What is an iBuyer? An iBuyer is a real estate company that utilizes technology to buy and sell homes quickly.
The goal of an iBuyer is to simplify the process of a real estate transaction by eliminating the friction of seller pains. When selling to an iBuyer, you can sell your home to them on the day you choose, often within days of deciding to sell. There are many different models of iBuyers, but the hallmark is to receive a cash offer on your home on the day you choose to sell.
How does the iBuyer business model work?
An iBuyer works by transacting large volumes of homes, earning money by collecting a service fee on each transaction. Often this service fee is the same or smaller than what you would pay to list with a traditional real estate agent. Not all iBuyers share the same model, and the best model for each individual may differ on a person-to-person basis.
Here are a few different styles of purchase that you may see offered by iBuyer companies:
Traditional Cash Offer (Swift Sale):
This is the most common method where you will receive an all-cash offer for market value less service fees. The value of your home can be determined using an appraisal, comparative market valuation, or an automated valuation model.
Renovate and Repair (Swift Sale):
This purchase style is best for homes that could be improved with some light repair work. You get the convenience of moving into your next home by unlocking the equity from your first home. Once you’ve purchased your new home repairs/improvements can be done to your old home. Once the house sells you can share in some or all of the net proceeds.
Rental:
Less common in the Canadian marketplace, this style of iBuyer purchases your home on the day you choose and then rents it back to you. This carries with it some additional costs when purchasing a home, but allows for you to move just once on the day that you choose.
Guaranteed Sale (Sweetly):
Some real estate companies will offer a guaranteed sale which means that they will purchase your home at a price negotiated earlier – if they are unable to sell it at the agreed-upon listing price. Unfortunately, this option often carries with it a lot of fine print, and the majority of these types of home sales end up going the route of the traditional home selling process.
Every iBuyer has a different method of selling your home; many of them focus on new homes or will attempt to make low-ball offers to owners in tough situations. At Sweetly, we offer a variety of products that we think are suited to help most homeowners experience a pain-free real estate transaction. Our Swift Sale PLUS allows us to provide our services for a fee similar to what you would experience in a traditional home sale – minus all the seller pains.
How can we make money offering more services for a similar cost to a traditional home sale?
It’s simple! We are a service fee-based business that has streamlined the home sale process. As a result, we move houses faster, easier, and less friction than the traditional real estate model. At Sweetly, we even share the profits with you.
Are iBuyers and Home Flippers the Same?
iBuyers, especially those who offer a renovation style program, are often confused with home flippers as the mechanism is quite similar. However, a few key points differentiate the two of them.
- Home flippers have no interest in providing you with fair market value for your home; their goal is to get the cheapest property with the most potential.
- Home flippers will not share any profits with you after the sale has been completed.
- Home flippers will often target distressed properties and have less interest in the majority of homes on the market.
Automated Valuations vs Comparative Market Analysis vs Appraisal
There are multiple ways to value a home, but the only true way is to test it on the open market, where the home’s sale price determines what the market is willing to pay for it.
Automated Valuation Model:
Each iBuyer that offers this style of home estimation has proprietary software that they utilize to assess home value. Typically this is run off of data input of recently sold nearby homes, city assessed values, neighbourhood value, and other market trends. The models used to develop this estimate are constantly improving. However, they will never be able to assess the value of things such as foundation issues, mould, roof, or general damage.
Comparative Market Valuation:
This is a system that has been developed and utilized by real estate agents ever since the MLS® system was developed. You take some of the main features from a home (square footage, garage, style, etc.) and compare the home you wish to assess with similar features sold nearby. This method is excellent for ballparking home values but is still more art than a science.
Appraisal:
An expert local appraiser estimates the value of your home by doing an on-site inspection and a comparative market evaluation of nearby comparables. An appraisal allows for the unique qualities of your property to shine. Even if you don’t sell your house, an appraisal is a great thing to have to help unlock additional equity in your home.
iBuyers Compared to Traditional Real Estate
It is often assumed that iBuyers are trying to replace traditional real estate agents, but this is far from the truth. Real estate agents are still a valuable part of our process, and Sweetly has agents both in-house at our internal brokerage and partners throughout Canada. We aim to improve the process of selling a home by eliminating pain points to make it faster and easier.
iBuyer Process
The iBuyer process is different depending on who you choose to work with, but it will often be similar – Request an offer, assess the home, accept the offer, and choose a moving date. Here is our process for our most popular program, the Swift Sale PLUS, which is available to customers who sell and then buy with Sweetly.
- Tell Us About Your Property:
You’ll get a computer-generated evaluation and comparable sales in your area. Then, we’ll arrange for a licensed Appraiser to view your home and set what they believe is a fair market value. - Appraisal & Inspection
Subject to a reasonable home inspection, you will receive a percentage of the appraised value of your home on the moving day you choose. This equity will allow you to purchase your new home without dealing with bridge financing or a second mortgage. - Close & Move
We’ll prep, stage, and resell the property. You’ll receive a second payment for any sale amount exceeding the original appraisal.
We also have other programs available such as our cash offer Swift Sale or our renovation program.
Benefits of an iBuyer
Using an iBuyer has many distinct advantages over the traditional real estate market:
Certainty:
Using an iBuyer can alleviate the uncertainty of the open market. It relieves the stress that you might experience going through the process of selling your home, but it also allows you to make a more powerful offer as you do not have to submit a conditional offer.
Convenience:
You choose the moving day – then move into your new home. Easy as that! Selling a home comes with seller pains, such as showing the home, repairing the home, and maintaining the home while it sits on the market. An iBuyer allows you to net the same market value without wasting time.
Time:
The most precious commodity – Choosing your own moving day can be the most enticing part of the iBuyer model for some homeowners. You can sell your house fast, avoiding the hassle of finding temporary accommodations or carrying a double mortgage.
No Obligation:
At Sweetly, our customers can go through the process of a traditional sale knowing that they will have a Swift Sale in their back pocket that they can use if they are unhappy with their house sitting on the market.
Certainty, Convenience, Cost, Timeline, Simplicity, Net Value, not having two mortgages, No Obligation
How to choose the right iBuyer
The Canadian iBuyer market is currently relatively small although some real estate companies are beginning to enter the space with ‘iBuyer Lite’ models. If you choose to go forward with an iBuyer, you should check to ensure that they have the following attributes:
A History of Positive Reviews:
Google is still the best bet to check for this. Ensure that they have positive overall reviews dating back for a period of time.
A Suite of Services:
A more established iBuyer will offer a suite of services that will help make your sale quick and easy. They will have systems in place to provide you with better deals on insurance, closing costs, fees, repairs, etc.
Trust:
The iBuyer you work with should be open and honest about their process with no hidden iBuyer service fees or surprising fine print.
Value:
Whether it is a cash offer or maybe your house would sell better with some light repairs, make sure the model that you select works for you.
Sweetly’s Models
Sweet Sale
With the Sweet Sale, you get a Fair Price Cash Offer. It’s a fair offer that lets you sell without showings and choose your own moving day.
Start your sale with a Free, Fair Price Cash Offer, which remains open to you for 60 days. Activate our offer any time – even without listing/showing your home, or at some later date if your home isn’t selling. Compare our hassle-free, all-Cash offer to a traditional MLS® listing. Make an informed decision. Choose what’s best for you. Offers remain open to our customers for 60 days. Our offer is withdrawn if you list with an outside REALTOR®.
Listing With Confidence
A traditional listing allows you to test the market with your price. A listing with Sweetly comes with it’s own set of perks.
- Test the market with confidence, knowing you’ll have a Sweet Sale available if your home doesn’t sell.
Start with an fair price cash offer to know the current value of your home. Then, decide ‘how’ you want to sell, BUT before you do, you can shop at your pace to find the right house. Beat out any competing buyer because you won’t need a ‘condition of sale’ so your offers are stronger without spending extra money. Once you have a firm purchase you can sell your house to Sweetly on a day that works best for you.
