6 mins read
Given how time consuming, and stressful selling a property can be, it’s no wonder people are looking to alternative methods of selling their home.
One of the more appealing routes is selling to a cash buying company or a ‘we buy any house’ type organization. The idea is that one of these companies makes an offer on your home, usually below market value, and if accepted, the sale will be completed within 7-28 days and you will be paid the full amount straight away.
We took a closer look at cash buying companies, what they offer to sellers and what risks you should be aware of.
What is a cash buyer?
A cash buyer is an individual or company able to buy a property outright. They don’t need to sell a property or take a mortgage to get the necessary funds. They will be able to provide proof that they have enough money to pay immediately.
There are lots of online companies that claim that they can buy your home with cash, quickly. And, there are a few that really do have the money on hand to do this. A professional cash buyer will be able to buy your house in 7-28 days.
However, there are a large number that don’t really have the funds available. These companies aren’t actually ‘cash buyers’ but rather act as a middle man for investors or other buyers. They’ll ask you to sign an ‘option agreement’ which ties you into using their service. The process will then actually take much longer than the 7-28 days they promise. One of the hardest things for home sellers is knowing how to tell the difference between reputable and disreputable firms.
How do cash buying companies work?
Valuation - First the cash buying company will conduct a valuation of your property. To help them figure out what your home is worth, they’ll be looking at the condition and location of the property, what has recently sold nearby, and what is currently on the market. Offer - Once they have valued your home, you’ll receive an offer - likely between 75-80% of the full market value Completion - If you choose to accept the offer, arrangements will be made to complete the sale and transfer the funds to you within 7-28 days.
Fast - if the company is a genuine cash buyer they will be able to complete very quickly, sometimes within a week. Sell ‘as is’ - Often ‘we buy any home’ companies are willing to take hard-to-sell properties. They could be in a state of disrepair, currently occupied by tenants, or on a short leasehold. Selling to one of these cash buying companies removes the hassle and cost of dealing with these issues pre-sale. No fees - Because you’re selling your property below market rate, buying companies will cover the costs of legal fees and surveys. The 15-25% discount you are taking on the market value of your property covers estate agent fees (usually 0.75-3.5% of the final sales price) and legal fees (£1,500+).
Sell for less than market value - Usually a cash buying company will offer between 75-80% of the market value of your home. So, although you won’t have to pay estate agent fees, you’ll generally end up walking away with less money overall. Lack of regulation - Unlike high street estate agents, online buying companies are not regulated. This means there are a number of untrustworthy sites out there, and an abundance of scams. One of the most common tricks used by less reputable cash buying companies is called gazundering. Gazundering occurs when the buyer reduces their offer on your property, usually right at the last minute. Unfortunately, this is a completely legal practice and is very difficult to prepare for or protect against. Another common scam is that a company will make a verbal offer, but then ask you to pay a refundable fee for a surveyor’s valuation before they confirm the offer in writing. Because this fee is only refunded if you accept their offer, the system is easily abused.
Questions to ask any cash buyer
Do you have immediate access to capital and how much? It’s important to always ask for proof of funds to ensure that the company you are dealing with is actually a genuine cash buyer. Legitimate companies are aware of this concern, and should have no problem providing this information. Proof should come either as a bank statement, or a solicitor’s letter.
Do you buy property for yourself or others? Asking this can help you get a sense of whether the company is legitimate or whether they are acting for 3rd parties.
What procedures do you have in place for complaints? A company’s response to this question will give you an insight into their level of customer service. If the firm doesn’t have a procedure, they’re unsure or rude when you ask this question, this is a warning sign.
Are you members of any professional bodies? (for example, the National Association of Property Buyers or The Property Ombudsman) Although the industry is not officially regulated, companies that are members of these professional bodies have made an agreement to act in line with their codes of conduct.
In addition to these questions, it’s vital that you ask for written confirmation that they will not drop their offer after you have accepted it. Although not completely failsafe, this will provide you with extra protection. And, if a company refuses to oblige, you will know to look elsewhere.
Note: A genuine cash buying company should never ask you to pay extra fees for things like valuations or repairs. If a cash buyer claims they have to charge you a fee for a valuation, go elsewhere.
So, should I sell my house to a cash buying company?
Sometimes your situation means that you need a quick sale, and you’re willing to accept a lower price for it. Perhaps you’re relocating for work, or you’ve inherited a difficult-to-sell property, and need to release some equity. There are a number of risks with going down the ‘we buy any house’ company route, but if you are willing to research carefully, they could offer a viable option.
If you have a bit more time, selling with a good local estate agent is undoubtedly the safer option, and will leave you with more cash in your pocket. Using GetAgent’s comparison tool you can see which agents near you sell properties fastest, and achieve the best price.
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