What Is an iBuyer?

Despite the challenges presented by the strongest seller’s market on record, iBuyers demonstrated resilience. In Q1, iBuyer purchases nearly doubled compared to the same period last year. Offer strength for iBuyers peaked at 104.1% of market value in Q2 2021 and stabilized at 98.7% in Q1 2022.

With the rebalancing market in 2023, iBuyer offers may decline from their peak.

After acquiring a home, an iBuyer will re-list the property on the market after making only light repairs.

Though there has been some skepticism about the business model’s ability to sustain long-term growth, iBuyers doubled their purchasing activity in 2021. In 2022, iBuyers made up approximately 1% of total U.S. sales for single-family homes, marking a 23% decrease from the previous year’s 1.3%.

When did iBuyers emerge?

iBuyers emerged in the mid-2010s. In 2014, Opendoor debuted to make it easier for sellers to move. Their business model was driven by large venture capital reserves to purchase homes with cash and the use of technology for valuing property quickly. After Opendoor, Offerpad launched a similar business in 2015.

At this point, homebuyers had long been using the web to browse listings and access property details. They benefited from new technology while selling a house remained largely the same. For this reason, iBuyer solutions have been seen as an opportunity to balance the scales by addressing seller frustrations and pain points.

The top iBuyer companies in 2023

The top iBuyers of 2023 based on transactions and coverage area including Opendoor and Offerpad. Here are some examples of the largest iBuyers today:

Opendoor: Launched in 2014, Opendoor is the largest iBuyer on the market. The company has over 50 metro locations across the U.S. It saw 5,383 homes sold in Q2 2023, down 49% from Q2 2022.

Offerpad: Launched in 2015, Offerpad is the second-largest iBuyer on the market. The company saw 650 homes sold in Q2 2023, a 77% dip from Q2 2022.

Some programs are specifically tailored to help people buy and sell a home simultaneously, such as HomeLight’s Buy Before You Sell program, launched in 2023. HomeLight will assess your current property’s value using our algorithm to determine how much of your home equity can be used for a down payment, moving, closing, or repairs.

Though expanding rapidly, iBuyers aren’t available in all locations. They have a heavy presence in mid-priced metro areas in the Southern band of the U.S.  Areas where houses are similarly built and mostly in good shape are prime iBuyer hubs.

As stated in a report from CoreLogic, the iBuying Activity Trend shows an uptick in iBuyer purchases from 0.7% in February 2023 to 1.4% in June 2023, indicating the potential rise in the flip rate, likely driven by rebounding appreciation. iBuyers act as specialized house flippers, suggesting a broader flip rate increase.

The states leading in investor share during Q2 2023 were California (34%), Washington, D.C. (33%), and Georgia (32%). The concentration of home investor shares was noted in Western, Southern, and lower Midwestern states. Notably, Washington, D.C. saw a significant gain, surpassing its neighboring states, with an investor share 10 percentage points higher than Virginia (23%) and Maryland (22%).

Are there any alternatives to iBuyers?

HomeLight’s Simple Sale platform is another option for selling your home quickly and with fewer hassles. With Simple Sale, you can receive a competitive all-cash offer to buy your home, on your timeline.

Simple Sale has a network of cash buyers on its platform, and partner investors have a wide range of investment strategies, including fix-and-flip and buy-and-hold. This enables Simple Sale to provide cash offers for a wide array of properties, even those that need some or a lot of work.

You can skip staging and repairs, and sell without agent commissions or upfront selling costs. Answer a few basic questions about your home’s condition, how much work it needs, and your selling timeline to get started with Simple Sale today.

Service fee: Some transaction fees apply. No hidden fees or agent commission costs, and requesting a no-obligation offer is free.

Locations: Available across most of the nation — input your address to see if we could provide a cash offer for your property

Closing window: After we’ve collected key details about your home, we’ll provide a cash offer in as little as a week, with the ability to close as quickly as 10 days. You can pick a move day that works for your schedule, typically within 30 days of closing.

Below you can hear about how Baohan Wu, a seller who used Simple Sale to sell his high-rise apartment, closed within three and a half weeks and what he thought of the process overall.

How much are iBuyer costs and fees?

iBuyer costs and fees vary depending on the company and specific program, but the largest iBuyers are almost identical in this regard to remain competitive with one another.

For example, Offerpad charges a 6% service fee based on the home’s sale price, whereas Opendoor‘s is 5%. This is below the average 5.8% commission real estate agents receive in traditional home sales. Still, you may receive a lower offer with an iBuyer versus an open market sale.

In addition to the service fee are closing costs. Offerpad and Opendoor estimate these to be between 1% and 2% of the sale price, depending on the state and municipality. Lumped into this sum are things such as escrow fees, title fees, and transfer taxes, all of which are standard for any real estate transaction.

The final fees are for any home repairs deemed necessary by the iBuyer. After you’ve agreed to an iBuyer’s offer to buy your home, the company inspects the home for anything they need to repair or replace to sell it. If you accept their offer, then they deduct the estimated cost of those repairs from the final offer price.

Here’s a basic example of how these fees would look in the sale of a $250,000 home*:

Market value of home	$250,000
iBuyer offer	$246,750 (98.7% of market value)
Service charge	5.8% (-$14,311.50)
Estimated closing costs	1% (-$2,467.50)
Repairs	$1,500 (varies based on assessment)
Est. net proceeds	$228,471

Working with an iBuyer

Selling to an iBuyer

1. To sell your home quickly to an iBuyer, you first need to make sure you qualify to do so.

2. To check this, go to each iBuyer’s website and explore what cities they operate in. To request an offer, you must provide basic information such as the home’s address, age, square footage, condition, features and upgrades.

3. If you meet the iBuyer’s purchasing criteria, an offer will be sent within 24-48 hours. It will include a breakdown of fees and costs associated with the sale. An iBuyer representative will call or email you to discuss the offer and answer any questions.

4. You have time to think about what you want to do. The offer is typically valid for a few days and can be updated even after the expiration.

5. If you accept, then an assessment will be scheduled so the iBuyer can evaluate the home’s condition.

6. If repairs are needed, the company will provide a cost estimate and deduct that amount from the net proceeds you receive in the sale.

7. You then choose a closing date and when you want to move out. After you close, you’ll get paid in a matter of days.

Purchasing from an iBuyer

Buying a house from an iBuyer is not much different than buying a home the traditional way.

1. Before you start shopping, take the time to figure out what you can afford and get preapproved for a home loan.

2. You can then browse iBuyer’s inventories directly on their websites. The properties listed are typically available for private viewing at any time. All you have to do is download the company’s app or go on their website to reserve a time slot and then use the app or a provided code to access the home.

3. The homes are usually ready to move into since the companies will do light repairs before listing them. Still, it’s always a good idea to have an independent inspector look at any home you’re seriously considering.

4. If the inspector finds anything noteworthy, this can be a bargaining chip during final sale negotiations.

5. All of this can be done independently, but you can always choose to hire your own real estate agent or ask to work with an agent partnered with the iBuyer you want to purchase from.

Pros and cons of selling to an iBuyer

In the past couple of years, iBuyers and other prop-tech companies have begun expanding their reach into what is known as “power buyer” programs. These include such services as cash-backed offers and home trade-ins.

Cash-backed offer

With a cash offer program, a power buyer company typically purchases a home on behalf of a pre-qualified buyer using cash. At that point, the buyer can usually move in right away while they obtain a mortgage to repurchase the home from the power buyer.

Cash offer programs generally enable buyers to remove the financing contingency from their offer and close faster, strengthening their position in a competitive market. Cash offers are 3x more likely to win and can get you 5% savings, on average, versus offers with a loan.

Companies providing cash-back offer programs include HomeLight, Flyhomes, Opendoor, Ribbon, and Better.

Trade-in

Many people need to sell their existing homes to have enough funds to cover the purchase of their new homes. Some house-buying companies offer or specialize in what are known as trade-in programs to make this a smoother process.

Generally, trade-in companies will offer to buy your current home, freeing up your funds to buy a new home and removing the need for a home sale contingency.

Some companies that offer home trade-in programs include HomeLight, Knock, Opendoor, and Orchard.

iBuying vs. house flipping

The modern-day practice of house flipping has been a popular means of making money among savvy investors for decades. Well-known real estate investing operations like We Buy Houses and We Buy Ugly Houses have existed since the late ’80s to mid-’90s.

House flipping is predicated on the ability to buy low (typically, at around 70% of the home’s estimated after-repair value) and sell high. This strategy often works best with foreclosed properties or when homes need significant repairs that investors can affordably fix and still profit from the resales.

iBuying is a different model. An iBuyer’s primary profit is a service fee charged to those they buy from. For that fee, iBuyers provide sellers speed, convenience, and certainty.

They also make some amount of money by ideally selling houses for more than they purchased them for, but the margins are much tighter because they are reselling homes faster and making minimal to no repairs.

iBuyer vs. real estate agent

How does working with an iBuyer compare to listing your home with a real estate agent? Let’s take a look at each option side by side.

Aspect of the Sale	iBuyer	Real estate agent
Sale timeline	As little as 10 days, or up to 90 days if a seller needs more flexibility to stay, depending on the iBuyer	One to three weeks to attract an offer, and another 30-45 days to close
Home preparations	None required	Recommended to address certain needed repairs, deep clean, declutter, and stage the home for viewings
Showings	None required, though some iBuyers will perform a virtual or in-person walkthrough	Anywhere from 10-25 in-person showings typically required to sell the home
Offer price	98.7% of market value, according to zavvie	Strong chance of commanding 100% of market value or higher
Inspections / repairs	Generally no pre-listing repairs required, though some iBuyers will identify needed repairs through an assessment and charge a repair credit	Some agents will recommend a pre-sale inspection to identify any issues related to the home’s structure and major systems, seller may need to remedy or adjust price accordingly
Appraisal	An iBuyer doesn’t use a traditional appraisal but an automated valuation model proprietary software that processes various data to arrive at an offer price, usually within 24 to 48 hours	If a buyer is financing the home with a mortgage, the lender will require an independent, third-party appraisal before closing. If the appraisal comes in under contract value, it could create delays or terminate the settlement
Title search	House will need to clear title; iBuyer will have a preferred title and escrow company, as well as closing attorney if needed in certain markets, expediting the title search	House will need to clear title; agents will often notify their title officers the moment they get a listing to find any potential title problems
Financing contingency	None since an iBuyer provides an all-cash offer	This varies, depending on location, but in general, a financed buyer has a specified number of days to obtain a mortgage for a property under contract (or request an extension)
Agent commission	None, but these companies charge a service fee ranging from 5.1% to 7.6% in recent years	HomeLight data shows the average real estate commission nationwide is 5.8%, with the seller paying for commissions for the listing agent and the buyer’s agent
Closing costs	About 1% to 3% of the sale price (on top of service fee) to include title insurance, escrow fees, and taxes	About 1% to 3% of the sale price (on top of commission) to include title insurance, escrow fees, and taxes

Which iBuyer is best?

Since most iBuyers operate in a very similar manner and their service fees tend to be comparable, picking a favorite is really in the eye of the beholder. If multiple iBuyers operate in your area, it’s a good idea to request offers from more than one to see who will give you the best price for your home.

Alternatively, you can try HomeLight Simple Sale platform, which facilitates cash offers. Unlike iBuyer services, Simple Sale is available across most of the country and your home can be sold in almost any condition. If you accept the offer, the cash deal can close in as little as 10 days.

Why use an iBuyer?

If you’re in a rush to sell your home for a job relocation or sudden move, need certainty that the sale will close on a certain timeline, or are overwhelmed with the listing process, using an iBuyer can relieve stress and be an attractive option.

How quickly can I sell a home through an iBuyer?

While the “i” may stand for an instant, receiving an offer on your home after filling out an offer request typically takes 24 hours and several days. If everything else goes smoothly from that point forward, then the seller can expect the deal to close and get cash for their home within as little as a week or two.

What does it cost to sell a home through an iBuyer?

As reported by Forbes, iBuyers typically charge a service fee ranging from 5% to 14% of the home’s sale price. This fee encompasses the company’s expenses for holding the property after the purchase, including insurance, property taxes, maintenance, utilities, and additional fees.

Key takeaways: iBuyer real estate in 2023

• An iBuyer is a real estate technology company with considerable financial reserves that buys homes digitally. These companies have front-facing websites where customers can request near-instant virtual offers on their homes.
• iBuyers enable sellers to skip repeated showings and the usual headaches of selling a house.
• iBuyers offer much closer to market value than other types of investors and flippers, but they also charge a service fee.
• Opendoor and Offerpad are among the largest iBuyer programs today.
• Not every home in the U.S. today will qualify for an iBuyer offer. iBuyers only operate in certain metro areas, with a heavy presence in the South, and target homes in good condition that fall within a specific price range.
• HomeLight’s Simple Sale platform offers similar benefits to working with an iBuyer and provides cash offers for homes nationwide. To get started, input a few property details and you’ll receive a no-obligation all-cash offer in as few as 48 hours.

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