Why You Should Avoid Selling Your Home The Silicon Valley Way
Every homeseller dreams of selling their home in a single day. Who wouldn’t love to see multiple offers come in just the span of one day? There are a host of start-ups and tech-savvy businesses that promise to accomplish that kind of sale. Those companies will usually guarantee to sell your home in a quick amount of time. Some businesses might just buy the house directly from you. While others may provide you with a digital platform to review the offers of potential buyers. These companies basically promise to turn the process of selling your home into a profitable breeze.
These promises honestly sound unbelievable, right? Unfortunately, they’re too good to be true. Those companies may make broad promises and claims, but selling your home doesn’t always work out super smoothly. If things go poorly, these kinds of companies can hit you with some serious hidden costs as well. Let’s dive into how the “Silicon Valley” method can hurt your home selling experience.
The Hidden Costs of Low-Ball Offers
Why do you think that most home sellers list their property with a real estate agent? It’s because that listing actually maximizes the overall value of their homes. Surprisingly, there is a huge price difference between a home being sold by an owner as opposed to a home represented by an agent. On average, homes represented by agents are priced significantly higher than those listed by the owner, approximately $60,000 higher.
Why does this price surge occur? It’s mainly due to the fact that a given real estate agent is fully immersed in their local market. They bring expert knowledge of the current real estate market, they know how to best price a home, and they can manageably stage a home to show off the natural beauty of the home. Realtors also understand the best quick fixes that you do to raise your home’s value. They can also come in handy when you’re selling your home as they can negotiate with the agent of the buyer, so you don’t have to cut the price by much to solidify a commitment to buy. Basically, a real estate agent maximizes the return on investment for your home.
On the flip side, those flat-fee platforms are entirely dependent on the number of people using the platform and the search visibility of your home online. If you live in an area where people don’t use the digital platform, your property will only get shown a handful of times and you’ll most likely on receive a few offers (which will be well below the average value of other neighborhood homes). In this scenario, you could actually lose more money than if you worked with a realtor. Exercise caution on these platforms when you’re selling your home.
“I got fewer showings than any other house and the only offer I got was WELL below my [asking price]. Other houses in the neighborhood (smaller and less maintained) sold for over my asking price with other agencies.”
There are some companies that will offer to buy your home outright. However, be cautious with these companies as you may not be compensated for the full value of your home. In some worse-off cases, those homes might never receive an offer at all! The offer is entirely dependent on the pricing algorithms used by these companies. These algorithms take into account a number of factors, including your neighborhood, your home’s style, and much more. Let’s assume that your home is decades old for a second.
Those algorithms will take the antiquity of your home into account, which results in a worse perceived value of your home. When you’re selling your home, you want to maximize your value for the best ROI. A worse value will typically result in lower offers and less potential profit. Given all that, you still can’t forget about the fees of these companies. Individual home fees will vary, however the average fee is around 8-9% of your home’s selling price. This percentage is far steeper than the average real estate agent fee.
The hidden fees don’t stop there. A number of sellers have been blindsided by outrageous repair costs and additional hidden fees. One such seller reported that the company buying his home tacked on over $8,000 in fees just an hour before the property was set to close. Their experience should serve as a reminder to be cautious with these larger faceless companies when selling your home.
“All in all, the inspection added up to about $12,000 in ‘repairs’ which would have caused us to walk away with almost no money after the closing fees…
The estimated cost of repairs were absolutely insane. For instance, the master bedroom has a ceiling fan with 4 light fixtures... The inspector took photos of the 'missing' bulbs, and estimated it would cost $200 to replace them.”
The Hidden Costs of No Human Contact
Most introverted homeowners might rejoice at the prospect of selling their home without any human contact. However, a lack of human interaction isn’t the ideal situation when you’re selling your home. What if your online listing was full of errors? Those larger companies could take their sweet time (up to 6 weeks of waiting) just to make minor changes to your listing. Customer service is not usually the highest priority for those larger companies.
You should also consider how your relationship with a company might change throughout the home selling process. Let’s assume you’re selling your home to a company that will buy it outright. As soon as you accept their offer, that relationship might become aggressive very quickly or it could just end abruptly. In one particularly negative customer review with Opendoor, a customer detailed how the company charged her $400 just to take the trash out of her house after the offer was accepted. Those companies may seem like a good idea right now, but they could abruptly turn on you later down the line.
“In the end, I lost out on a good $20,000 - $40,000 on the house alone, plus another $7,500+ for false claims of repairs they said they had to do (which in reality I had fixed on my own already so they had nothing to do).”
The Hidden Costs of Unexpected Surprises
Real estate agents are unique as they offer one-on-one representation. That is definitely not the case with the companies that sell homes with this “Silicon Valley” approach. Let’s say that you list your home on a service that promises to sell your home for a flat fee. That company could even match you up with an “area expert.” But, you shouldn’t expect much help from them, because they’ll be stretched for time and can’t provide very much one-on-one representation. There’s also a chance that your “area expert” will change due to company turnover. In one customer experience, the seller went through 3 different “area experts” in the span of just 8 weeks!
“My property was on the market for 90 days and had just 6 viewings. I withdrew my property and instructed [a local realtor].
They listened to the feedback and took on board that the price was too high. Within 11 days they had shown a total of 36 people around my property and 3 offers came in. My house has now sold.”
It’s also worth noting that a real estate agent handles the marketing of your home. Yes, they’ll hang a sign in front of your home and place your listing on the right website. But, a real estate agent markets your home through a number of additional ways. When you’re selling your home through the alternative route, the marketing of your home is a little different. Your “area expert” will most likely just upload photos of your home and that’s it. It’s highly likely that you’ll have to end up handling the marketing efforts by distributing flyers and organizing your own open house days.
Even when you utilize the services that buy your home outright, you’ll experience a very minimal relationship between you and the company. This relationship can usually become an expensive problem. Let’s say you need to hire roof repair experts to improve the value of your company. But, what if they leave your home without fully completing the project? Without a good relationship with the homebuying company, you could be charged extensively for those repairs. And, unfortunately, you might not be able to negotiate with the company.
“On top of the $26,000 upfront fee, they tried to charge me $21,000 for ‘repairs’. They refused to negotiate anything, and now I have to pay an attorney for the ‘assessment’ process.”
Hopefully it’s clear now that the “Silicon Valley” way of selling your home definitely isn’t the best approach for every home seller. If you’re thinking about making your next move, let's get together over a cup of coffee and discuss how we can benefit your home selling experience. Contact the experts at the Grant Muller group today!