Late last year I was showing houses to a young first-time buyer. She had seen a certain house online that “spoke to her” and was very specific in asking that she see this house first. We looked at the house. The exterior was exactly what she wanted but the interior was disappointing. Drab, somehow appeared not quite clean, windows not washed, and so forth…with a faint smell of mold. So we moved on to other things.

 

I was curious about this listing as it was my first experience with a home listed by an IBuyer firm such as Zillow or Open Door. These firms advertise a 0% listing fee and buy the home outright from the seller for cash. Of course, this is a real convenience to the seller, as it removes all uncertainty from transactions and gives the seller their money immediately so they can move on to their next purchase. However, upon further investigation of the business model for these companies, I discovered that they charge a 7% “service fee”, and also have an inspection contingency where they do an initial assessment and come up with a price for “necessary repairs”. It was not clear to me what would happen if a buyer requested repairs in excess of what the firm had estimated. In any event, this is pretty much an open-ended $$ amount, that will be deducted from the final selling price. This number is not subject to review or oversight by the seller.

 

It WAS clear that no resident human being was involved with the listing, as no effort had been made to present the property in its most advantageous state to attain the highest price, and furthermore, we learned from an informative neighbor next door that there had been extensive flooding in the house prior to listing for sale with extensive mitigation, hence the mold smell.

 

Considering that the selling price of the property was $25,000 less than what the iBuyer firm had paid for it, and the 7% ”service fee” and cost of repairs were deducted from the selling price, I believe we are safe in saying that the sellers of the house paid dearly for their convenience. The house in question was on the market for a total of 128 days.

 

So what is an alternative scenario? An average listing fee is 6%, and with the help of Compass Concierge, a seller can pay for repairs with no immediate out-of-pocket expense. They will have made their own judgments about what they wanted to spend on repairs. The sellers have access to Compass’ program for Bridge Loans, which offers 6months of interest-free bridge loan financing costs. So they could have moved on to their next house right away. By using a licensed Compass Broker, the house would have been exposed right away to the maximum number of buyers to attain the highest selling price, rather than settling on an off-market purchase price set by the iBuyer company.

 

Inasmuch as a home represents a large percentage of the net worth of most sellers, it follows that a seller would want “white glove” service from a licensed Realtor with knowledge of the local market to represent the sale of their main asset.