Guaranteed Offer: Pros vs Cons of Selling to an iBuyer (Opendoor)
Have you been prepping your home to sell and completing repairs? It can feel daunting, but it doesn’t have to be so overwhelming. There are many options out there to sell your home that features some level of convenience.
Maybe you’ve seen advertisements for guaranteed offers from companies like Zillow, OpenDoor, and even local realtors. It seems a little too good to be true, a market-price offer without the hassle of showing your home the traditional way? No option is truly perfect, so check out the pros and cons before you go down this path.
What Is A Guaranteed Offer Program?
Ever see an ad for “We Buy Ugly Houses?” These types of advertisements seem to be everywhere in Nashville right now. This is an example of a Guaranteed Offer program. They are also known as instant-buyers or iBuyers for short. OpenDoor was the first to the game in 2014, but OfferPad is also a significant player.
These companies profit from buying homes at lower rates, doing minor repairs, and listing them for a profit. Homeowners know they are trading off maximum profit for a more effortless experience. They are promised a guaranteed sale, no home showings, and a flexible closing process.
One thing to watch out for: instant buyers promise to pay market value for your home. But it turns out that they typically will not pay as much as a traditional homebuyer. This makes sense since most of the profit these companies make is from buying low and selling high. We’ll walk you through their process below.
Do All Homes Qualify For A Guaranteed Offer?
First off, not all homes qualify for a guaranteed offer. Typically, companies will not extend offers on homes that are older than 1970, need excessive repairs, on a large amount of land, or are over $700,000.
Additionally, these companies typically shy away from unique homes. After all, their goal is to buy the home and flip it for a profit as quickly as possible.
What Is The Process Like For Getting A Guaranteed Offer?
When you request an offer from a company, the company will request photos or a video walkthrough of your home. You should expect an introductory offer in about 72 hours. Keep in mind this offer is preliminary and will likely change because there will be fees and repairs that are taken out of the sales price. Be prepared for your guaranteed offer to get renegotiated.
Next, the guaranteed offer company will send a home inspector to make sure the house is in good condition.
From here, the “guaranteed offer” will change. The iBuyer will ask for credits to make repairs. On the one hand, it can be convenient not to have to be responsible for these repairs yourself. But the company is going to ask you to discount the price even further.
After all parties agree to the stipulations and repair credit, the closing can happen in as few as 14 days.
Who Offers A Guaranteed Offer Program In Nashville?
Many companies and individuals are offering guaranteed sales in the Nashville area. Some major corporations have significant name recognition, and others are established real estate agents in Nashville. But the reality is any realtor can offer a guaranteed sale through referral programs that OpenDoor, and Offerpad offer. These companies will then provide the realtor with a referral fee (typically 1% of the sales price).
We’ll walk you through some of the major options in Nashville that you have likely seen advertised:
OpenDoor was founded in 2014. They initially started in a few select cities and have quickly expanded. They were the first iBuyer to expand to Nashville.
After OpenDoor, OfferPad, which was founded in 2015, began offering the same Guaranteed Offer program. They recently launched in Nashville earlier this year.
What Are The Advantages And Disadvantages Of A Guaranteed Offer Program?
There’s a lot to consider when you’re selling a home. Don’t assume that an instant offer is the best choice. It’s crucial to weigh the pros and cons before leaping so you can evaluate if this path is right for you.
What Are The Pros Of Using A Guaranteed Offer Program?
Certainty of a sale
You don’t have to worry your home will sit on the market too long. This will cause many potential buyers to think there is something wrong with the house. A Guaranteed Offer will take this fear away because your house will close quickly.
It can be inconvenient to leave for showings when you are selling your house. It can be disruptive to your family to have random people walking through your home at random times. A guaranteed offer eliminates the need for showings.
No appraisal or repairs
There are two stressful parts of selling your house after you go under contract: the appraisal and the inspection. This is when your deal can fall through. You don’t have to worry about a large company not being able to fund the home sale. You also won’t be responsible for coordinating repairs after the inspection (although they will ask you to take money off the price tag in lieu of repairs).
Close on your timeline
Are you worried about being able to sell your house and then buy a new one? That’s a valid concern in Nashville’s crazy real estate market. Guaranteed offers mean you have more control over your timeline. Your buyer isn’t going anywhere. You can close in as little as 14 days or take more time if you need it.
What Are The Cons Of Using A Guaranteed Offer Program?
Receive an offer that is lower than market value
These companies are flipping homes. They make money by buying low and selling high. Unlike a realtor, there is no incentive for the iBuyer to give you the highest price. You are likely to walk away with less money.
Pay a service charge
In addition to offering to purchase the home for slightly less than market value, many of these companies charge a service fee or convenience fee. This fee has historically been between 7%-14%.
Pay a repair credit
You will not have to coordinate repairs on your home when you go the Guaranteed Offer route, but it will still cost you. When repairs need to be done, iBuyers often ask for a lower price or repair credit to pay for them.
Who Should Consider Getting A Guaranteed Offer
The biggest takeaway is a guaranteed offer program is not for individuals who want to make the most money. Rather, they are for people who are prioritizing convenience, ease, and the speed of sale.
Some people value convenience over netting the most money. Maybe selling your home feels daunting, and you just want someone to buy it from you without dealing with showings.
If you need to move quickly, this can also be a good option. It could mean relocating with the peace of mind that your house has already sold.
Our Final Thoughts
Listing your home on the market doesn't prevent you from taking the guaranteed offer down the line. Let's say you need to move by a specific date, and you decide to list your home on the market, but no one is biting. You could always request a guaranteed offer as a backup plan.
For people who are thinking about using a guaranteed offer, it may not be a bad idea to see what these companies are willing to offer you.
That being said, if the number is lower than you expected, it is likely you can get significantly more by listing your home on the market and selling it to a traditional buyer.
Whether you are interested in selling to an iBuyer or listing on the market, reach out to Felix Homes today to discuss all of your options.