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Corporate entities buying single-family homes is nothing new. They’ve been doing it for years to diversify their portfolios, to add rental income to their revenue streams, or to sell the houses they buy for a profit. But, according to the National Association of Realtors (NAR), the last few years have witnessed a sea change.
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Tech companies — backed by money from Wall Street and venture capitalists — are entering the market as digital direct buyers, and they’re offering both sellers and buyers alike a new kind of bargain that is changing a sorely outdated business model.
Direct Buyers Take the Stress Out of Selling — For a Price
The new crop of startups that the NAR referenced are known as eBuyers or iBuyers. They offer homeowners a tempting alternative to the long, drawn-out, and often frustrating process of selling a home the traditional way.
iBuyers use algorithms to estimate the fair market price of the homes of interested customers and then make those customers a cash offer. If the homeowner agrees, the iBuyer takes ownership of the house, which it will then turn around and sell to a regular homebuyer. iBuyers make money by buying at a slight discount, selling at a slight premium, and by charging a service fee, which is roughly in line with traditional agent commissions, according to MarketWatch.
Even if they get less for their house than they might have the old-fashioned way, sellers close the deal right away without listing, staging, and showing the home, and without the months-long closing process that’s standard with a buyer with a mortgage. The process also gives the seller much more control over when they move out.
For those willing to pay a premium for stress-free simplicity, iBuyers have filled a gaping void left open by the traditional real estate model. Here’s a look at the biggest in the industry.
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Opendoor Has Low Fees and a Strong Record
As of September 30, 2020, Opendoor’s service charge will be no more than 5% — historically, it’s been as high as 14%. There are no hidden fees and the top-tier iBuyer makes any necessary repairs after you move — sellers choose their own move-out date. One of the best-known iBuyers, Opendoor receives a request for an offer every 60 seconds. You can also list your home through Opendoor and interested buyers can purchase a home from the company, as well.