Companies that buy houses – how do they work?
Companies that buy houses have become increasingly popular over the last few years. Whilst it can take anything from three months to around a year to sell a property on the open market, many companies that buy houses claim to be able to purchase your property in as little as a week. So, how do they work, how much do they pay and are there any risks you need to be aware of?
In this guide
- How do companies that buy houses work?
- How much do house buying companies pay?
- How long does it take to sell your house to a company?
- What happens to my house after I sell it to a company?
- What are the benefits of selling a house to a company?
- Are there any risks if I choose to sell my house to a company?
- Who should I choose when they all appear to offer the same service?
- Can companies that buy houses buy entire property portfolios?
- What can I do if I feel I have been treated unfairly?
- Key takeaways:
How do companies that buy houses work?
Companies that buy houses claim to be able to buy your property much quicker than you can sell on the open market.
A genuine cash home buying company will be able to offer you a guaranteed property sale on a date of your choice. They use their own cash funds to purchase your property directly. Not relying on a mortgage means they can be flexible about how quickly they buy your property. They should be able to complete the sale in just a week, if required.
Companies that buy houses directly – How they work
Most genuine cash home buying companies who are buying your property directly will following a similar process:
Step one: Indicative offer
When you first contact a company that buys houses, they will ask you a few basic questions about the property you’re looking to sell. They’ll then go away and do some basic desk-based research before coming back to you with an indication of how much they might be able to pay for the property. You’ll usually receive this indicative offer within a few hours of your initial enquiry.
Step two: Formal offer
If you’re happy with the indicative offer you receive and would like to proceed to getting a formal offer for your property, the house buying company will ask a local, independent estate agent to carry out a formal valuation. If you’re dealing with a reputable company that buys your house directly with their own cash funds, this figure will only alter during the sale process if a structural survey uncovers an issue that would have a major impact on the property’s value. This is very rare and a reputable company’s offer will be cost and obligation free, so you can walk away at any point.
Step three: You choose your completion date
If you’re happy with the formal offer and wish to proceed, it is at this point that you should be asked to choose your completion date. This could be as quick as a week, or anytime within the next few months. Any company that is unable to commit to a date should be treated with extreme caution, as it’s unlikely that they will buy your property directly.
Step four: Your sale completes, and the money is paid into your account
On the completion date you chose, your sale will complete and the money will be paid into your bank account.
Other types of companies that buy houses
There are other types of companies that buy houses. These companies are usually ‘brokers’ who connect homeowners with investors looking for properties. These companies will often offer to pay more than a genuine cash home buying company but, as they are not purchasing your property themselves, this offer will be an estimate of what they may possibly be able to get an investor to pay for your property rather than a formal offer. The higher offer is likely to be tempting, but it is incredibly rare that homeowners receive the amount initially quoted by a broker. Because this type of house buying company is not purchasing your property directly, they’re unable to offer any certainty around how quickly your house will sell or how much you will achieve for it. This sort of company will try to tempt you with a high offer and then tie you in with an option agreement that prevents you from selling to anyone else whilst they look for a buyer. These agreements can last up to 6 months, or even longer, and are often very costly to get out of.
The real benefit of using companies that buy houses is the speed and certainty they can offer. Any company that isn’t buying your property directly cannot offer that benefit. If you’re unable to accept the offer made by a genuine cash home buyer purchasing your property, the open market is likely to be a better route for you.
How much do house buying companies pay?
Any genuine home buying company that is buying your property directly will be open and honest from the start about how much they can pay.
Companies that buy houses cannot buy your property for full market value because of the costs associated with purchasing your home. However, they also shouldn’t charge you any fees, so the offer they make you should be the amount you receive on completion day.
You can expect any company buying your property directly to pay between 80% and 85% of full market value. That may feel like a big discount at first glance, but for many people the speed and certainty offered make it an attractive prospect. You will also save considerable time and money, not having to pay estate agents or legal fees.
Here’s how the figure might compare:
|Genuine cash house buying company|
(buying your property directly)
(selling via an estate agent)
|Full market valuation||£200,000||£200,000|
|Estate agency fees (1.5%)||£0||£2,775|
|Cost of decorating to get property ready to market||£0 (not necessary)||£2,000|
|Mortgage payments whilst selling property||£0||£4,800 (6 months x £800)|
|Household bills whilst selling property||£0||£1,000|
|Time taken to sell||7 days||6 months|
|Final price achieved from sale||£170,000||£178,425|
How long does it take to sell your house to a company?
This will depend on whether the company is buying your property directly or acting as a broker.
If a company is buying your house directly, you should be able to choose the date the sale completes. The company should be able of purchasing your property in as little as a week, if required.
If the company you’re using is a ‘middleman’ and trying to match you with an investor, there will be no guarantees around timescales and it could easily take the same amount of time as selling on the open market, or even longer.
What happens to my house after I sell it to a company?
Different companies that buy houses will have different business models for what they do with the properties they purchase. Some will keep the properties and rent them out, but most will re-sell them on the open market. This means the company takes all the risks associated with how long the property will sit on the market and what price the property will achieve.
What are the benefits of selling a house to a company?
The benefits of selling a house to a company that buys your property directly are the speed and certainty they can offer. A genuine cash buyer does not rely on mortgages or investors, so they can offer a guaranteed quick house sale on a date of your choice. The speed and certainty offered by this type of company cannot be matched by the open market.
Homeowners use companies that buy houses for a variety of reasons, including:
- Found their dream home and need to have a sale agreed on their current property to have their offer accepted
- Downsizing and don’t want the hassle of selling on the open market
- Selling an inherited property
- Experienced chain collapse
- Struggling to find a buyer on the open market
- Agreed sale has fallen through
- Relocating and need a house sale to time in with their plans
- Quick sale to pay off debt or avoid repossession
- Selling a property after a divorce or relationship breakdown
Are there any risks if I choose to sell my house to a company?
The biggest risk when selling to a house buying company is that they are not genuine and will drop their offer before the sale completes. This is unfortunately quite common when dealing with a broker rather than a company that buys houses directly.
Because a broker won’t be buying your property themselves, the figure they give you initially is an ‘estimate’ rather than an offer. They will often tie you in with an option agreement and then, once they’ve found you a buyer, reduce their offer to one far below their initial figure.
You can spot a broker because they will often make an unsubstantiated claim about being able to pay 90% of market value, or more. Some will even tell you they can get you a quick sale and pay 100% of market value. Unfortunately, this simply isn’t possible. If you want 100% of market value, your best route is to sell on the open market. If you want a quick sale, it’s important to use a genuine cash home buyer who will buy your property directly. If you want to avoid getting scammed by a broker, it’s important that you don’t sign any contract or option agreement. You can read more about how to avoid rogue traders here.
Who should I choose when they all appear to offer the same service?
Lots of house buying companies may look similar on the surface, but dig a little deeper and you’ll start to see a truer picture. There are several ways you can find out which companies can be trusted.
- Research the industry so you know what to look out for and can spot a company that isn’t being honest about the service they offer.
- Check their business accounts – the average house price is currently more than £250,000, so any company that claims to buy properties directly should have an annual turnover of several million pounds.
- Read customer reviews – a reputable house buying company will have reviews from genuine customers. Make sure you compare the number and timing of reviews with the company accounts though – if a company has 20 reviews in a month, but their turnover and company accounts suggests they only purchase 5 properties a year, they’re either publishing fake reviews or the company is not buying properties directly (or both!).
Can companies that buy houses buy entire property portfolios?
Some companies may consider buying entire property portfolios.
Quick Move Now, for example, will consider buying a number of properties from the same seller, as long as those properties will not compete against each other at the point of resale. This means we would be unable to buy five flats in the same block, but would consider buying several properties from a varied portfolio.
What can I do if I feel I have been treated unfairly?
Unfortunately, despite Quick Move Now’s best efforts, house buying companies remain unregulated. There are things you can do if you feel you’ve been treated unfairly though.
- Ask the company you have been dealing with for their complaints procedure and put your complaint in writing.
- Find out whether the company is part of any professional associations. Quick Move Now is a founding member of the National Association of Property Buyers, registered with the Property Ombudsman and member of the British Property Federation. If the company is monitored by any of these industry associations, they should be contacted and informed about the treatment you received.
- You can also contact Trading Standards.
- Companies that buy houses can offer a quick, guaranteed and hassle-free alternative to the open market, as long as the company you use buys properties directly with their own cash.
- The speed and certainty offered by a genuine company cannot be matched on the open market. A genuine company can complete a sale on a date of your choice – in as little as a week, if required.
- You should be aware of any company that does not buy properties directly and with their own funds, as these companies will be unable to offer any guarantees around price or speed.
- Any genuine, reputable company that can offer speed and certainty will buy at a discount. You can expect an offer of between 80% and 85% of full market value.
- The house buying company industry remains unregulated, so be wary of any company claiming to be regulated.
- Read reviews carefully and make sure you check company accounts to see whether the company you’re speaking to really can do what they claim.
Find out more about:
- Selling a house with a sitting tenant
- What is probate? – A step by step guide
- How to sell a house without an estate agent
- What to do if your house sale falls through
- Companies that buy houses – how do they work?
- What is gazumping?
- Making an offer on a house before selling your existing home
- Can I sell my house with an ongoing neighbour dispute?
- Step-by-step guide to selling your house
- How to sell your house – which way is best?