How much below market value do house buying companies offer?

House buying companies have been around for decades. But with plenty of doubts surrounding their practices, it’s understandable to worry whether you’re getting a good deal or not.

Opting for a cash buyer over traditional estate agents supposedly offers advantages such as speed and simplicity, especially in scenarios where urgent financial needs or significant property repairs are involved.

So, how much below market value do house buying companies actually offer?

What is a cash house buying company?

Luckily, there aren’t any surprises about what a cash buying company is - it’s a business that makes money by buying properties for cash. After buying a house, they make some repairs and redecorate, before selling it on at auction.

The business model behind house buying companies

House buying companies operate on a business model that revolves around buying properties at a discounted price and reselling them at a profit. They offer a quick and hassle-free sale process, which is particularly appealing to sellers needing to sell their property quickly or facing financial difficulties.

These companies make their profit by purchasing properties below market value and reselling them closer to market value. Additionally, they may charge fees to the seller, such as estate agent fees and legal fees, which contribute to their revenue.

The business model is designed to provide a quick and efficient sale process. A quick house sale company typically handles all the paperwork and legalities involved, which can be a significant advantage for sellers unfamiliar with the process.

This streamlined approach is a key selling point for many homeowners looking for a fast and straightforward sale.

Property valuation and market value

Property valuation is a crucial step when selling a house to a house buying company. The market value of a property is determined by various factors, including its location, condition, size, and age.

House buying companies use a combination of online valuations, property inspections, and comparable sales data to assess the market value of a property.

The market value represents the price a buyer is willing to pay under current market conditions. It’s important to note that this value can fluctuate over time due to changes in the property market, local economy, and other influencing factors.

House buying companies typically offer a price below the market value. This is because they need to make a profit when they resell the property. The discount offered can vary based on the property’s condition, the urgency of the sale, and local market conditions.

How much below market value do house buying companies offer?

It depends on the company, but you can expect most of these property buyers to provide a ‘no obligation cash offer’ of somewhere in the region of 70 to 80% of your property's market value.

Let’s look at this in cash terms. As of 2024, the average UK property is worth £291,029 (Halifax). If you sold your house to a cash house buying company for 70%, you would receive £203,720. That’s a whole lot less than your property’s real price.

Factors influencing offers from property buying companies

Several factors influence the offers made by property buying companies. Understanding these can help you gauge why a particular offer might be lower than expected:

• Condition of the property: Properties in good condition that require minimal repairs will generally fetch higher offers. Conversely, properties needing significant repairs will see lower offers due to the additional investment required by the buyer.
• Local property market conditions: The state of the local property market plays a significant role. In a booming market, property buying companies might offer higher prices to stay competitive. In a slower market, offers may be lower to reflect reduced demand.
• Speed of sale required: If you need a quick sale, the offer might be lower. Quick sales often involve more risk and effort for the buying company, which is reflected in their offer.
• Property location and demand: Properties in high-demand areas or with unique features can command higher offers. Conversely, properties in less desirable locations may receive lower offers.

By considering these factors, sellers can better understand the rationale behind the offers they receive from property buying companies.

So why sell with a house buying company?

While you can’t expect to make a killing, selling with a property buying company can have its benefits.

The transaction is completed faster than standard because you’ve already got a ready and willing buyer. With no need to go through an estate agent or wait for a better offer, you simply accept a cash offer from the company and they’ll do the paperwork for you. Cash buyers offer a quick and hassle-free process compared to traditional estate agents, making them an attractive option for urgent sales.

Another reason homeowners choose to sell with a house buying company is because the buyers are generally willing to buy any type of property off your hands - this includes fixer-uppers, or properties beset by natural problems, such as a high risk of flooding or Japanese Knotweed.

So the benefits are clear: speed, instant cash, and a high success rate. But why shouldn’t you sell with a house buying company?

Why shouldn't you sell with a house buying company?

Less-than-market value usually means 70 - 80%

Buy any house companies aren't known for being generous. With their main benefits being speed and reliability, you're never going to achieve a sale for full market value. More often than not, you'll end up with a one-off payment that is 60 - 80% of your property's market value.

You miss out on an opportunity to make more money

There’s a reason why people sell with a traditional estate agent. As property sales experts, they tend to make you more money. Skilled in marketing and offer progression, agents can help field your property to a range of interested buyers, increasing the likelihood that it sells for more than market value.

At GetAgent, we rank the best estate agents in your area by several performance metrics, including percentage of asking price achieved. If you want to work with an agent who regularly gets the best possible price for properties, you can do that with our free comparison service.

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Some cash house buying companies are shady

Unlike traditional property transactions, buy any house companies aren’t widely regulated. This means you’re more vulnerable to scams when you use them. However, some reputable house buying companies are members of the National Association of Property Buyers (NAPB), which ensures professionalism, transparency, and adherence to industry standards.

One frequently employed tactic by the less scrupulous cash house buyer is gazundering. Gazundering occurs when the buyer lowers their offer on your property, typically right before finalising the deal, placing you in a position to either accept a reduced sale price or withdraw from the transaction. Unfortunately, this is a legal practice, making it challenging to anticipate or safeguard your sale against.

To ease concerns, some cash buying companies are members of an organisation called the National Association of Property Buyers (NAPB). This collective serves to hold its members to correct standards and punish those who use unethical tactics to get business.

Alternatives to house buying companies

While house buying companies offer a quick and convenient sale, there are several alternatives that sellers can consider:

• Traditional estate agents: Working with traditional estate agents can provide a more conventional sales process. Although it may take longer and involve higher fees, estate agents are skilled in marketing properties and negotiating higher sale prices.
• Property auctions: Auctions can offer a fast and competitive sales process. They are ideal for sellers looking for a quick sale, but the process can be unpredictable, and a minimum reserve price is often required.
• Private sales: Selling privately can be fast and flexible, allowing sellers to negotiate directly with buyers. However, this method requires more effort and negotiation skills from the seller.

Each alternative has its pros and cons, and it’s essential for sellers to carefully consider their options before making a decision. By weighing the benefits and drawbacks of each method, sellers can choose the best approach for their specific situation.

How to avoid being scammed by a cash house buying company

There’s several ways you can ensure a quicker sale and avoid the ‘drop price tactic’ (gazundering) that is commonplace among illegitimate cash buying companies…

1. Read their reviews carefully

Your biggest indicator of a reputable house buying company is their reviews. If they receive plenty of good ones, you can be a little more confident in the company's legitimacy. Of course, it's also possible for a company to pay a shady service to flood their comms with vague, five star reviews.

So how do you work out which reviews are real?

Detail is key. Reviews that are in-depth about the selling process, that clearly reference members of the cash buying business (names which you can cross-reference across several reviews), are more likely to be from genuine members of the public.

2. Check if they're members of the NAPB or the Property Ombudsman

It's also worth checking whether they're members of the NAPB or the Property Ombudsman. The NAPB should give some credence to their honesty, while the Property Ombudsman is a well-established property market watchdog that many estate agencies subscribe to. Membership to both organisations should provide some peace-of-mind to potential sellers.

3. Is their offer genuine? Make sure it's a guarantee!

When you receive an offer, make sure they back it with a guarantee. It's normal for cash companies to make an informal offer over the phone and then drop the price later when one of their agents visits your home. If you want to make sure the offer is set in stone, ask for a guarantee to prevent them dropping their offer at the last minute.

4. Make sure the survey is carried out at the beginning of the selling process

Normal property transactions involve surveys to confirm the structural well-being of the properties being sold. They are typically arranged immediately after the informal offer. Cash house buying companies should be no different. If they prolong the survey until the last minute, it could be a sign that they're planning to drop the price before contracts exchange and use the survey results as an excuse.

5. Get a date for the exchange of contracts ASAP!

The moment contracts exchange, the sale becomes legally binding. That means the offer the company makes in the exchange is final. To avoid any price drop shenanigans, make sure the exchange is set in stone.

Summary: Consider your options carefully

Cash buying companies are infamous for a reason, but that’s not to say there aren’t legitimate businesses out there that are willing to take a property off your hands for 80% of your home’s value.

But it’s important to never underestimate the value of a reputable estate agent. There’s always money left on the table - so don’t count out your property until you’ve received a valuation from one of your area’s top performers. While estate agent fees are something to think about, a top local agent more than makes up their commission by achieving a good price for your property.

If you want to see some of our reviews for cash house buying companies, check out the links below:

1. Good Move
2. National Home Buyers
3. We Buy Any Home
4. We Buy Any House