November 2019 - Title First Agency

Are iBuyers Worth the Cost?

What’s the latest technology trend to sweep the real estate industry? iBuyers.

iBuyers, or “instant” buyers, are online real estate investors who use digital tools to make instant cash offers on homes and resell them online. They handle the repairs, staging and home showings, allowing sellers to avoid the time and energy often associated with the traditional selling process. But that convenience often comes at a cost.

If you want to learn more about iBuyers in general, click here. If you’re trying to decide between selling your home to an iBuyer or listing it on the open market, here are some things to consider.

iBuyers don’t buy every home. iBuyers can be mistaken for house flippers, but iBuyers are more risk-averse and don’t exist in every market. Since 2014, iBuyers have expanded into 22 markets across the country and show no signs of slowing. Unlike flippers, iBuyers purchase moderately priced homes (the largest company buys homes between $100K and $500K) and avoid properties that could take too long or cost too much to improve. For example: short sales and foreclosures; homes built before 1960 or located in flood zones; and properties that require major renovations. It’s always best to check an iBuyer’s eligibility criteria upfront.
With an iBuyer, you get less than Fair Market Value (FMV) for your home. iBuyers need to purchase properties slightly below FMV to make a profit. Real estate agents list properties at or above FMV, and they have the financial incentive to get sellers the highest price possible. If your goal is to get as much money for your home as you can, it may be best to work with a real estate agent.
With an iBuyer, sellers are required to pay for repair costs they may not agree with. An iBuyer’s instant offer is a base price that gets lower after the home inspection. Sellers know they must pay for repairs their iBuyer will make to their property, but many are surprised by the cost of improvements they would not have made on their own. As those costs get higher, the iBuyer’s offer price gets lower, sometimes requiring frustrated sellers to pay thousands of dollars in seemingly petty repairs, out-of-pocket costs or both. Sellers who want more control over what they spend on repairs may want to think twice before selling to an iBuyer.
Not all iBuyers offer the same services. All iBuyers offer an expedited sale and give sellers more control over the moving process, but not all companies take the same approach. Some iBuyers advance cash to sellers who need quick access to the equity they’ve earned in their home to move. Others integrate mortgage financing into the purchase process and offer more flexible loan terms than banks, helping borrowers enjoy a simpler end-to-end process that gets them into homes sooner.
You pay NOT to play on the open market. The average real estate agent commission is about 6 percent of a home’s sale price, while iBuyer service fees vary by company and market. According to an analysis of transaction data for the largest iBuyer, the average service fee falls somewhere between eight and nine percent, but it can get up to 12 percent in riskier markets. iBuyer service fees generally earn investors a small profit of 5.5 percent, but it may still cost sellers more than working with a real estate agent.

It’s worth noting that many iBuyers rely on local agents to support their online listing service. They compensate agents for seller referrals and pay full commissions to buyer agents. Working directly with an agent instead of going through an iBuyer can save sellers money, but it costs them more time. We’ll explore how much in the cost breakdown and time table below.

iBuyer vs. Real Estate Agent

The example below is for illustrative purposes only. It allows sellers to compare how much they could make and spend working with an iBuyer versus a real estate agent to sell a home valued at $300K.

Remember, iBuyers purchase homes below FMV and realtors list homes at or above FMV, so that is where the comparison begins. The cost of repairs and holding property (mortgage, taxes, insurance, homeowners association fees and utilities) varies widely from one property to the next, and are the responsibility of whoever owns the property, so those variables were not assigned a specific value in the example below. All other values are calculated using industry averages that express a percentage of the home’s sale price.

Money

	iBuyer	Real Estate Agent
Home Sale Price	$270K (FMV -10%)	$300K (FMV)	FMV is $300K and the iBuyer offers to purchase at a 10% discount.
Loan Balance	-$100K	-$100K	The loan payoff amount is the same, regardless of who buys.
Repair Costs	iBuyer decides	Seller decides	Varies by property
Holding Costs	iBuyer assumes after a quick closing	Seller carries until home is sold	Varies by property
Professional Fee	-$24.3K (9%)	-$18K (6%)	Based on an average iBuyer service fee of 9% and a real estate agent commission of 6%.
Closing Costs	-$8.1K (3%)	-$9K (3%)	Based on average seller closing costs, which range between 1% and 3%.
Net Profit	$137.6K	$173K	Cost difference: $35.4K

In this scenario, the seller walks away with $35.4K less – that’s 13.1 percent of the sale price – by selling their home to an iBuyer. According to a new study by Collaterial Analytics, iBuyers can cost sellers up to 15 percent of their home’s sale price.

Time

	iBuyer	Real Estate Agent
Days on Market (DOM)	0	Av. 58 days*
Days to Close	Less than 14 days****	Av. 47 days**
Number of home showings	0	4 / month***
Flexible closing date	Yes	Depends on buyer
Flexible moving date	Yes	Depends on buyer

*National average based on April 2019 data from Realtor.com.
**National average based on February 2019 data from mortgage software company Ellie Mae.
***Average number of home showings for Portland, OR, based on 2017-2018 RMLS data.
**** No industry average available; based on various iBuyer claims.

While it is possible to sell quickly using a real estate agent, the traditional closing process usually takes well over a month. Selling to an iBuyer involves a faster transaction with minimal effort from sellers. It can also benefit sellers with busy schedules and time constraints, such as those who need to relocate for work or get cash fast.

So, that brings us back to the million-dollar question: Is selling your home to an iBuyer worth the cost? It depends on who you ask. Everyone wants to sell their property for as much as possible, but in real estate and real life, time is money. The answer comes down to each seller’s situation and what they value more: cash or convenience.

These are the opinions of Eric Lapin and not necessarily reflective of Title First.

Eric has 25 years of experience in the mortgage industry, which includes origination through servicing, technology, innovation, data and analytics. He is a member of the MISMO Community of Practice for Blockchain Education Committee and a frequent speaker at industry events.

Share This Post

Serious Problems in Overpricing Your Home

Putting your home on the market and want to get the most you can out of the sale? Of course, you do. We all do. However, there are issues associated with listing your home too high. After you review the comps from your neighborhood, you come to your own conclusion that your home is worth more. You can even find Realtors who will agree with you but know that the very best Realtors will tell you that overpricing a home can lead to serious problems.

Problem #1: Listings get the most showings in the first 30 days of being on the market. If a home is priced too high, buyers may choose to ignore it or put it in a “wait and see category.” The longer the home sits unsold, though, the more negatively it is viewed. Buyers will think it must be overpriced or there is something wrong with the home. If you wait too long to do drop the price, most of those “wait and see” buyers will have already moved on and there will be a smaller pool of buyers interested in your listing as the days on the market increase.

If the home is on the market too long, potential buyers will think they are in a better negotiating position and you may end receiving a low ball offer, which can be frustrating. Even if you can negotiate up, it will be for far less than your original asking price. If you want to attract as many potential buyers as possible, it’s important that the home is priced correctly from the onset of it going on the market.

Problem #2: An overpriced home helps your competitors. When a buyer looks at your home and then visits another that is priced the same but comes with more features, your competitor’s home will look like a much better deal.

Problem #3: If your home sits on the market for too long, neighbors and potential buyers will assume that there is a problem with it. The home will be stigmatized, and buyers will either be too turned off or too afraid to check it out.

No one wants to buy a house that nobody else seems to want. A house that sticks on the market for months often generate suspicions that some undisclosed feature or element is making it unsalable.

Problem #4: A buyer is interested in your house and willing to pay the price you are asking. But they need to get money from the bank to pay for it. All banks demand an appraisal of any property they loan out money for, and yours will not be the exception. The market runs the appraiser and they will appraise your property in accordance with it. When the appraiser comes back with a noticeably lower market value than the price the buyer is offering the bank will likely refuse to give the buyer a mortgage. This can lead you from a safe selling to an unsuccessful mortgage application leaving you with no option than seeking more buyers.

The Bottom Line: Find an experienced Real Estate Agent and listen to their advice for pricing your home, stay realistic in your pricing and accomplish your ultimate goal of selling your home. Know that 75% of real estate marketing is the price you set for your home. All of the marketing and advertising in the world will not sell an overpriced home.

Share This Post

Securing Your Smartphone

As technology advances, so does the use of smartphones. How cool is it to be able to do just about anything online, while on the go? These devices are becoming more commonplace, and the number of mobile phone users around the globe is expected to exceed the 5 billion mark in 2019. Most people don’t leave home or work without having their phone in tow.

Whether it’s calling your coworker, checking your bank account or sending a quick email, smartphones have become the one-stop-shop for conducting business. Now, more than ever, smartphones are being targeted by cybercriminals due to their part in multifactor authentication to access computers, mobile banking and shopping accounts. These accounts often hold sensitive data, credit card information (PCI) and personally identifiable information (PII). As we move into a digital era for the home closing process, smartphones have become another place to review sensitive documents ahead of signing. With such important information being viewed and sometimes stored on your phone, it has become even more vital that you keep your phone secure.

It may be surprising, but the largest risk to your phone security isn’t hackers, it’s you. Forgetting your phone at the table when you leave a restaurant, losing it at the airport or having it plucked from your purse are far more likely scenarios than getting hacked. However, hacking devices is on the rise too, and your phone security strategy should take that into account. Activating the lock screen feature on all your devices is a good place to start. The screen automatically locks when the device is not in use, and it requires a passcode, fingerprint or facial recognition to unlock it. This step helps to ensure that no one can access your device if it is lost or stolen.

Here are some other great tips to help secure your mobile device:

Ensure your phone is always running the latest version of its operating system and apps by enabling automatic updates. These updates often are meant to fix security weaknesses in the software to reduce its chance of being hacked.
When downloading apps to your phone, only use trusted sources such as the Apple App Store, Google Play or the Amazon Appstore. Don’t trust every app on these stores, either. Many apps ask for overly broad permissions, are brand new and not fully tested, or are no longer updated, which could expose you to security vulnerabilities. Be sure to check reviews and for active updating before downloading an app.
Download a credible antivirus app recommended by a trusted source. Your device should be treated just like a computer and protected that way as well.
Many phones today come with software you can enable to remotely track your device if it’s lost or stolen. Even if your phone doesn’t come with this feature, or you would like expanded security options, there are many anti-theft apps available. These apps range from simply pinging your phone’s location to being able to remotely lock and wipe all content from it.
Regularly backing up your data is a great strategy to retain your information. Many phones allow you to set up an automatic backup to store photos, messages, apps and more. Knowing this information is backed up will make it easier to choose to remotely wipe your phone, if needed.

Overall, mobile devices add productivity and flexibility by providing access to resources at any time, from anywhere. Smartphones are becoming our constant companions, so we need to stay vigilant when it comes to mobile security.

Share This Post

Increase the Value of Your Home, Inexpensively

Considering selling your home by next Spring? You will want to get the best price, of course, so start now by getting your home in tip-top shape. You don’t need to spend a lot of money and can do much on your own. Here are a few ideas and if you need guidance, calling the most experienced Realtor to visit and give you advice is always a good idea.

Deep Clean: Start with decluttering every room and closet. Donate, sell or throw away things you don’t use anymore. Vacuum, mop, & dust every surface, every vent, every blind and scrub the bathrooms. Get down on the floor and get your baseboards and lower cabinet doors wiped down. Wash the walls and make all your windows sparkle. Steam-clean all the carpets. These are all perfect cold, Winter day chores to tackle.

Paint: While you may love your brightly painted rooms, they make it harder to sell as the potential buyer usually can’t see beyond your taste. Use neutral colors and watch as minor flaws are hidden and the rooms are brightened. Simply paint the trim and see a new room appear! Just updating paint jobs, especially in the master bedroom the entry foyer, living room, and kitchen can increase the value of your home.

The Face of the Home: Rent a power washer if you don’t have one and transform the exterior of your home from “lived in” to “like new”. Use it on the siding, brick or wood, sidewalks, driveways, decks, porches, garage doors, any porch furniture that is left out and windows.

Landscaping: Depending on the time of year – if it’s right now, Fall, get the leaves up and off the ground. Rake out gardens and pick up sticks. Cut down any low hanging branches or twigs. Removed dead shrubs and make sure the property is well-edged.

Spruce Up Your Kitchen: No need to gut and rebuild. Add value by replacing cabinet hardware, the faucet in the sink, even appliances if they are dented or overused. Repaint walls and even cabinets.

The Bottom Line: There are so many ways to upgrade your home before you sell it and literally up the value by thousands. A simple change of light switch and outlet covers make a world of difference. So, if you are waiting until Spring to list your home, spend the dark Winter months knocking off a to-do list!

Share This Post

CLOSING TIME: 6 STEPS EVERY HOMEOWNER SHOULD EXPECT

Get owner’s title insurance and buy your home with confidence
Your long home-buying journey is almost over. You found the home you love, the seller agreed to your offer and now it’s time for closing. Of course, there’s a lot to think about right now, and the last thing you want is something to go wrong. So make sure you work with an experienced closing agent to help ensure the details come together and everything runs smoothly.

As soon as the seller accepts your offer, the behind-the-scenes work begins. You can expect closing to happen within 30 to 90 days.

Select a Closing Agent: If you are working with a real estate agent, with your permission, he or she may place an order with a closing agent as soon as your sales contract is accepted. The closing agent can be a title company, an escrow company or a settlement company. Most homebuyers rely on their real estate agents to select a closing agent – someone they work with regularly and know to be professional, reliable and efficient. However, you can choose your own closing agent if you wish. The closing agent will oversee the closing process and make sure everything happens in the right order and on time, without unnecessary delays or glitches.
Draw up an Escrow Agreement: First, a contract or escrow agreement is drafted, which the closing agent reviews for completeness and accuracy. The agent will also put your deposit into an escrow account, where the funds will remain until closing.
Title Search is Conducted: Once the title order is placed, the title company conducts a search of the public records. This should identify any issues with the title such as liens against the property, utility easements, and so on. If a problem is discovered, most often the title professional will take care of it without you even knowing about it. After the title search is complete, the title company can provide a title insurance policy.
Shop for Title Insurance: There are two kinds of title insurance coverage: a Lender’s policy, which covers the lender for the amount of the mortgage loan; and an Owner’s policy, which covers the homebuyer for the amount of the purchase price. If you are obtaining a loan, the bank or lender will typically require that you purchase a Lender’s policy. However, it only protects the lender. It is always recommended that you obtain an Owner’s policy to protect your investment. The party that pays for the Owner’s policy varies from state to state, so ask your settlement agent for guidance. before closing.
Obtain a Closing Disclosure: Your lender must provide a Closing Disclosure to you at least three days prior to closing. Your lender may also have a closing agent provide the Closing Disclosure to you three days before you close your transaction. If your lender makes certain significant changes between the time the Closing Disclosure form is given to you and the closing, you must be provided a new form and an additional three-business-day waiting period after the receipt of the new form. This applies if the creditor: 1: Makes changes to the APR above 1/8 of a percent for most loans (and 1/4 of a percent for loans with irregular payments or periods) 2. Changes the loan product 3. Adds a prepayment penalty to the loan. If the changes are less significant, they can be disclosed on a revised Closing Disclosure form provided to you at or before closing, without delaying the closing.
The Finish Line: Prepare for Closing: As closing day approaches, the closing agent orders any updated information that may be required. Once the closing agent confirms with the lender and the seller, he or she will set a final date, time and location of the closing. On closing day, all of the behind-the-scenes work is complete. While you’ve been busy packing, ordering utilities and coordinating the movers, your closing agent has been managing the closing process so that you can rest assured, knowing all the paperwork is in order.

More Homebuyer Tips & Information
The American Land Title Association helps educate homebuyers like you about title insurance so you can protect your property rights. Check out Title First Agency to learn more about title insurance and the home closing process.

This advertising offers a brief description of insurance coverages, products and services and is meant for informational purposes only. Actual coverages may vary by state, company or locality. You may not be eligible for all of the insurance products, coverages or services described in this advertising. For exact terms, conditions, exclusions, and limitations, please contact a title insurance company authorized to do business in your location.

Share This Post