Things to consider and compare when using Online, Instant quote, Instant Offer Services.  Are They what they advertise to be?

A homeowner has many things to consider when selling their home. A new trend are websites that foster a Direct Sale or a For Sale By Owner, FSBO, approach, that claims the home owner will save money on commission and other cost.  Redfin, Opendoor, Zillow Offers are some of these service providers. 

Lots of terms are used to describe their services, Fast Cash, No Hassle, Fair Price, Painless, and Free.  But the real question is, how will these services work with getting the most equity out of your home and into your pocket?

At the end of the day, How can a company buy your home at or above a fair price and then resell it to a buyer for a profit, after they double their closing cost, double administration fees, financial carrying fees until it sells and STILL give you more money than you could get in a conventional sale? 

Buyers are not going to pay more than what a home is worth, so their profit will probably come from buying it lower than fair price, charging more fees and getting inflated repair costs tacked to the closing.

  • How will my home’s value get set?
    • If priced too low, you will leave money on the closing table.
    • If priced to high, your home will not get many showings or just not sell.

Some services ask you to research and get a price, others will have “Experts” provide the listing price. Some will send you comparable sales, but you really don’t know if they are showing all the sales and if the comps are the same ones a Mortgage appraiser will use or If their comparable sales will fairly compare to your home’s amenities ( Updates, Lot size/location, floorplan, pool, sq.ft. size range, flooded/not flooded, area construction, schools, … )

One of the most important parts of selling your home is getting an accurate, fair price to list and sell it for.

  • How will my home be advertised and marketed?
    • The days of a sign in the yard and posted on MLS are about over. Homes need to be actively marketed towards target niches and buyers.
      • Hiring a professional photographer is fairly easy, but you need to get the photographer to take the photos to show your home’s best attributes. Photographers take pretty pictures, but will they give your home the advantages it needs to capture a buyer’s attention.
      • Will they market to local areas or will they even know who the most probable buyers to target? Buyers look for areas, shopping, schools, parks, commute times and many other factors. Using a service over the internet, its most likely they will have little knowledge or experience in your neighborhood or area.
      • Buyers also get information for homes from Social Media that are shared friends and family in the area. National services will not be connected to this referral system of close relationships.
  • Most Buyers will use a Buyer’s agent. This agent will want to provide their buyers with as much information as they can. Will they be able to get this information in a timely way, will it be complete, and will they be able to feel confident the information is correct? Agents have learned to be skeptical of working with FSBO services. Not because the seller is saving money, but to not getting the transaction to process smoothly. When there are lots of problems for their buyers, the buyer becomes angry and will blame everyone, including his agent, who really had nothing to do with the problem. So instead of risking another bad transaction, they will not be encouraged to offer positive feedback to their buyers on selecting homes from these online services.

In general, selling your home can be a pretty easy process, or it can be a transaction from hell.  Critical parts can be forgotten, not processed on time, followed up or just negotiated incorrectly.

  • Experience is the key to a smooth transaction.
  • Will the online service be there to ensure the Earnest Money be delivered and posted per the contract.
  • Will Option Fees be on time before the option period expires,
  • Will they have local contractors/handy men that can help with repairs and also will they have experience to know how to negotiate repairs?
  • Will they follow thru with calling the lender throughout the process to verify loan status and if any problems need to be worked out before becoming critical to missing closing date?
  • Do they make sure proper scheduling of the closing and if buyers and sellers will be available or need Power of Attorney?
  • Will the title fees be reasonable, or will they be higher than normal?

I’ve seen realtors take hours comparing sales after they visit a home to calculate a fair and sellable value.  Some of these services use an automated process to get it in seconds. Makes you wonder just how accurate it can be. Computers can’t compute factors of Location, Appearance, Condition, room flow and multiple other factors that Buyers consider when selecting a home.  So these services must allow room in the price to adjust for the items they can’t measure. This adjustment will not be in your favor.

To get an accurate answer IF you will save money, get real numbers and not generally supplied guesstimates from the services.  You will need to know up front

  • how they valuated your property.What comparable sales did they use and can you verify they used recent sales, sales in your neighborhood, approx.. size as your home and did not cherry pick out the low sales.
  • real value on the repair cost and how these costs are bid out. Will these repairs have to be done before selling them your home and will you control how they are done.
  • what their title company fees will be and what their closing cost ( aka Commission ) is.
  • Verify there will not be any other fees that pop up.One trick is to say they have a 1% commission while charging a 7% Transaction fee.

 If you can’t get this information in a concrete form, then you may be signing a contract with lots of bad surprises.