Kim Bass: Study Says It Costs Sellers More To Work With iBuyers

Wednesday, October 2, 2019 - by Kim Bass, president, Greater Chattanooga Realtors
Home sellers who choose to sell directly to an iBuyer, such as Zillow or Opendoor, often end up paying higher fees than if they sold the traditional way with a Realtor, according to a new study by Collateral Analytics, a real estate analytics firm. Recently Realtor Magazine examined some of consequences of sellers who utilize iBuyers.

iBuyers provide instant cash offers and quick closings, which are perks that are hard for sellers to ignore. Transactions involving iBuyers have been growing at a clip of more than 25% annually in recent years.
But how profitable is it for sellers who choose this expedited route to a sale? The answer hasn't been clear since iBuyers first surfaced in 2014 with the launch of Opendoor.

As of this summer, most iBuyer transactions nationwide occur in Phoenix, but these companies also operate in Las Vegas, Atlanta, Denver, Charlotte and Houston. Yet it’s important for the Greater Chattanooga market to take note that Zillow has recently expanded its iBuyer service to Nashville.

Collateral Analytics, in a white paper, looks to quantify the costs to sellers of working with iBuyers versus taking the traditional route of working with a real estate professional. Researchers estimate that sellers end up paying between 13% to 15% more when working with iBuyers. The percentage reflects differences in traditional real estate agency fees, as well as an allowance iBuyers often request for repairs and an additional 3% to 5% to cover the iBuyer’s liquidity risks and carrying costs. “Most iBuyers will inspect the home, assess a generous home repair allowance, and negotiate (an additional) credit to handle such repairs,” the Collateral Analytics report notes.

However, some iBuyers take on other costs that most traditional buyers wouldn’t. For example, companies such as OfferPad offer to pay the costs of a seller's move up to 50 miles away. iBuyers may also allow a grace period after closing for the seller to vacate the property.

The report also notes that the iBuying model could make properties vulnerable to several financial risks, such as the use of automated valuation models that could inflate property values. Also, properties remain empty while in the possession of iBuyers, which could make the homes vulnerable to theft and other criminal activity.

Wall Street has been betting big on iBuyers in recent years. Opendoor has reportedly raised at least $1.3 billion and purchased more than 10,000 homes in 2018—three times that of its closest competitor, OfferPad. “For some sellers needing to move or requiring quick extraction of equity, this is certainly worthwhile,” according to the research paper. “But what percentage of the market will want this service remains to be seen.”


The Lane Mortgage Lending Team Hits Record Year Of Production

Work Begins On The First Home In The Orchard Knob Initiative

Large Office/Warehouse In Bonny Oaks Area Sells For Almost $3 Million


Movement Mortgage, LLC announced that Christina Lane and her team had their biggest year of production in the mortgage business. The Movement office, at 1830 Washington Street in Chattanooga, ... (click for more)

Since 1986, Habitat for Humanity of Greater Chattanooga has been building and repairing homes to make sure the clients they serve have decent places to live. Throughout their history they’ve ... (click for more)

A large office/warehouse at 4840 Geminus Dr. in the Bonny Oaks area has sold for almost $3 million. The building is a 12,000-square-foot office/warehouse Flex Building with approximately 5,800 ... (click for more)


Real Estate

The Lane Mortgage Lending Team Hits Record Year Of Production

Movement Mortgage, LLC announced that Christina Lane and her team had their biggest year of production in the mortgage business. The Movement office, at 1830 Washington Street in Chattanooga, is led by Barbara Courtney. Movement Mortgage has been recognized as the fastest-growing private mortgage bank in the U.S., powered by its innovative process and culture. Movement ... (click for more)

Work Begins On The First Home In The Orchard Knob Initiative

Since 1986, Habitat for Humanity of Greater Chattanooga has been building and repairing homes to make sure the clients they serve have decent places to live. Throughout their history they’ve partnered with individuals and organizations that share their vision; however, a partnership with Parkridge Medical Center is one that will be "transformational" in the Orchard Knob community. ... (click for more)

Breaking News

Gang-Related Party At Short-Term Rental Property On Signal Grew Out Of Members’ Desire To “Get Out Of Chattanooga Where The Heat Was On”

When three Signal Mountain police responded to reports of a fight in Old Towne Friday night, they found that the house at 404 South Street was dark. Investigators soon learned from neighbors, however, that the lights in the house had been on prior to the arrival of law enforcement officers, and could see for themselves that the driveway and back yard were filled with vehicles. ... (click for more)

Inspired Reverend Paul McDaniel Leads Reminiscences At Celebratory M.L. King Event

What started as a remembrance by five local civil rights leaders praising the 50-year-old Unity Group and other local civil rights work turned into an enthusiastic sermon by the Reverend Paul McDaniel Monday night of what still needs to be done. Mr. McDaniel, the last of the five speakers at the special Dr. Martin Luther King Jr. Day town hall program at Orchard Knob Missionary ... (click for more)

Opinion

A Lack Of Civility At The Women's Rally

The behavior of our local radical left women was abusive and uncalled for. The next Woman’s Rally and March should be lessons in common decency and civility towards other women. Interrupting an invited female speaker with displays of yelling and holding up disparaging signs is wrong. The women before me that broke the barriers in male-dominated professions would be embarrassed ... (click for more)

Roy Exum: Angels Walk Among Us

I know little about Scott Shaunfield, other than that he is a Captain with the Houston, Texas Fire Department, and the fact he once wrote a story about “the angels among us” that he knows is true. For the record, I am a huge believer in angels on this earth. No, you can’t see them, but I can easily recall the times that I have been highly suspect of angel-like people during my life. ... (click for more)