Homeowners Robbing Themselves For Convenience
How surprised would you be if I told you that one of the top agents in Nashville over the last couple of years doesn’t live here, doesn’t personally advertise here, and doesn’t go to any of their closings? As a matter of fact, one particular company has done over 100 million dollars’ worth of business the last couple of years and you’ve probably never heard of the agent’s name that goes on the contract. It’s no secret that our culture is becoming more and more isolated and self-centered by the day.
Cyber Monday is one of the biggest shopping days of the year, because companies realize that people would rather shop online than in-store. Amazon is the new Wal-Mart because they have completely dominated the market due to the convenience and limited human interaction that comes with online shopping. Over the last few years, even the real estate market hasn’t been able to escape the grasp of the avoidance of human interaction when it comes to shopping. iBuyers offer their services for quick, minimal human interaction closings that help home sellers deal with less people and hassle when it comes to selling. Sounds like a proper good deal, right? (Insert Jim Carrey’s Grinch, “Wrong-o”.) Let’s take a bit deeper of a dive in to why one of the largest shareholders of Nashville real-estate is cutting people way short, and why using an agent- ME - is the better option for you.
All of these particular companies have a pretty similar process in valuing your home. The steps are as follows: First, you go to your website and provide them with some basic information about your home including square footage, bedrooms, bathrooms, lot size. Second, they will ask for pictures to check for any updates made to the home since most recent purchase according to the tax record. Most likely, their initial offer is going to be lower than expected. So buyer Jane Doe calls the company, complains and rants about how it’s ridiculous, and then maybe has to wait for a representative from the company to come out and look at it themselves (like an appraisal but still nothing close to as legitimate and competitive). Said company will take a couple days and give you a bit higher of an offer, but will still be well below what your house would bring if listed traditionally by a realtor. Let’s dive a bit further in-depth on what some imaginary numbers might look like for an offer.
As I may have mentioned in the past, I live in a fairly newly constructed community. Eighty-one homes, four different floor plans, ranging from two to three bedrooms, 1500 square feet to 2150 square feet. A two bedroom sells for about $310,000 right now, and three bedrooms are selling from $340-350,000 depending on the master bedroom configuration. Let’s take the largest option for this example ($350,000 if traditionally listed). I get on said iBuyer’s website and go through the usual steps. Let’s say that they give me a decent offer of $330,000. There are a couple of reasons that this might be enticing to me: 1. I have a good amount of equity in the house because it’s a quickly appreciating community and am not worried about losing extra. 2. I got a job in a new city and need a quick move or to get a chunk of cash for the move. That’s literally it. “Well, if you use agents you’re going to lose 6% for commissions plus paying for title!” This is true (unless you use me to sell and buy your next home; then, you’re only paying 5% on your sale) and something to consider, but iBuyer is still going to hit you with their fees that can pile up quickly, as well as other repair items that are non-negotiable.
So online-buyer-guy tells you that they have no commission fees, but here are the things that they will charge you for: the first item is going to be a customer experience fee and risk fee. Yes- they’re charging you for the experience of not having to use a realtor and dealing with a buyer that might want to haggle for a couple thousand dollars. Second, they’re going to give you a list of repairs for the property and a price reduction option if you don’t feel like doing the repairs yourself or hiring out for the help. And even once you do the repairs, they still have to meet their standard of satisfaction or the price will be reduced anyway. Tack on closing costs and you can throw in another $5,000 or so, and you’re looking at possibly giving up tens of thousands of dollars for the convenience of a closing that might take a couple weeks off of your selling timeline and not having to deal with agents and a buyer. If you’ve never sold a home before, there are a few reasons that that is not a justifiable financial sacrifice.
If you’re committed to being reasonable throughout the home selling process, with your realtor as well as potential buyers, it’s usually going to be a smooth process and a financially rewarding one. It’s not often that someone comes away with tens of thousands of dollars less than they should be getting come closing day. Say you use a traditional selling process to sell a home for $350,000. Take off 6% for realtor commission fees, title expenses (it’s customary in middle Tennessee for sellers to pay title) and maybe two thousand dollars for repairs. That’s $25,000 to sell your home. You have a mortgage payoff of $250,000. You’re walking away with $75,000. With an iBuyer, that number could be closer to $50,000. In other words, for your “convenience” and lack of needing to haggle with other humans, it’s costing you double to sell your home. In no sane, critically thinking mind does this make sense. How rich do you need to be to think that a couple extra weeks and counter offers is worth that much money? And if you are that rich, you didn’t become so by being an idiot when it comes to your finances.
Don’t be a sucker for the convenience of being able to sell your home from your iPhone or laptop. Human connection, and to be honest, the experience of negotiating contracts and working through the details of dollars and cents, is worth earning the extra money on the sale of your home. Because most likely, if you’re selling your home now you’re going to be buying another, and working to win the game over the seller, which is exactly what you were trying to avoid as the seller of your own home! Which is the problem with modern society: inconvenience for you= bad, inconvenience and winning for yourself while trying to beat someone else= victory. I’m beating a dead horse, but save yourself the money and hire a realtor (ME). It’s worth it.