What Are iBuyers? Your Guide to Instant Home Buying (2024)

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• An iBuyer is a company that purchases and buys homes directly from sellers using an algorithm.
• Selling to an iBuyer can be convenient if you need a quick sale or don't want to go through the stress of a traditional sale.
• When you sell to an iBuyer, you typically won't earn as large a profit as you would selling your home the traditional way.

An iBuyer is a tech-powered investment company that can streamline the home-selling process.

Unlike in a traditional home sale, there's no marketing, cleaning, or showing your home when an iBuyer's involved. They simply make you an offer, buy your home as-is, and then handle repairing and selling it to another buyer down the line.

If you're looking for a quick and hassle-free sale, exploring an iBuyer in your area may be an option — but there are drawbacks to consider, too. Here's what to know about these home-buying entities.

How do iBuyers work?

An iBuyer, or "instant" buyer, is a company that buys homes directly from homeowners. These companies are often able to make offers on a home in a matter of hours or days based on information, photos, and video provided by the homeowner.

After purchasing a home, an iBuyer will then make any necessary preparations or repairs and list the home for sale. Here's a breakdown of what the process looks like:

1. Submit information online

To sell your home to an iBuyer, you'll first need to find out if your home meets the criteria iBuyers typically look for. This criteria can vary depending on the company you work with and the market you're in.

To be eligible for purchase, homes need to be in good condition and typically can't be located on large lots. iBuyers also aren't available everywhere in the U.S., so you'll only be able to sell your home to an iBuyer if one is available in your area.

When you request an offer on your home from an iBuyer, you'll submit some basic information about the property and may be asked to upload pictures or video.

2. Receive an instant cash offer

The iBuyer will then use the information you provide to determine the market value of your home with the help of an algorithm. iBuyer algorithms use data from your local housing market to compare your home to other similar homes that have recently sold, much like how a real estate agent would use comps, or comparable sales, to price a home. iBuyers will typically make an initial offer on your home within 24 to 48 hours.

3. Accept or decline

If you're satisfied with what the iBuyer offers you for your home, you'll accept the offer and start preparing to close. There may be some documents you'll need to sign to get the process officially started.

4. Schedule a home inspection

Your iBuyer will schedule a home inspection to determine if any repairs need to be made before the home can be resold. If the home needs repairs, the iBuyer may deduct the costs from its offer price or allow you to make the repairs before closing.

5. Close quickly

You'll usually get to choose when you want to close with an iBuyer. Closings can often be completed within a couple of weeks or a couple of months, depending on your timeline.

Benefits of using iBuyers

There are a few benefits to using an iBuyer to sell your home — especially compared to the traditional approach. These include:

Speed and convenience

The main benefit of selling to an iBuyer is convenience. iBuyer companies streamline the home-selling process so that all you have to do is provide them with some basic information and work with them to schedule your inspection and closing. For buyers who need to sell quickly or buy a new home while selling their current one, this can be a really valuable and time-saving service.

Reduced stress

Selling to an iBuyer is typically much less stressful than selling a home on the open market. There's no staging, cleaning, or marketing, you don't have to clear out for showings, and there's no back-and-forth haggling either.

"We're eliminating the need for folks to go through the process of repairs and upgrades for their homes and eliminating the myriad of people that have to come through their homes," says Kerry Melcher, head of real estate at the iBuyer company Opendoor.

Certainty and flexibility

Traditional selling tactics are uncertain. You don't know when you'll have showings, get a buyer, or close on the home, and it can make the whole process more challenging and taxing. With an iBuyer, you have more control in the process. (You can usually set your own closing timeline, too.)

Drawbacks of using iBuyers

Using an iBuyer can be handy, but it's not a perfect arrangement. Consider these drawbacks before using one:

Lower offers

The trade-off of using an iBuyer is that you might not make as much money selling your home to an iBuyer as you could selling it to a traditional buyer.

Though iBuyers say they make competitive offers on the homes they buy, housing market conditions still favor sellers right now. Receiving multiple offers on a home is common, which means sellers may be able to earn more on a traditional sale than what an iBuyer determines is their home's fair market value.

When you sell the traditional way, you'll also have the benefit of having a real estate agent who is an expert in your local market and can help you maximize your profits.

"The value proposition of a real estate agent is that I know the home, and I know the area, and I can convey what it's like to live there," says Marie Bromberg, a licensed real estate salesperson with Compass in New York City.

Because real estate agents know the market they work in so well, they have an advantage when it comes to conveying the value of your home to buyers and getting you a bigger profit, Bromberg says.

Service fees

iBuyers also charge fees for their services, often around 5% of the sales price. You'll pay this in addition to closing costs and any repair costs that were deducted from your proceeds.

By contrast, with a traditional sale, sellers typically pay between 5% to 6% of the sales price in real estate agent commission.

If you want, you can work with a real estate agent to help you sell your home to an iBuyer. Just keep in mind that if you do, you'll be paying both the iBuyer fee as well as any agent fees or commission.

Limited availability

While there are many iBuying companies out there, they're not present in every city in the nation. In fact, most are limited to a select few larger metro areas.

Depending on local demand, iBuyers may also only operate within certain neighborhoods in a community as well.

Less room for negotiation

Not having to haggle can be nice, but it can also mean you get less than what you want out of the deal. With a traditional home sale, you and your agent can negotiate many of the terms of your sale (not just how much money you get either).

Top iBuyers in the market

Two of the most popular iBuyer companies include Opendoor and Offerpad. Zillow and Redfin used to have iBuying businesses, known as Zillow Offers and RedfinNow, respectively. But Zillow Offers was shut down in 2021, followed by RedfinNow in 2022.

Every iBuying company has its own quirks and criteria for its buying processes. If you're considering selling to an iBuyer, compare multiple companies to determine which one best meets your needs. Be sure to look at the fees they charge, when you'll be able to close, and whether they offer any additional perks, such as free moving assistance.

Be wary of companies that make claims that seem too good to be true. In 2022, the Federal Trade Commission ordered Opendoor to pay $62 million to settle allegations that the iBuyer advertised misleading and deceptive information about how much sellers could earn by using the platform. According to the FTC, "most people who sold to Opendoor made thousands of dollars less than they would have by selling their homes using the traditional process."

Who should consider iBuyers?

An iBuyer can often be a smart choice, but it's not right for every home seller. You might want to use one when:

You need a quick sale

If you need to sell your property quick and can't afford the weeks- or months-long process that comes with a traditional home sale, an iBuyer might be the right way to go.

You want to avoid hassle

Selling your home the traditional way can be a lot of work, and it also means having buyers traipse through your home constantly. If this sounds like something you want to avoid, you may want to use an iBuyer.

Your home is in good condition

iBuyers typically won't buy fixer-uppers or homes in major need of repairs. They tend to gravitate to more turn-key, move-in-ready homes that need a new paint job or minor fixes before they can be sold on the open market.

If you're considering selling your home to an iBuyer but aren't sure if it makes sense profit-wise, you can typically get a commitment-free offer to see how much they're willing to pay. You can also talk to a real estate agent to see what they think your house could ultimately sell for if you were to do a traditional sale. How you decide to move forward should depend on your potential profits and what your goals for your home sale are.

If your main goal is to make as much money as you can, and a local agent tells you that homes like yours are consistently selling over asking, it might make more sense for you to sell to a traditional buyer. But if your priority is a quick sale or a less stressful experience, selling to an iBuyer might be worth it to you, even if that means you could potentially be leaving money on the table.

FAQs about iBuyers