs, Knock takes care of that, too.
The entire operation is also guided by a team of local real estate specialists (who are not paid by commission), who help each client through each step of their process. This hands-on, human touch is very much appreciated by their customers, according to third-party testimonials.
Knock combines data science, out-of-the-box thinking and local/human real estate expertise to offer homebuyers and sellers a never-before-seen option when it comes to real estate transactions.
Established in 2014, and currently operating in 13 cities across the nation, Opendoor’s main focus is simplicity and ease.
The real estate/tech company has successfully taken a very complicated process (home selling) and made it a simple, seamless experience. They’re basically mirroring the same tech/business models that boil down transactions to a few button-clicks on a smartphone. Think Uber, GrubHub or Airbnb.
Opendoor enables its clients to sell on their own timeline without ever listing their property on the market. No stagings, showings or months of uncertainty.
How does Opendoor do it? They determine the value of your home (through neighborhood comparables, property tax information and a bit of machine learning) and then make a fair offer to purchase it. Opendoor also charges a single service fee that enables them to “provide an expedited experience from offer to the closing”, aka “make a profit.” The charge averages around 6.7% and caps out at 13%.
They also offer the Opendoor Trade-In program, where customers can choose any home on the market (not just an Opendoor home), sell their current home to Opendoor, and close on both homes in the same day.
Offerpad was one of the first to enter the direct homebuyer, cash offer market when it launched back in 2014. From day one, their company goal has been to reinvent and challenge the traditional real estate transaction process by offering convenience, control, and certainty.
Offerpad accomplishes this by removing home seller stress and uncertainties such as stagings, showings, contingencies, and deals that fall through.
The OfferPad product and experience aim to reduce the challenges and unknowns for home sellers. With its offering, sellers no longer have to worry about timing when selling their home or having to deal with surprise house showings to strangers.
And should renovations be necessary to get the home buyer-ready, the seller doesn’t have to manage contractors or shell out cash for improvements—OfferPad takes care of it, giving home sellers the ability to move without worries or hassle.
They also offer great flexibility when it comes to timing the closing date and when the seller has to move. Their “Extended Stay” program is sort of like a late hotel check out for closing on a home. If your new home isn’t ready, it’s no problem. There’s no need to rush or move twice or move your things into storage. Offerpad allows you up to three days to move to your new home.
Speaking of moving, Offerpad also throws in an extra nice incentive for using their business—they pay for your move! That’s right, sell your home through Offerpad and they will cover the cost for you to have a professional moving company move you.
Perch, founded in 2015, directly buy properties from home sellers in the San Antonio, Texas market. The company has also recently secured 30 million in investment capital, ensuring that it will begin servicing new markets in the near future.
The company’s philosophy is that the traditional real estate process is ripe and overdue for a change. The way consumers buy and sell everything has been streamlined and digitally simplified (even automobiles!), so why not real estate? Instead of an anxiety-laden experience that can take months, Perch offers a modern alternative to home selling.
Perch’s mission as a company is to take one of life’s biggest monetary transactions and make it less intimidating. True to the iBuyer model, Perch connects with customers online, makes them a “market price” offer, then closes the deal free of things such as home repairs, showings, and deal-breaking contingencies.
With its discount-meets-tech approach, Redfin has already established itself as an emerging leader in the “discount” brokerage/agent model. Now, the company is throwing its hat into the direct home buying ring by introducing “Redfin Now.”
This fairly new division of Redfin was market tested in California last year: the Inland Empire area east of Los Angeles in first quarter 2017, expanding to the San Diego real estate market in June of 2017, with eyes on Orange County and more in the future.
Redfin Now works like most cash offer businesses. Home sellers fill out a form, Redfin comes back to them with an offer within 48 hours, the seller agrees and closing happens fast.
Redfin believes their years of experience with technology and online real estate, coupled with expert, local agents can give them an edge in the burgeoning “iBuyer” segment.
Zillow, the online real estate listing and information giant, is entering the direct home buying market with “Zillow Instant Offers.” The service is currently available in Phoenix and Las Vegas, with plans to expand in the works.
Putting control of the sale in the customer’s hands is Zillow’s goal and it seems that the ball is completely in the seller’s court with Zillow Instant Offers. Once sellers receive their cash offer, they are also followed up with by a visit from a traditional real estate agent. The agent will then share a CMA (Comparative Market Analysis) on the seller’s property, so they can compare it to the Zillow offer. This gives sellers peace of mind to help them make their decision.
By including agents in the process, Zillow Instant Offers differs slightly from some of the other “iBuyer” players. A move Zillow feels will help sellers feel more comfortable and confident with the process as a whole.
The Cash Offer Option For Home Sellers
More ways of buying and selling real estate emerge each day, including the cash offer model. To keep up with all the new options, visit Sold.com today. Take our Home Seller Quiz and we’ll help determine what option is best for you and your situation.