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The Harsh Truth of iBuyer Convenience
Dated: April 18 2022
The Harsh Truth of iBuyer Convenience
In our ongoing effort to educate Oklahoma homeowners about new practices in the real estate market, we’ll be talking about “iBuyer” services this month.
What is an iBuyer?
In short, iBuyers are national, real estate technology companies that offer an “instant cash offer” for your home, sight-unseen, and typically via a fully-online transaction. You likely may have received one of these offers in your mail from companies like OpenDoor, Offerpad, or RedfinNow, and even traditional real estate brokerages like Keller Williams are getting into the iBuyer game with Keller Offers.
How Are “Instant Offers” Determined?
The offer you receive from these companies is calculated by Automated Valuation Model (AVM) technology. Compare that to the pricing model of a traditional sale—a Comparative Market Analysis, where an appraiser evaluates your home and compares it to recent sales data of homes like yours. This human-centric evaluation of data can give you a more accurate valuation of your home. In fact, iBuyer companies may need to send an appraiser to your home anyway to get an “adjusted offer” if the instant offer isn’t accurate.
Is Selling to an iBuyer Company More Profitable Than a Traditional Sale?
Here we come to the crux of this article—What benefits a homeowner more: An instant sale, or a traditional sale?
National research has already been done showing that owners selling to iBuyer companies net on average 11% less than a traditional sale (even taking into account commissions and fees).
Tyler Forte, CEO of Felix Homes in Nashville, TN says, "In many cases, iBuyers are re-listing homes for 10%-plus compared to the price they purchased it."
But we decided to do our own research into Oklahoma City iBuyer sales. So we dug into the public tax records & MLS for homeowners who sold to OpenDoor. We researched what the homeowner sold to OpenDoor for, then what OpenDoor turned around and sold the home for— our results showed many instances of OpenDoor selling homes for 16% and even 18% more than what they purchased them for.
In short, our research of sales between April 2021 to April 2022 showed the median potential sales price lost by homeowners by selling to OpenDoor was $19,500 . The highest amount we saw lost by a homeowner after to selling to OpenDoor was $55,000 when OpenDoor sold that home only 2 months later.
That dollar amount of loss translates to a median percentage loss of 8.5% in potential closing price by Oklahoma homeowners selling to OpenDoor—compare that to a traditional sale where the REALTOR® commission is typically 6% or less. In other words, homeowners essentially paid an additional 2.5% commission for the convenience of an instant sale.
Ultimately, we found that out of all 53 homes sold to OpenDoor in the past year, there were 16 instances (30% of the time) where it was more profitable to sell to OpenDoor rather than a traditional sale with a REALTOR®.
For those who actually saved money by selling to OpenDoor, their savings vs. a traditional sale averaged about $8,118. However, for those homes sold to OpenDoor when a traditional sale would have been more profitable, the losses were greater—costing sellers an additional $11,434 more on average for selling to OpenDoor than if they had chosen a traditional sale.
What Does It Mean for Oklahoma?
OpenDoor’s headquarters is in San Francisco, and their “Oklahoma branch office” is located in Tempe, AZ. All of their agents who “listed” the homes we researched were represented by agents out of Texas and Arizona.
To paraphrase a former presidential candidate—that “giant sucking sound” you hear is Oklahoma homeowners’ equity being funneled from Oklahoma into big, tech companies in other states. Not only is homeowner equity being transferred out of Oklahoma, but homes listed by OpenDoor aren’t being represented by local, Oklahoma real estate professionals.
At Flotilla, we work to educate both homeowners and our partner brokerages on trends in the real estate market. We believe that the Oklahoma real estate market is best served when agents are educated, who are your own friends & neighbors with whom you can speak face-to-face, and who remain a long-time, trusted partner to you even after the transaction. Most importantly: We believe Oklahoma’s wealth, equity, and value should stay in Oklahoma .
When you receive an “instant offer” from one of these companies, please consult with your Flotilla Real Estate Partner to make sure you're receiving top-dollar for your home so your wealth stays yours.
© 2022 Flotilla Holdings, Inc.
Public tax record home sale data between April 2021 to April 2022 obtained via MLSOK.
Jennifer Arsenault is the Founder and Managing Broker of Flotilla, and has been in the Oklahoma City real estate industry since 1998. In January 2015, after eight years as a sales associate with Kelle....