04/02/2020
A special thank you to Barbara Woyak - Divorce Real Estate Agent for this interesting article.
iBuyers and Divorce
Barbara Woyak, MBA, GRI, CNE, ABR
Certified Divorce Real Estate Expert
Keller Williams Realty Sonoran Living
There’s a growing trend in the real estate investing space, and divorcing homeowners are becoming
prime targets. If you haven’t already seen this, you likely will. My intention is to give you some insight
so that you can weigh the pros and cons, while protecting your clients from predators who are looking
to cash in on your clients’ real estate asset.
They go by the term “iBuyers” and the larger company names you may hear are Zillow Offers,
Opendoor, and Offerpad. iBuyers employ phone sales departments whose job is to troll county records
for recent divorce filings and solicit divorcing homeowners directly. They offer to buy their houses with
cash, as-is, on a specific closing date. While this may sound like a great solution to liquidating the
house in a case, it comes with a heavy price.
What are iBuyers?
iBuyers are large-scale companies that use automated pricing algorithms to make offers on houses.
When a seller agrees to discuss the offer, the iBuyer names their price, based on their analysis of the
home’s market value and the amount of work it needs. Sellers get the convenience of picking their
moving date, and it’s very easy to time a move with the purchase or lease of another property.
Why are they targeting divorcing clients?
iBuyers are most attractive to sellers with some time urgency. Key examples are estate sales, sellers
moving for work, and of course divorcing clients. They have identified divorcing homeowners as
“distressed” and desperate, so this is one of their top lead generation markets that they are specifically
targeting.
The Cost Benefit Analysis
Because iBuyers are focused most on speed, there’s a cost involved. The goal of any investor is to
buy low and sell high. iBuyers are just another form of investors that have repackaged themselves with
the proposition of speed and convenience. They charge fees because, naturally, they want to be
compensated for the risk they take on. iBuyers are looking to sell the house at a profit, so they need
their costs covered, including repair costs, holding costs, and closing costs. This comes out of the
sellers’ bottom line, either through a lower offer or through fees.
One of the interesting positions I’ve seen them take is convincing a homeowner “When you sell to us,
you don’t have to pay a commission or pay for any repairs.” That is just a spin on words, because for
most sellers, the cost is dramatic, and the true cost of selling so low outweighs the cost of paying a
commission and crediting a buyer for repairs.
An August 2019 study by Market Watch found that iBuyer sales netted owners 11% less than selling
on the open market. That is a lot of money to give up.
The Bottom-Line
The only true test of fair market value is to make the house available to the open market. Selling a
house is a real pain, however a few months of inconvenience can earn tens of thousands of dollars -
enough to pay legal fees, joint debt, months of support, and secure new housing for two individuals
who begin their journey to recover financially and emotionally from the devastation of divorce.
I’ve never met a divorcing client who had money to waste. My suggestion is to put the house on the
open market and let the best offer win. The only time that I can recommend considering selling to an
iBuyer is if foreclosure is so imminent that it’s better to cut losses and take something rather than lose
it all.
