iBuyers in the Denver Market

You’ve seen the commercials and heard the radio ads. “We’ll make you a cash offer in minutes”. More and more we’re seeing these companies pop up with these adverts, selling the idea of an easy sale within minutes. They are referred to as “iBuyers”, the i standing for instant. There are a number of iBuyers operating in the Denver metro area, but the space is dominated by a select few.

First, let me say that I am not here to bash them. I have heard both success and horror stories from individuals who have chosen to work iBuyers over the years. There are pros and cons to almost every spending decision you can make, and it’s no different with real estate. I am here to present you with facts and real life examples of what I’m seeing in the Denver market. Just a straight shooter here who doesn’t like sugarcoating things I think my clients would like to know. That being said, what should potential sellers know about iBuyers?

Pros:

Speed - The process of selling your home will happen faster as the company simply pays you for the home and you go about your life.

Ease - If your home is in decent condition, these companies may not ask you to make many/any improvements or repairs and the property take as-is. <That’s pretty much how the Denver market is operating for sellers now anyway.

Timing - In cases where you’re looking to buy and sell a house at the same time, things can get hectic. Most people stuck in this type of situation have two options:

(1) Move out and rent before purchasing their their next home.

(2) Purchase next home before selling their current one, resulting in multiple mortgage payments and possible financial strain.

With quick payments that iBuyers offer, it can make managing your timeline a littler easier. If this is you, contact me. I work with a company that offers great solutions for moves like these that do not charge exorbitant fees.

Cons:

Price - At the end of the day, sellers end up paying the price for the convenience when selling to an iBuyer. It is a well-known fact that these companies purchase properties and markup the prices when they turn them around on the open market. They are also known to charge a service fee (around 5%) for the transaction.

I’ve actually told a friend about this who quickly shrugged it off. “Whatever I’ll deal with it. I’m not paying someone commission to sell my house in this market when I know it will sell.” After laughing off their comment, I wanted to break down the facts because I’m numbers person (10+ years in finance) and get fulfillment in proving my points. My husband would agree.

Let’s look at some examples, but first I ‘d like to disclose a few things:

• The examples to follow come from the 3 big players in our market.

• These listings’ status and asking prices may have changed since going live on the market.

• I have greyed out sensitive information that is not necessary to know here.

• I may have buyers that wish to purchase from these iBuyers in the future, so in order to protect my clients’ interests I will not be identifying their names.

Let’s get to it…

Example 1

Example #1: This Lakewood property was sold to the iBuyer in April for $248,700 and later listed on the open market for $290,900*.

Total Markup: $42,400 (17%)

Turnaround time: 15 days

* If you are keeping up with the market, you know homes are selling over listing price. I can’t wait to see what these properties actually close for. Should I post a follow up?

Example 2

Example #2: This Aurora property was sold to the iBuyer in April for $307,000 and later listed on the open market for $360,000.

Total Markup: $53,000 (17%)

Turnaround time: 34 days

Example 3

Example #3: This Aurora property was sold to the iBuyer in May for $506,900 and later listed on the open market for $590,000.

Total Markup: $83,100 (16%)

Turnaround time: 15 days

Outlier

The same iBuyer in the previous example purchased a Commerce City property in May for $487,600 and later listed on the open market for $600,000.

Total Markup: $112,400 (23% - Let’s call this a “major outlier of a stat”, but still. Holy heck.)

Turnaround time: 14 days

Conclusion: Even if we exclude the latter (major outlier of a stat) and take the average of the three iBuyer markup examples, they average $59,500 with a turnaround of 21 days.

$59,500! In Denver’s current market, one can expect to leave $59k (or about 17%) on the table when selling their property to an iBuyer. If you have any prior experience with buying or selling, that’s a lot more than any commission you’d pay to the professionals guiding you through the process. Don’t forget that 5% or so service fee charged by the iBuyer that’s taken out of your proceeds from the sale.

Now that we know more about the actual price you pay for convenience of using an iBuyer, you have a decision to make. List with a company that will offer you a price that they calculate on their computer and call it fair market value (knowing they’re going to list for 17% more in 2/3 week’s time), or work with an industry expert who won’t let you leave money on the table.

Service and Expertise - I’d be doing myself and my colleagues a great disservice if I didn’t also mention the value of a working with a REALTOR®. Our industry knowledge and expertise allows us to know how much you are likely able to sell your property for and we work out butts of to get it done. We want you to get that extra 17% left on the table. Why? Yes, our share is usually a percentage of the purchase price. Please don’t also forget that our business is typically based off of referrals from satisfied clients. The more we can get you for your property and happier you are with your service works in our favor. That’s the difference. We are there to negotiate on behalf of our clients and want the protect their interests while doing so.

iBuyers can be a great asset to those that are in a bind and need to sell fast, but please know it comes with a cost and you pay a premium for the convenience of the service.

If you have any questions about the process of selling your home, please reach out. I’m happy to help. If you live outside of the Denver metro area, I am also happy to connect you with a reputable REALTOR® from my network who can assist you. Don’t leave money on the table if you don’t have to.