Home buying companies – scams to avoid!

Home buying companies can offer a quick and convenient alternative to selling your property with an estate agent. However, despite several campaigns to impose tighter restrictions, the industry remains unregulated. In order to avoid falling victim to any rogue traders, there are some scams to avoid and red flags to look out for.

Home buying companies, scams to avoid

They over-promise on their initial offer

Genuine cash home buying companies will purchase your property at a discount, with most offering between 80% and 85% of market value. Home buying companies are required to pay higher fees than a private buyer on the open market, and as a business they also need to make a profit to keep operating. Any offer of above 85% is very unlikely to come from a genuine cash home buying company, as offers above that level are simply not financially viable.

If a company makes you an offer of above 85% of market value, they are likely to be a property broker rather than a genuine home buying company. Because they are not buying your property directly, brokers are unable to offer any certainty regarding timescales or the price they can pay. This removes all benefits of using a cash home buying company. If the company you’re considering using is revealed to be a broker, you are likely to be better off selling your property on the open market than using their services. Only a genuine cash home buyer can offer the speed and certainty you are looking for.

They ask you to sign a contract

Trustworthy home buying companies don’t need to tie you into a contract. You will, of course, sign the same contracts that you would sign as part of any property sale to transfer ownership, but shouldn’t sign anything that ties you into using that company.

Any company that asks you to sign a contract to use their services (often called an option agreement) will not have the cash funds to buy your house. Instead, they will use the time when you’re tied in to using their services to look for an investor willing to buy your house. A broker is likely to initially make you a higher offer than genuine cash home buying companies, so you may be tempted, but the reality is that they are unable to offer you any certainty about how much they can pay for the property. The price they quote you at the start is purposely overinflated to draw you in and get you to sign the tie-in contract. The final price you get offered, once an investor has been found, is likely to be significantly lower. The really tricky thing about these contracts is that they are expensive to get out of, so homeowners who really need a quick sale will be put in a position where they either have to accept a very low offer from the investor (usually much lower than the 80% to 85% paid by a genuine cash home buyer), or have to pay a hefty fee to buy themselves out of the contract to enable them to sell on the open market or to another home buying company.

They ask you to pay a fee – either upfront or on completion

The business model for home buying companies is that they make their profit by buying your property at a discounted price. This means you should not be asked to pay a fee at any time – upfront or on completion of the sale. If a buyer tries to charge you a fee, it is another indication that they are a middle-man and are not purchasing your property directly. Anyone who is not purchasing your property directly is unable to offer you any guarantees regarding the sale.

They are unable to complete the sale on the date of your choice 

Another sign that a company is not purchasing your property with their own cash funds will be that they are unable to complete the sale on a date of your choice. One of the key benefits of using a home buying company is that they can time the completion of the sale to fit in with your onward move, buying in a very short amount of time where required. If a house buying company is unable to offer that guarantee, you are no better off than selling your property on the open market with an estate agent.

They drop their agreed offer price at the last minute

One trick unscrupulous home buying companies use is to drop their agreed offer price at the last minute. They assume you will already feel too invested in the sale to pull out, and believe you will accept a much lower offer than you would have at the start of the process.

The only reason a genuine home buying company should reduce their formal agreed offer price is if the property survey reveals an issue that would significantly impact the resale value of the property. Any other circumstance is just a disreputable company trying to take advantage of your situation.

They introduce a third party as a buyer

As we’ve already mentioned, any company that is not purchasing your property directly is unable to offer you any level of guarantee on price or timing. At the point of filling out legal contracts for the transfer of property ownership, it will become clear who is actually buying your property. If it’s not who you thought was buying the property, it’s time to walk away!

They don’t have the accounts to back up their claims

Any home buying companies claiming to be able to offer you a quick sale should have the accounts to back up their claims. With the average property currently costing around £250,000, you would expect any genuine home buying company to have an annual turnover of several million. They should also have a current balance of £1million-plus, as this would only enable them to buy around four average-priced properties. Any company with a smaller turnover or balance is not able to buy any real number of properties and is likely a broker.

You have concerns about whether their customer reviews are genuine

Do their reviews fit with their company accounts? Unfortunately, some disreputable companies have been known to post fake customer reviews to try to attract homeowners and dilute negative reviews from genuine customers. If a company’s accounts are saying it only has the funds to buy two properties a year, but they have ten customer reviews from the last six months, it’s safe to assume they’re not a company to be trusted! It’s also important to read customer reviews to see what service was provided. How quickly was the customer’s property purchased? Did the sale complete on the date they chose? Did the price drop before the sale completed?

They claim to be regulated

The professional home buying industry is unregulated. Any company that claims to be regulated is being dishonest and should not be trusted.  There are several member associations that home buying companies can voluntarily be part of, but they have no regulatory power and are able to offer little protection if you are unfortunate enough to fall victim to a rogue trader.

If you’re in need of a quick house sale, or want the convenience of your property sale tying in with your next property purchase, a home buying companies can be a great option. They offer a speed and certainty that is simply unmatchable on the open market, and have the ability to take the stress out of trying to coordinate a sale and purchase. There are, sadly, several dishonest companies that tarnish the industry’s reputation, but if you look out for the warning signs shared in this guide, you can be confident of avoiding rogue traders.

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If you’d like to find out how much a professional home buying company could pay for your property, call Quick Move Now’s friendly team today on 0800 068 3366 or fill in our online enquiry form for a free, no-obligation cash offer

Author:

Beth Lane

Beth Lane

As an integral part of the marketing team, Beth is responsible for creating Quick Move Now’s external communications and dealing with national and regional press enquiries.

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