Services: Instant Offers
Likely something new to real estate since the last time you sold a home are “Instant Offers” or “ibuyers”, which are large, investor funded companies making an offer on your home with a strategy of then very quickly re-selling it at a profit.
If you wish to explore an Instant Offer through any of the institutional buyers working in our market, but certainly don’t want to be in a position having to accept their offer, here’s our advice:
Understand that these Institutional Buyers want to purchase and very quickly re-sell your home at a profit. In fact, Zillow expects to conduct $20-Billion dollars a year in sales flipping homes like yours. (Insert from Inman News: During his interview with WBUR, [Rich] Barton [CEO of Zillow] echoed his own earlier comments about the [Zillow Instant Offer] program, saying that within three to five years Zillow Offers could be doing $20 billion in sales per year. Barton said that amounts to about 5,000 houses per month.)
If you carefully read the offer any of these Institution Buyers present to you or hire an attorney to do so on your behalf, you should be able to avoid being locked into a sale that you will regret.
Institutional Investors make money at least two ways: 1) buying your home at a price they can instantly turn around and re-sell it at a profit for, or 2) receiving large referral fees from "Zillow Premiere" real estate agents, or other agents the Institutional Investor is contractually affiliated with, they will forward your contact information to.
Although the fees are not published, experts in the industry estimate Zillow and other Institutional flippers receive in the range of 30% to 40% referral fees from agents they sell your information to. You will receive aggressive calls from agents paying referral fees to the Institutional Investors–perhaps to the point of requiring that you speak with the agent–when you ask Institutional Investors for an Instant Offer on your home.
A third way Institutional Investors make money is through referral or advertising fees from third-party vendors (title companies, lenders, inspectors, repair and renovation companies, etc.). They may either receive fees from when you use recommended services, or the Institutional Investors may own these companies outright and can take the profits directly.
If you are only halfway sure you want to consider an offer from an Institutional Investor Clear Realty can legally help you one way—that’s through our Instant Offer Service.
With Clear Realty’s Instant Offer Service, we will complete our Full Service agreement to market and sell your home. Within the agreement is a paragraph stating that if you sell to a specific buyer (the Institutional Buyer named in the contract) we will greatly reduce our fee from 4% to just a flat $1,500.
This allows us to discuss market values, inspection contingencies, and alternatives to their demands with you as you negotiate with the Institutional Buyer. If the Investor deal works out, Clear Realty assists you in your real estate related decisions all the way to closing.
If you end up rejecting the Institutional Buyer’s offer, we will have not missed a beat–already having implemented our Full Service Marketing of your home including the PRICE, PREPARE and PROMOTE tools exclusively for you. You get both options.
Please note: Clear Realty is a real estate brokerage and not a law office. As such we can only advise you regarding real estate and market value information; by Colorado law we (and every other licensed real estate broker) cannot advise you on contracts created by private legal corporations such as Institutional Investors. Because the Institutional Buyer's sale contract was drawn up by their attorneys and written to their maximum benefit, you will still need to hire an attorney to discuss legal ramifications of the document. The Department of Regulatory Agencies for the state of Colorado does not allow real estate brokers to advise on real estate sale contracts outside of those created and approved by the state of Colorado.
At the bottom of this screen are links of the most well-known of these Institutional Investor companies, and at the time of writing this, these Investors include: Zillow, Redfin Now, Opendoor, Offerpad, and Knock.
Clear Realty™ wants you to know these institutional investors exist in case you want to sell your home directly to them. But please read all of their “small print” about the requirements to sell your home to them and their fees and expenses to you.
Based on a well respected real estate industry analyst's report these Institutional Investors (AKA: I-Buyers) are making a low of 9% and a high of 18% flipping homes like yours. This is based on fees they charge you and the price they sell your home for above what they pay you. Please see page 27 of this complete industry report.
The perpetually adjusting fees from institutional investors likely come from: 1) how much profit they made during recent flips, and 2) the rate of appreciation for homes like yours. If they sense missing their profit target they likely adjust upward the fees you pay.
I do want to note that it’s not really Redfin buying your home—it’s some separate institutional investor “Redfin Now” (see their disclosure directly below). I know this because they were the only institutional investor openly stating that you have zero representation when they make a direct offer on your home—meaning they are in this deal for their own best interests and profit. All of the other institutional investors are also in this for their own best interests and profit, but were not as forthcoming with this kind of disclosure.
Another caveat from others outside of Metro Denver who inquired about the Zillow instant offer online is that they also sell your information to Zillow Premiere Agents and you will get solicitations from them. So once you submit your home’s information online to institutional investors be aware you are living by their rules and they may make money either by directly buying and flipping your home or through fees received by agents buying your information. Read in detail each investor’s “terms of service” and every bit of information regarding their investment program to avoid unexpected losses on your sale.
Below is Zillow’s instant offer terms of service—but there are many other details you must read beyond this statement.
Since as a home seller you receive no representation directly from the institutional investors buying your home via their instant offers, you should hire an attorney at your expense.