Stepping into the emotional and financially tricky process of selling and buying a house at the same time can be overwhelming. With all the options, from real estate agents to iBuyers to companies like Homeward, figuring out which one fits your expectations, budget, and timeline could turn rocky fast. However, illuminating the differences between your choices may make the decision easier.
The traditional model, real estate agents, operates far differently than iBuyers like Opendoor, Offerpad, Knock, Zillow Offers, RedfinNow, Abodewell, or Orchard (formerly Perch). And although Homeward is sometimes confused with an iBuyer, Homeward’s buy before you sell process is distinct from the competition.
To offer a bit of guidance on your home purchasing journey, we’re sorting through what makes Homeward unique when compared to iBuyers, and how you can select the process that matches your needs.
What’s an iBuyer?
iBuyers are companies who purchase your existing home without you having to list it. They then perform repairs on your home if needed, and sell it on the open market themselves. Their process can be quicker and easier than traditional selling with a real estate agent; but homeowners typically get less than market value for their home, and sometimes repair costs on your home eat into your profits.
Think more along the lines of tech-enabled home flippers when it comes to iBuyers. Although you’re getting the cash for your existing home, some contracts bar you from buying a new home until your current home sells. Plus, you’re giving up the opportunity to sell your home for its full value on the open market. Homebuyers who need to move quickly, aren’t fully invested in getting as much as possible for their home, or want to skip the selling process, working with an agent, or repairs, may find this route works for them the best.
iBuyers can charge you from 5 to 9 percent of the home sale price in addition to repair costs and real estate agent fees. The estimates they provide may show what you might get from the sale, but they don’t include what you could pay for repairs; a key piece of info that can eat into your home sale profits fast.
iBuyer use proprietary models to predict a reasonable offer on your current home, which can vary by tens of thousands of dollars between companies. Just like you would if you went with a traditional Realtor or real estate agent, it’s always a good idea to shop around and compare sale prices so you can get the highest offer.
After you receive your estimate and accept it, some companies give you all-cash from the time you accept, while others provide profits after your home sells and the repair costs have been deducted. In all cases, the iBuyer now owns your home. That means they pay taxes, utilities, insurance, and maintenance for a service fee, which is usually 6 to 7 percent on average. And you’re paying for home repairs and/or upgrades they believe the home needs to be market ready.
The selling of your existing home plus the fees are how iBuyers make their profits. Because the offer you received was likely below what the home could have sold for on the open market, and iBuyers usually subtract fees from your profit, they list your home with a higher price tag. Then, they take the profit amount from what they paid you and what the home actually sold for.
If you’re a homebuyer who wants to avoid some of the headaches of selling, like showings, staging, or waiting for the right buyer, or are in a time crunch, selling your home to an iBuyer may be the option that fits your needs.
- Opendoor: The largest iBuyer that’s in the most markets, Opendoor buys your home, completes repairs, then sells your home for a mark up. They typically charge you around 6 to 7 percent plus repairs, but you’ve now alleviated the issue of selling your house with a traditional agent… and eventually, you have funds to purchase your new home. Repair costs can be 1.7 to 3.2 percent of the purchase price with Opendoor. When you request an offer, it’s delivered within 48 hours, it’s an all-cash offer, is valid for 5 days, and includes a net profit estimate for seller. If the seller accepts, they can schedule their home assessment and Opendoor completes repairs after you move out. They then deduct any costs from your sale price, and you get paid so you can shop for your next home. This is for sellers who want convenience over the full price for their home and aren’t worried about getting stuck with a big repair bill to get the home ready for listing.
- Offerpad: Similar to Opendoor in that they buy and then sell your home, Offerpad has some minor differences in operations, but perform the same function as Opendoor. They’re making you an offer, you’re paying for repairs, then Offerpad is dealing with selling your home while you then take the funds to buy your new house.
- Zillow Offers: Limited in the current number of available markets, Zillow Offers is providing essentially the same service as Offerpad and Opendoor. Zillow is hoping you’ll sell your home to them and work with their network of real estate agents to buy your new home.
- RedfinNow: Cousin to Zillow Offers, and lacking a bit in marketplace presence, RedfinNow has one differentiator from the other iBuyers: if the offer they give you is too low or you’re not a fan of it, they can connect you with a Redfin listing agent who can sell your home at a 1 percent fee.
- Knock: Unlike the other iBuyers, Knock’s uniqueness comes from their model of essentially swapping or trading one home for another. This works for sellers who’re looking to sell a home and buy another simultaneously through Knock’s “trade-in” program. Sellers don’t have to list their home on the market, they buy their new home via Knock, and then Knock turns around to list and sell the existing home.
Homeward provides funds for you to buy your new home with an all-cash offer without you having to sell your existing home. After the new home is secured, Homeward rents the new home back to you while you get your existing home ready to sell. Homeward affords you six months to get top market value for your existing home. Homebuyers and Homeward agree on a guaranteed price for your current home before buying your new home, and Homeward will buy it for that price in the unlikely case that you have trouble selling it.
When your existing home closes, you buy your new home back from Homeward for the original purchase price plus a fixed convenience fee of 1.9 percent of the purchase price.
Homeward allows you to buy the home you want before you sell the one you’ve got – the opposite of what an iBuyer offers. And when it comes to fees, you’re paying rent plus the 1.9 percent convenience fee only. Once your current home sells, you buy back your home from Homeward and you can use the cash from your home sale towards a down payment on the new one.
Unlike with iBuyers, those who use Homeward don’t have to sell their existing home at a discount or worry about nontransparent repair fees. They can secure their ideal home and take it off the market so they don’t miss out on their ideal home, list their previous home for full market value, leaseback their new home for up to six months, and have the guarantee that their home will be purchased by Homeward if it doesn’t sell on the open market.
- Get approved and then shop for your new home
- Find your dream home on your schedule and make a competitive, all-cash offer on it with Homeward’s funds (All-cash offers are two times more likely to beat out offers that have financing contingencies, and all-cash offers can sometimes command 2 to 5 percent discounts on the purchase price from the seller)
- Close quickly on your new home purchase because it’s cash instead of a financed mortgage
- Move once into your new home and rent your new home from Homeward for up to six months
- Prepare your current home for sale by getting repairs and maintenance completed if necessary
- List your existing home and take your time to get full market value with the guarantee that if your home doesn’t sell, Homeward will buy it from you at the previously agreed upon price
- When your existing home closes, you buy back your new home at the original all-cash offer price plus the fixed 1.9 percent convenience fee
Homeward vs. iBuyers
Between the two categories, Homeward is looking to finance the purchase of your new home, then you’re able to sell your current home. iBuyers are looking to buy your existing home then sell it themselves. Homeowners who want to sell quickly, are not concerned about getting full market value , and want to remove themselves from the selling process and handling repairs may want to consider the iBuyer approach. Those who are interested in buying a house before selling but don’t have the funds, and who want the best chance to secure their dream home in a competitive market or are tired of watching great homes pass them by while their funds are tied up in their current home might want to consider going with Homeward.
iBuyers have variable fees (unlike Homeward), and homeowners who sell to iBuyers may lose profits because the iBuyers typically provide below market value offers. Additionally, those who’ve sold their home to iBuyers often have to make mortgage-contingent offers on their next homes. But buyers who work with Homeward go into their new home purchase with an all-cash offer and contingency-free contract; a much more attractive offer to sellers.
Homeward also allows you to get full market value for your current home because you’re able to sell it on the open market, unlike with iBuyers. And with the six-month leaseback period on your new home with Homeward, you can prepare your existing home for sale by completing repairs or staging on your own timeline. With an iBuyer, the idea is to move quickly and trust that the estimates they provide you for repair costs are fair.
When you’re considering Homeward or an iBuyer, think about how critical buying your new home before selling your existing home is to you, if transparent fees are important, and if you want to sell your current home for full value and on your own schedule.
Although both iBuyers and Homeward guarantee a home sale, Homeward provides the opportunity and convenience to purchase your dream home without the concern of selling your existing property first. The ability to grab your perfect house off the market with an all-cash offer, then handle repairs and selling your current home after the fact not only helps reduce stress, but gives homeowners a chance to get more money from their home sale. iBuyers may be able to give you a quick sale, but Homeward invests in your future home as well as helping you tie up the loose ends on your existing property.