The Instant Buyer Real Estate Model Is Here to Stay

A case study on iBuyers

ibuyer real estate

In many growing real estate markets in the country, you have likely seen homes for sale in desirable neighborhoods purchased by Opendoor, Zillow, or Offerpad, the three leaders of the iBuyer marketplace. Opendoor has dominated this space for most of 2019, acquiring over 9,000 homes in the first half of the year, which was three times the amount purchased by their closest competitor, Zillow, according to a report conducted by the University of Colorado Boulder.

In case you are not familiar, Opendoor, Zillow, and Offerpad provide opportunities for current homeowners to bypass the process of listing their home with a real estate agent, staging a home, conducting open houses, and haggling over offers with buyers. Very similar to the model CarMax provides automobile owners, all three platforms will purchase your home directly from you, starting with a free cash offer of your address after submitting some basic information of your property in minutes.

With all three platforms, there are no listings, showings, or open houses, and you can pick your closing date. Opendoor and Zillow will allow you to back out at any time without penalty, and their offer provided is valid for five days.

The iBuying platform has attracted other competitors, such as Knock and RedFin, however their strategies appear to be noticeably different than Opendoor and Zillow. As of the original published date of this article (September 2019), Zillow, Redfin, Opendoor, Offerpad, and Knock were only competing directly against each other in one market (Dallas). Four of the five (Redfin excluded) are in the Atlanta, Phoenix, Raleigh, and Charlotte markets, and there is iBuyer representation in other markets throughout the Southeast and West Coast. Notably there is no presence north of North Carolina, and very limited in the heartland of America.

You may be wondering how do these companies make a profit on these homes they purchase. Essentially these are very well run house flipping operations by name brands you know and trust. The offer presented to a seller is fair market value, likely a bit less than what they would get if they listed in on the open market, however they are selling the home as-is, with no effort to do anything other than be available for one inspection to be completed prior to close.

Once the transaction closes, the iBuyers will pay to renovate (when needed) or do basic cleaning and maintenance to the home to get it ready to put on the market. While they are owning the property, the iBuyer is responsible for any homeowner’s association dues and property taxes. Once they put the house on the market, they will have to pay the commission to a buyer’s real estate agent. After adding all the numbers up, you can imagine in many cases the margins are razor thin.

I wanted to put the iBuyer programs to the test, so I leveraged the current property I am living in (a 3 bedroom, 2.5 bathroom townhome purchased nearly 3 years ago to be a buy and hold rental) as an address to compare the differences in offers I receive. In the neighborhood my property is currently in, there have been four homes purchased by iBuyers, with Zillow and Opendoor both acquiring 2. 3 of the 4 ended up selling, and 1 (an Opendoor purchase) is currently being rented out.


It took roughly ten minutes to answer all the questions on Opendoors website about my townhome. The process was relatively painless, and there were sections in the questionnaire where I could upload photos of specific upgrades, or add additional information via text.

Opendoor sent over the offer two days later via e-mail, in which they came in at $162,600 for the townhome. Opendoor has a 6.5 percent service charge (1 percent lower than Offerpad) and stated they could close in two weeks from acceptance of the offer.


Since I had just answered the questions on Opendoor’s website, I breezed through Offerpad in less than 10 minutes, as the questions were identical. The only difference I found when requesting an offer with them was that they did request photos, and would wait 24 hours for me upload pictures before working on my offer. I will not send any, so I suspect that will cause a slight delay in the time for receiving the offer.

Update – A few hours after submitting my information, Offerpad replied with my purchase offer. They shared a purchase price of $166,000, and the flexibility of selling over the course of 90 days. Offerpad also offered a $500 Home Depot Gift Card if I signed within 7 days of receiving the offer, as well as a free local moving service and the ability to stay in the home three additional days after closing. The email provided contact information for a local representative should there be any questions, however it’s process seems to be very smooth. In the offer, it does share that the “service charge” is 7.5 percent of the purchase price, which in this case was a little over $12,000.

The 1.5 percent difference between going through a real estate agent and using an iBuyer in my opinion is offset by the free local movers, the ability to stay in the home if needed up to three days after closing, and the flexibility of choosing a closing date, which makes the sale stress free. As you know, real estate agents don’t get paid until your home sells, so they often are not as motivated to work with a passive seller.


This is where things got interesting. When submitting the information on Knock’s website, it started out the same as Opendoor and Offerpad, however Knock’s strategy is to allow you to “trade in” your home for another. After I submitted all the information, I was presented a marketplace of homes that apparently Knock had acquired in the area, with pricing that was slightly below what you find on an MLS. Minutes later, I received an e-mail with my price analysis for my home. It shared the estimated value with a very wide range, in this case $157,500 to $183,500, and a two-week window that the offer was valid for. The e-mail provided the name and contact information of a local contact for Knock, and instructions to move forward in the process (which included scheduling a phone call, finalizing pricing, and setting setting up dates for closing). Knock appears like their process is very smooth, and I could envision someone staying in a local market being able to seamlessly sell one home and purchase another through them with no real estate agents used at all.

Zillow Offers

The final platform I submitted my offer for my property was for Zillow Offers. The process went very smooth completing information on their website as well, and at the completion it was noted an advisor would be calling within 24 hours to collect more information and provide an initial offer. After that phone call, the advisor will share information with Zillow’s pricing team, and a few days after that an offer is provided.

Recap 48 Hours After Submittal


Opendoor           $162,600

Offerpad              $166,600

Zillow Offers      ???

Knock                   $165,500

48 hours after completing the information on all four websites, submitting zero photos, and making no phone calls to share additional information, I have a general idea of what the market thinks my townhome is worth, if I decided to sell it. Full disclosure, I had considered changing my investment strategy from a one door at a time, buy and hold to purchasing a multi-family (4 plex) somewhere in the heartland or, join, which is an online platform that allows you (the investor) to enjoy the benefits of flipping homes or owning rentals, without the hassle of the upkeep. You can start investing with Fundrise with as little as $500, and invest directly in a portfolio of properties that generate consistent quarterly cash flow with upside potential.

Fundrise offers investors a number of products to potentially invest in, and we will do a comprehensive review of their platform in a future article.

Which iBuyer is best for you?

There is no easy answer to this question, however it is important for you to know everything before you decide to move forward and sell your home with one. iBuyers typically charge a total fee in excess of 7.5 percent of the purchase price, compared to the standard 6 percent real estate agent commission. They will also offer you a purchase price between 85-95 percent of the retail market value for the home. The ideal customer for them is willing to forego the money they are leaving on the table for the convenience of selling their home in a matter of days.

A former co-worker of mine sold his home when he accepted a position with his new employer across country with Opendoor, and from offer to closing, the process took 12 days. He likely could have yielded an extra $5-10,000 in his pocket had he sold it with an agent, however there was no guarantee of that, and he was on a time crunch. For some whose financial situations change (think job loss, loss of income due to a death in the family), the iBuyer platform checks many boxes to make the real estate sales process painless. My suggestion is if you are in a market when one or more iBuyers are available, get an offer from all of them, and make sure you do your due diligence before committing to the sale.

0 0 vote
Article Rating


Notify of

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Inline Feedbacks
View all comments





Should I close unused credit cards

Should I Close Unused Credit Cards?