The post The New Way To Sell A Home — Evaluating Ibuyers appeared first on Affording Freedom.
]]>With house prices soaring, my wife and I have decided it’s time to make a change. We have known for a while now that we want to be able to have a simpler life and slow down our go-go-go lifestyle. A life that truly embraces the less is more mindset just isn’t possible where we are now. The fact we can sell our house for a profit gives us the freedom to actually chase our dreams and find that peace we are looking for. Unfortunately, selling your home takes a substantial amount of work. A lot goes into selling your home and getting it ready to go on the market. Cleaning, getting the house show-ready, open houses, the list feels endless. It is a process that only gets more complex when you add little kids to the mix. Trying to arrange a time to be out of the house at a moment’s notice with kids is something we are definitely not looking forward to. It almost felt impossible with our work schedules to be able to find the time to work, get the house ready to sell, and take care of our daughter. We were desperately looking for a new way to sell our home, and we stumbled upon the concept of Ibuyers. Throughout this article, we will go over our experience with an Ibuyer, how it works, and the pros and cons of working with them compared to a traditional real estate agent.
Ibuyers or instant buyers are real estate companies that leverage technology and unique algorithms to evaluate your home and offer cash quickly without the traditional pain points of selling your home through the market. Sound too good to be true? We thought so too. Let’s take a deeper look at the largest Ibuyer out there, Opendoor.
Like most Ibuyers, there do not serve every location and are selective about the markets they serve. They are currently available in over 40 markets and are constantly looking for ways to expand. Below are just a few of the cities they service and if you are interested in the complete list of cities they cover click the link here.
The basic model of Ibuyers and Opendoor is based on a straightforward model.
1. O ffer a free assessment and make a competitive to below-market cash offer on a property they view as undervalued.
2. Send an in-house inspector to the property and conduct an in-depth inspection.
3. Based on the findings in the inspection, adjust the final offer (if need be) and deduct any required repairs or cosmetic enhancement from the offer.
4. Quickly turnaround and sell the house for more than purchased.
When comparing Ibuyer to the traditional home sale, both have various pros and cons associated with them. Essentially with the Ibuyer model, you are sacrificing the maximum sale price for speed and a stress-free sales experience.
| Selling To Open Door | Traitional Home Sale | |
| Fees | 5% seller charge | 6% Commission (standard) |
| Offer Range | 97% – 100% of Market Value | 100% – 104% Market value |
| Closing Costs | 1-4% | 1-4% |
| Closing Timeframe | Completely in your control | Less control and potential overlap with extra fees |
| Repairs | No out-of-pocket costs. Repairs taken out of offer price | Negotaited with buyer |
| Cleaing/House Prep/Open Houses | N/A | Must be down until house is under contract. |
| Seller Conssessions | N/A | Can be requested by buyer |
| Primary Point Of Contact | Opendoor Team | Real Estate Agent |
When it comes to what is the right choice for you, it really depends on two key factors; goals and timeline. An Ibuyer is a great fit if you want to move quickly and have an easy sales experience. For my wife and I, the reason we like them is because the offer is extremely competitive and the fact we don’t have to worry about showing the house with our newborn is a massive benefit to us.
However, we are sacrificing maximum profitability by choosing Opendoor and foregoing the traditional home sale. If you aren’t in a hurry and are more focused on making the most you can, the traditional real estate market will be a better fit for you. No matter what, selling your home can be an extremely stressful time so having more options never hurt anything.
I’d love to know in the comments your experience with any Ibuyers and if you would personally recommend them. So far, we have only positive things to say about Opendoor and would defintely recommend you to at least take a look and see what they would offer you.
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]]>Purchasing your first home, or any home for that matter, is a big deal! It is without a doubt the most significant purchase that most of us will make in our lives. We contrast this want of a home with the allure of living rent-free. Living rent-free sounds like a fairy tale to most of us. We are usually so excited to purchase a home that we never really stop to consider if it is a good investment. It is not just if we like our home or can afford it, but does it truly makes sense and align with our goals. In all my life, I have never heard anyone say they would like to be in crippling debt and financial stress for their entire lives, but often the home is nothing but a liability for us financially rather than a benefit to us from day one.
The traditional method is to wait at least five years, and you will be able to break even on your home while you are paying off debt for the next 30 years. The problem with this method is we don’t evaluate the house like an investment. We need to consider the true costs of homeownership. This article will highlight a few ways to look at the purchase of your home so it can benefit you from day one rather than just a long-term investment or liability in the present.
“Home is where the heart is” I like to take that literally whenever we think about our housing situation. The most traditional way to generate wealth is by purchasing property, primarily a single-family dwelling. There’s nothing wrong with this method, and it has been highly successful for many people for thousands of years. However, the conventional home only offers one consistent way to generate income: allowing appreciation of the land and property to occur over time. Typically this takes a minimum of five years for appreciation to occur to a point where it can be financially profitable. In the past few years in this unbelievable market, it has taken five minutes to sell a property and be profitable instead of five years. This, however, is unsustainable and should not be banked on.
The only problem with the traditional home-buying approach is it doesn’t help you today other than locking in your housing expense. Your home has the potential to bring payments to you today rather than just you paying out today. Typically, when evaluating a home, you are only concerned with what you can qualify for. The home is viewed as a fixed expense, and if we make money on the home, eventually fantastic. We need to view homes differently as investments.
Here are a few key ideas to treat a home as an investment.
When you look at your 30-year mortgage, it can be depressing and sometimes overwhelming. We sign up for an obscene amount of debt and agree to pay it off for the rest of our lives. It is true that we are locking in our housing expense which is a great thing, but there has to be a better way.
When evaluating the home, we often look at the total purchase price rather than the payment. We need to be reviewing the ratio of payments to our whole income level and budget in addition to the loan amount. Debt can be used to our advantage if we genuinely think it through. Too often, though, the home is just a place where we lay our head down at night with no real financial value for today. Differentiating between payments and debts may seem simple, but it’s crucial to our ability to live rent-free.
The difference between good debt and bad debt is simply if you can receive money on the debt or not. Suppose you are paying money to pay off debt; that typically makes no sense. If you can make money by acquiring debt, you might have something there.
For example, going into debt to purchase a new car is not a good idea. That car is depreciating from the moment you pull it off the lot. You are only paying money towards the car, and it is offering no financial value to you. Contrastly, if you purchase a rental property, you are going into debt to receive money each month in the form of rent. This is a much better use of capital and debt because you have an asset that gives you options, and someone else is paying for it.
We all know there are many costs when it comes to homeownership, such as taxes, insurance, repairs, the list goes on. Whether we are trying to earn extra income by renting out a bedroom or viewing a rental property, a good rule of thumb is if you can make in rent one percent of the total purchase price, you have yourself a winner. This will typically allow you to cover all expenses related to the house and potentially have a little leftover to go against the mortgage or directly into your pocketbook.
Let’s say we are looking at purchasing a home worth $400,000 in Dallas, Texas. The 1% rule says if we receive $4,000 a month, that will cover all expenses related to housing. Let’s see if this holds.
This property in downtown Dallas has a pretty hefty HOA and property taxes but is standard in the area. We can use the 1% rule to see what it would take to offset our housing costs and evaluate a property’s rent potential. Our total monthly payment for this home is $3,599. The 1% rule would allow us to profit $400 or at least use the money to cover unexpected expenses. This deal cash flows nicely with a $4,000 rental income. Remember just because the 1% rule works on paper does not mean it is a good deal. It just means that it is worth a deeper look at the home and to see if it makes a good investment.
Things to consider if the 1% rule holds true:
Affordable housing is starting to seem like a myth right now, and inflation is running wild. Even with interest rates at historically low levels, finding a house within a budget is proving to be almost impossible. In times like these, we need to get creative because there are still many options in front of us. We just need a change in perspective.
The traditional single-family home in the city or suburb might be out of reach right now, but if that is our goal, we need to focus on creating more financial margin in our lives. We might just need to sacrifice what we want now with what we want most.
Tiny homes, multi-family housing such as duplexes, triplexes, ADUs (Alternative Dwelling Units) are becoming increasingly popular. They offer flexibility and affordability with the potential to earn income on the side.
It may look different than what you thought, but let’s face it, normal isn’t working. It’s time to start thinking and looking at things differently.
If you are interested in talking with one of our experienced financial coaches please click the link here! We would love to walk through this journey with you!
As always, you got this!
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