Within the last decade, as a homeowner selling your home, you’ve been given more choices than you might have had before. You no longer are forced to list your home with an agent and pay thousands, if not tens of thousands of dollars for the advertising; And no, I’m not talking about posting your home on a For Sale by Owner (FSBO) site. Although for the most patient, that has had some modest success through the years.
What is the change that has occurred over the past decade and become the biggest disruptor to the real estate industry?… Cash buyers.
What is a Cash Buyer?
When you hear “cash buyer”, an image of a person with a briefcase full of money might come to mind. Buying a home with cash of course, simply means purchasing real estate without the need of financing. The funds can be from savings, investments or the sale of another property.
The cash buyer could be a single person, a single investor or an investment company.
A Tried, True and Flawed Process?
We all know how the real estate process has worked since the inception of the National Association of Realtors (NAR) in 1908. You find a real estate professional to place your house on a list of homes for sale. Another real estate agent shows a list of homes to a prospective buyer. Hopefully they like your house and offer you a price worth selling. The buyer then attempts to find the funds to purchase the home. Once the funds are secured, both parties sign closing documents. The buyer collects the keys and you collect the proceeds from the sale, minus any expenses, including closing fees and commissions.
This process has worked through the decades but has not come without its flaws. First, the elephant in the room – 6% commissions. That is a lot of equity homeowners have worked hard to save up. Secondly, the financing hasn’t always been a guarantee and as such, the buyer turns out to be a dud. Because of these, and other issues, something needed to change.
The First Disruptor to the Real Estate Industry
With the onset of sites like Zillow.com, Realtor.com and Redfin.com, the “seller lists” no longer have been a mystery to the home buyer. A person can simply type in the location along with the type of home they’re looking for and the list magically appears. Add in property tools that allow a well educated investor to determine a fair market value for the home, and suddenly real estate agents become less of a requirement for both home sellers and home buyers.
This alone hasn’t turned the industry on its end as most would have thought though. The cash buyers still need to know when a seller is ready to sell. Over the past decade, tools were developed that allowed wholesale investors and companies to find potential sellers and match them up with larger investors. With a simple call, a postcard or email, companies have been able to reach out and find the occasional seller. This has helped but the cost to acquire a seller has been an expense to overcome. All of this has led to a new player entering the arena.
The Next Big Disruptor – iBuyers
With some seeing the ever-changing market and seeking a way to bridge the gap, the next big change has already made its foothold in the real estate industry. Companies have now begun popping up with websites along with full teams of real estate analysts, agents and appraisers. These companies purchase properties either directly as cash, charging a service fee to the seller or the old school route by listing the property and charging a commission. In either case, the cost ends up being comparable to that of a real estate agent commission.
What’s the Benefit?
You might be asking, what is the benefit of selling to an iBuyer if their fee is nearly that of a real estate commission? The main benefit is speed. You can go directly to your buyer via website and start the process immediately. Also, with no buyer financing, there’s no chance of fallout due to financing denials.
The Future of the Real Estate Industry
Sellers need a solution that combines the speed of an iBuyer but the benefit of a no cost wholesaler. Slowly more companies like ListFree will become that solution. Soon enough, the industry will adapt and selling your home will be much less expensive and the hassles of listing, cleaning and showing your home to strangers will be no more.
