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iBuyers: The Cost to Home Sellers

There’s been a lot of buzz around iBuyers the past couple of years. iBuyers are a hot new technology trend that has been shaking up the real estate industry. The term stands for “instant buyers” (although commonly mistaken to mean “internet buyers”).

An iBuyer is an organization who uses online tools to purchase and sell real estate, using technology to reduce costs and time typically involved in real estate transactions. But are any of those savings passed on to the home seller? In this blog, we’ll take a look at iBuyers and whether the new model is worth it to home sellers.

How it Works

iBuyers will use a proprietary model to valuate any homes on the market. Using this model, they are typically able to make an offer on a home in days, hours, or even minutes. If the seller chooses to accept their offer, an inspector from the iBuyers will visit to evaluate the property and itemize anything that requires repairs. The seller can choose to repair these items or they will be deducted from the closing price. Within this model, home sellers can potentially close the deal in under a week. The value proposition to home sellers is that the whole experience is fast and easy, and for those desperate to relocate quickly, iBuyers offer a unique solution.


Another big selling point for iBuyers is that they cut out the “middle man” by eliminating real estate agents, thus saving the home seller on commission fees. However, most iBuyers still do charge a commission- typically around 5 to 6%. On top of this, they will also include a number of other fees such as “holding fees”, “closing fees”, and “experience fees”. When these fees are added up, along with any added costs from repairs, iBuyers may cost you significantly more than working with a real estate agent. In data collected by Collateral Analytics, the fees collected by iBuyers cost home sellers 13% to 15% of a home’s sales price, while traditional real estate agents cost only 5% to 7% on average.

Sale Price

In addition to the fees, home sellers could stand to lose tens of thousands of dollars on the sale of their home when working with an iBuyer. iBuyers are driven only by speed and efficiency, and their valuation models leave little-to-no-room for negotiation on their offer price. On the other hand, a real estate agent is motivated to get their seller the highest price on their market. Qualified agents will typically have years of experience in their local market, selling techniques and strategies, and research on their side. And by using the competitive market to their advantage, they can help get top dollar for their client’s home. A recent study by MarketWatch found that home owners lost 11% on their sale price versus sellers on the open market.

At the end of the day, selling your home is likely to be one of the most important transactions of your life. In certain situations, home sellers may think the speed of an iBuyer is the right choice for them. However, in addition the financial disadvantages, there is just no price you could place on the value of working with a seasoned, knowledgeable real estate agent that you trust to guide you through the home selling process.

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