Cash house buyers are a new thing.
They’ve arrived on the back of considerable frustration with estate agents, and a realisation that, in general, it's taking longer and longer to sell a property.
When a cash house buyer delivers, the end result is a fast sale, and a huge reduction in the stress and strain that surrounds house purchasing. We’re going to take a look at cash house buyers, what they are, and how best to ensure you’re choosing a reputable cash house buyer to work with.
What are cash house buyers?
Simply put, it’s a company that's in the position to make an immediate cash offer on the property you are hoping to sell. With the rise in wait times to sell a property, cash house buyers form a unique section of the property market.
A cash house buyer is a very relevant part of the market too.
House sales have lowered simply due higher prices. There have been ups and downs, but the general slump in sales means that having a cash purchase is very attractive.
Benefits of a cash house buyer
There are a number of benefits, we’ll take them in turn:
Ideal for difficult circumstances. If a seller has had sudden life changes, such as a bereavement, a divorce, or emigrating abroad, selling a home could be the thing they want to be taken care of quickly. It can be incredibly challenging to manage life after a divorce for example. If a cash buyer is there to pay for a property quickly, this makes it easier to move on
There are no fees. This is a major benefit, because selling a house is often more expensive than people think.
A cash house buyer is able to make a quick offer for the property. In some cases, sellers have received an offer from a company within 24 hours.
Quick turnaround. Back to that timescale thing, it can take months to find a buyer for your property. Cash house buyers have the funds to make the whole process part of a quick turnaround
What to be wary of
Of course, things aren’t always plain sailing, and there's every chance you may be exposed to a cash house buyer company that is dishonest and unprofessional. One of the biggest problems is gazundering. We’ll deal with that one first.
What on earth is gazundering?
Gazundering happens when a house sale is close to completion.
What the more unscrupulous cash house buyers can do is suddenly lower their offer at this stage. If there's a good reason for lowering an offer (an unfortunate discovery in a survey for example) then that’s fair enough.
But, sometimes there isn't a good reason.
The gazundering is all about forcing a seller to take a lower offer, one which they'll find it hard to back out of.
Two things can happen here:
The seller can take the lower offer
The seller can refuse
It might seem simple, but the emotional cost can be significant.
If a seller doesn't take the offer because they simply don't want to be forced into losing money then they'll have to remarket their home for sale.
This could mean even more waiting.
And if the seller accepts the new, lower offer, they'll simply lose money. They may want to get the sale over with (because it is so close to the final contracts), but the buyer has forced them into financial loss. And with some cash house buyers being unscrupulous, this could very easily run into the tens of thousands.
You can protect yourself against gazundering, to an extent.
If you're looking to sell your property to a cash house buyer company, consider taking the following steps to make sure you’re as protected as possible against the practice:
Take the time to investigate the company. Do they have a full website with contact details?
Look at the terms and conditions. Plus any other aspects of the work that they do and the offer they make to customers. Is there an upfront fee they charge? Most reputable companies would not charge anything upfront.
When they give you an offer, don't jump at it straight away, especially if it seems very high. Don't forget that companies need to make profit. If they're offering a large amount of money, chances are that will be lowered at the last minute.
Is the company a member of The Property Ombudsman (TPO)? The TPO offer rights and protection to both the client and the service provider, and being a member is a quality mark.
If the valuation by the company is less than thorough, again this is a clear warning sign that things may not be as clear as you want them to be. Ask how the company makes its valuation, and contact local estate agents to get a true and realistic opinion of the property’s value.
Ask for proof of any recent sales they have helped make happen. Then ask for contact details for the sellers of these homes. It should be seen as perfectly reasonable for you to contact these previous customers to find out how things were and if they were happy with the process.
How much can you get for your property?
Essentially, this is down to the company that is offering to buy your property for cash.
That said, it's important to remember that a cash house buyer company operates under a profit model, and they will be offering you less than the market value. You can expect to see an offer that's somewhere between 10-15% less than the value of your property.
This is good news, in a way.
Firstly, it will help you see, immediately, if you are dealing with an unscrupulous company. A cash house buyer company that is dishonest will most likely offer you (or very close to) the ‘full market value’.
This isn't right, and you should be querying this or ignoring them.
Secondly, companies that are quality cash house buyers will work hard to get your property sold in days rather than weeks or months. This should be reflected in that offer price. They won’t pay for a full value, because they have to make a profit quickly.
Just don’t expect to get the full value of your property. This isn't the way it works. The low offer is a clear signal that the company knows what it's doing and is able to sell quick and make a profit.
Are there any other fees involved?
The whole point of using a cash buyer company is to make things happen quickly.
However, it's also important that you save money on the process. You're already taking a discounted offer, so you shouldn't expect to see any fees coming up as extras.
With that low offer comes the peace of mind that you don't have to pay anything to the company. They become the owner of the property, and they most likely will be selling it again a few weeks down the line.
There shouldn't be any fees!
When you think about it, this makes sense. You're not getting the market value because the company has it’s own costs. A reputable company will charge you nothing, with even the legal fees taken care of within the offer price.
One caveat here.
Some cash house buyers will claim they have to levy a fee for evaluation. This is not appropriate and you should steer clear of these companies. Sometimes this figure is as much as £1000! Once again, a good company will give you a lower offer than the market value, because everything else, including fees, is accommodated through that offer.
How quickly can cash house buyers purchase the property?
It’s probably a lot quicker than you think. The majority of good and experienced companies out there will take the property off your hands within two to three weeks. Sometimes, you may even find companies that can get the whole thing done and dusted in just one week, that includes us by the way.
This is why the concept is so attractive to people who want to sell quickly.
These companies don't have to rely on acquiring finance through a mortgage, so the idea of a ‘cash’ buyer is literally the truth of the matter. The wait usually boils down to the legal compliance.
Solicitors and specialist conveyancers have a lot of paperwork to get through, and the conveyancing process can time consuming and expensive. But the whole process is made quicker due cash involved and the experience of a cash house buying company having solicitors on hand who can make the process a breeze.
Should you sell your home to a cash buyer?
Selling a home is typically stressful and drawn out.
Some sellers have to wait months, if not years, to sell a property, simply because the process can be complicated, especially if there's a chain involved.
Selling to a cash buyer takes away all of that stress and strain. As mentioned earlier, a cash buyer is also the perfect solution for anyone who wants to be rid of a property quickly. The only downside is the lower offer, but even that makes sense because there are no fees involved for you and it makes the whole process quicker.
Most people who sell to cash house buyers do it for one simple reason. They don't want to wait weeks and months for a chain to complete. They simply want things done quickly.
In a housing market that's becoming even more saturated, they know that a cash house buyer is able to take a property off their hands and leave them with cash for the next house purchase.
It just saves time and effort.
In addition to all of the stress involved in selling a house, there has been further bad news in the housing market. House prices in the United Kingdom are going up, with the average house price rising by £1,000 in the summer of 2017. This simply means people are finding it harder to buy.
It's why a cash house buyer may well be the solution for many sellers, especially if their property has been on the market for a long time. If you’re looking for a quick sale and a huge reduction on the paperwork and waiting times, it may well be the solution you are looking for.