Selling my house to a cash buyer – Read our 5 top tips
Moving house is notoriously one of the most stressful things you will do in your lifetime. In fact, many homeowners voted it even more stressful than a divorce.
The average person buys and sells just three properties in their lifetime, so it’s no wonder the process feels unfamiliar and stressful for many people going through it.
Most homeowners think they have little choice but to go through the draining process of selling their property via an estate agent if they want to move, but that isn’t necessarily the case.
Over the last twenty years, we have seen the growth of the cash home buying industry. Born out of the property part-exchange service offered by many new build property developers, cash home buying companies use their own cash funds to purchase your property directly from you. Because they don’t rely on mortgages or investors, a genuine cash house buyer can provide a guaranteed sale and complete on a date of your choice. A sale on the open market usually takes three to six months, and can take longer if you struggle to find a buyer or are part of a property chain. With a genuine cash home buying company, you can sell your property in as little as a week.
So, what’s the catch?
There are a few things it’s important to know if you’re thinking about selling your house to a cash home buying company. These top tips will help you ensure it’s the right route for you and that you only deal with a reputable company that does what it promises.
Familiarise yourself with the cash home buying industry
When selling to a cash property buyer, before you start approaching individual companies, it’s important that you understand the business model for the industry. This will help you to decide whether it an appropriate route for you.
Any genuine cash home buying company will be honest and upfront about the level of offer they’re able to make for your property. Instead of charging you a fee for the service of buying your property, a genuine company will deduct their costs from the offer they make you. These costs include stamp duty (a property buying company is required to pay a higher level of stamp duty), legal fees and staffing costs. You can expect any genuine cash home buying company, buying with their own cash funds, to pay around 80-85% of market value for your property. In exchange you’ll get a quick, guaranteed and hassle-free house sale on a date of your choice, but you need to be realistic about whether you can make it work financially. It can be tempting to be lured in by companies who make you an offer that is closer to market value, but it’s important to note that those companies are almost certainly not genuine. Because of the costs incurred by a genuine cash home buying company, it is simply not possible to make an offer of more than 85% of market value and maintain a viable business. Any offer above 85% should be a red flag and we would strongly encourage you to walk away.
When selling to a cash property buyer, make sure the company you’re dealing with is a reputable one
Unfortunately, despite several efforts from some of the industry’s more reputable companies, the cash home buying industry remains unregulated. For this reason, it is vital that you thoroughly research any company you consider using.
Being a member of an industry body does not guarantee that the company you’re dealing with is a reputable one, but it is a positive sign. You certainly should be cautious of any company that isn’t a member of any professional organisations. Organisations your should look out for include the NAPB (National Association of Property Buyers), the Property Ombudsman and BPF (the British Property Federation).
Another way to research any companies you’re interested in using is to read customer reviews. Reviews are a great way to get a feel for a company and the service they offer. Companies have been known to post fake reviews though so look out for a large number of different reviews posted on the same day, or reviews that use similar language that may have been written by the same person. Any genuine company is likely to have a range of different reviews, spread across a significant amount of time.
If you want a quick or guaranteed sale, make sure the company uses its own cash funds
Many companies will claim to be able to buy your house, but few have the cash funds available to be able to offer any level of guarantee.
The majority of companies claiming to be able to provide a quick house sale will either be brokers or companies that rely on finance from investors or mortgages. Relying on investors or mortgages means these companies are unable to offer any guarantee regarding price or speed. A sale to these companies is unlikely to be any quicker than a sale on the open market, but they will still pay less than market value. If you are not sure that the company you’re dealing with has its own cash funds, you’re better off selling your property via the traditional route and getting in touch with a local estate agent.
The best way to assess whether a company has its own cash funds to purchase your property is to look at their accounts on the Companies House website.
The company’s accounts can provide a great deal of information
A company’s accounts can offer a great deal of information about how their business works.
Keeping in mind that the average UK house price is currently around £250,000, you would expect any genuine cash home buying company to have an annual turnover of £4million-plus and a current balance of at least £1million. Smaller figures would indicate that the company is not buying any volume of properties directly, and is therefore likely to be acting as a broker.
Companies House will also be able to provide other information. This will include who the company directors are, how long they have been operating and whether they are affiliated with any other company name. If the company is associated with others, it’s advisable to look for reviews under each company name to get a better picture of how the company operates.
Ask questions – it will tell you a lot about the company!
The final tip is to ask lots of questions. How the company responds to questions will tell you a lot about the type of company they are. Do they welcome you asking questions about the cash home buying industry and how their company works? Are they forthcoming with information about their company accounts and how many properties they have bought in the last year? Are their answers detailed or vague?
Genuine cash home buying companies offer a valuable service that can take all of the stress and uncertainty out of a property sale, but there are many imposters in the industry so it is important that you know who you are dealing with. Many salespeople will be persuasive with what they say, so ensure you’re armed with facts about the company’s accounts and have thoroughly researched customer reviews before approaching a company for a cash offer.
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