Does a company that lets you skip the traditional home-selling process and instantly make thousands sound too good to be true? It might be. Lately, there have been a lot of reports of homeowners being scammed out of money by iBuyer companies. If you want to protect your finances, it’s important to understand these scams and learn how to avoid them.
FTC Investigation Finds iBuyers Are Scamming Homeowners
If the recent real estate boom has you considering selling your home, you’ve probably come across iBuyers. Short for “instant buyers,” these are online companies that promise to buy your home quickly. Instead of spending weeks negotiating and scheduling showings, you can get a cash offer in as little as 24 hours. This might sound awesome, but it comes with a major downside.
iBuyers like Opendoor and Offerpad claim to offer fair market value. Supposedly, they turn a profit by using technology to skip fees and hassle. But recent government investigations have found that these marketing claims can be misleading. Instead of streamlining the process while giving homeowners a fair price, many iBuyers are tricking customers.
The Federal Trade Commission (FTC) recently announced that industry giant Opendoor was lying to customers. Their investigation discovered that the company was offering prices below market value. Once uninformed homeowners sold for a low price, Opendoor would then turn around and sell at a higher price to get a profit. To resolve the issue, an administrative order requires Opendoor to pay $62 million to compensate homeowners who lost money. Opendoor has also been ordered to stop deceiving home sellers.
The FTC may have gotten Opendoor to agree to stop making misleading claims, but there are countless other iBuyers around. The internet lets just about anyone start a business for buying homes online. These unregulated businesses can easily cheat unsuspecting homeowners out of their property’s full value. Going with an iBuyer can cause you to lose a lot of money.
Learn Your Home’s True Value to Avoid Being Cheated
If you don’t want to end up losing your hard-earned money, it’s essential to do research before selling. The main way that iBuyers cheat their clients is by offering below-market prices. You can often make far more by selling on the open market instead of working with an iBuyer. By knowing your home’s true value, you can make sure you agree to reputable deals only.
Discovering a home’s value involves more than just looking at automated real estate sites like Redfin. Though online estimators are OK to start with, they just guess based on nearby home values. They don’t take into account unique landscaping, desirable locations nearby, high-end kitchen appliances, or other factors. Even a small error in your estimated value could mean you leave thousands of dollars on the table.
How do you make sure you’re asking for enough money? If possible, work with a licensed appraiser. These professionals have specialized tools and training. They’ll assess your home’s location, upgrades, and other features to find its true value. Though a professional appraisal isn’t free, it’s certainly worth it. Once you know how much your house is worth, you can make sure potential buyers are offering a fair amount.
You also need to make sure you compare prices from different prospective buyers. Many iBuyers scam people by getting them so excited about fast sales that they don’t get other estimates. If you go with the first person to make an offer on your home, there’s a big chance you’re missing out. Instead, you need to consult with multiple reputable sources to get an accurate idea of your home’s value.
What determines your home’s true value?
True value is more than the number you can get from the above sources. There is fundamental investment data that helps determine the true value of your property. Home features, location, local comps, updates, etc. are all key to determining the value. But your home value is wrapped up in more than a resale number. So what investor data helps determine true value? To name a few …
- Monthly rental rate the property would provide
- Daily rental rate the home could achieve as a short-term rental
- Net Operating Income
- Market-Ready Renovation Costs
- Local Investor Activity
- Local Business Development Data
To learn the True Value of your home, contact Evergreen Investments.
Informed Sellers Are Less Likely to Get Scammed
It’s also worth noting that many iBuyers use their client’s ignorance about the home-buying process to cheat them. A site might say, “We offer $20,000 below market price, but you’d spend way more selling your home traditionally.” You do have to spend a little preparing your home and paying a realtor when you sell traditionally. However, this might not cost as much as an iBuyer claims.
Instead of taking iBuyer claims at face value, you need to do some research. Being informed helps you avoid mistakes that can cost you money. The right research will do more than just help you spot iBuyer deceptions. It can also help you turn an even bigger profit than you thought possible. There are a lot of little details about home sales that you might not know. For example, houses sell for more in the summer, so waiting a few months can result in more money.
How can you figure out all these details? Of course, it is possible to look into everything yourself. The internet contains a lot of helpful resources that homeowners can use to get ready for a sale. You can also get help from experts. Evergreen Investments has years of experience, so we can advise you on the best way to sell. Our advice lets you find the right time to sell and figure out how to prepare your home for showings. We can even provide insight into the best market for your property. Depending on your type of home, you might benefit from selling to local investors in our network.
How to Tell if a Company Is Fraudulent
The final thing you need to do to avoid being scammed is to work with reputable companies only. With all the different options to choose from, this can definitely seem easier said than done though. You’ll need to take some time to search for companies you can trust. Not all iBuyers are automatically sketchy, but an unfortunately large number of them are. You’ll need to weed out the potentially problematic companies to find reliable real estate professionals.
Start by looking at the company’s website and marketing material. Learn a little about the company and see how long they’ve been in business. If they make promises that seem a little too flashy and profitable, they might be misleading you. Pay close attention to details about things like fees to avoid getting scammed in the fine print. A reputable business usually has a professionally built website and a decent portfolio of past projects. They should also have a team of dedicated employees who are happy to explain how the company works.
You can also check up on companies by researching them online. Looking to see if they’ve been involved in any legal drama or government investigations is often a starting point. If possible, learn who owns the company and how they run their business. Next, see what their past customers say. A reputable company will have plenty of satisfied clients who are happy to recommend the business.
Ultimately, iBuyers might seem convenient, but you risk losing a lot of money by working with them. Homeowners are better off taking the time to research market conditions and work with established real estate companies. If you want to take charge of your finances, Evergreen Investments can help. Our team is here to help you find your home’s true value and develop a profitable real estate investing strategy. Contact us today to learn more about our services.