For the average Colorado priced at $380,000, the commission paid to real estate agents is $22,800. Now, just looking at this number without understanding what all comes with it (i.e. negotiations, knowledge, experience, advice, network, personality, etc.), seems very overwhelming. So naturally, the seller automatically thinks of alternatives to try and save a couple dollars, and that's where iBuyers have entered the market. But turns out, with iBuyers, you end up paying a lot more, for a lot less. To illustrate this, I'm going to walk you through a real OfferPad and OpenDoor offers I got from National Real Estate Post.
See the offers here and my explanation below.
In these offers, I highlighted the areas of focus. On the first offer from OpenDoor, they credit the seller a sales price of $323,900. An agent charging the typical 6% would then cost $19,434 to be split between that agent's broker as well as the buying agent and his or her broker. For the sake of comparison, we're going to assume that OpenDoor gave a fair, full price offer, which it probably isn't, but that isn't the main area of concern for these offers. If you look towards the bottom of the page, there's an "experience charge" for $19,434. Sounds like a commission to me, and coincidentally, it's the same 6% the traditional broker would charge. Then OpenDoor tacked on another $6,210 for repairs and $4,858.50 for "market risk". They also let the seller pay for all escrow and title costs, which, without an agent, are non-negotiable. Even if we don't include the title and escrow costs, which, again, a traditional agent could negotiate on your behalf, the iBuyer costs the seller $11,068.50 more than the traditional broker. Yikes!
Now let's look at OfferPad on the second and third pages. OfferPad credits the seller a sales price of $191,310, probably a little below fair market price. There's then a huge 7.5% commission. Well, they call it a "credit to buyer", but remember, the buyer is OfferPad themselves, so it's a commission. The seller then also owes a $5,750 repair credit to the buyer (OfferPad) in addition to $3,000 "Funds Held: Post Possession" for who knows what. Again, OfferPad, like OpenDoor, lets the Seller pay for all title and escrow costs, but even without those calculated in, OfferPad costs the seller $23,098.25. That's more than double the $11,478.60 a traditional broker would charge you with the typical 6% commission. Again I'll say, yikes!!
Contrary to the current viewpoints, selling with an iBuyer costs the seller much more than a traditional broker, and offers much less in terms of service. iBuyers completely throw the idea of checks and balances out the window.
In short, if you sell with an iBuyer, you could be spending thousands more, with less representation, as you will not have an agent personally responsible to work on your behalf.
If you have more questions about the iBuyer industry, or are looking to sell (or know someone who is), I invite you to reach out to me here to discuss everything Velocity has to offer while maximizing your profit and convenience.
Shelbee Wallace was born & raised in Colorado and graduated from Colorado State University in 2018 with a BS in Finance with concentrations in Real Estate Finance and Investment Analysis.