Deploying the obligatory annoying jingle in their daytime TV adverts, there is a new breed of company promising to buy any home up to 90 per cent of its value with cash in your pocket in a matter of weeks. But, beware of house buyers – the new breed. All is not what it seems!
This may sound like the ideal solution if you need to move fast and there are many quick sale property firms to choose from. They all offer to buy property from struggling homeowners needing to sell up quickly, but in reality you could be offered a fraction of its real value, losing out on tens of thousands of pounds. Even worse, with no regulation in place, we could see quick sale customers following in the footsteps of sale and rent back (SRB) victims.
Peter Bolton King of the Royal Institute of Chartered Surveyors (Rics), says;
Homeowners looking for a quick sale are by definition vulnerable and obvious targets for quick sale property websites. Homeowners should know that they are unlikely to be offered the value they might hope for, or indeed that which that which an RICS accredited member might give.
Some of these websites say that will knock just 10 per cent of the market value but the figure is likely to be much higher. When we put it to the test, using a two-bedroom masionette in West London one online quote was as low as £337,500 – a far cry from the £475,000 to £500,000 range that two local estate agents came up with.
On the plus side, there are usually no legal, valuation or estate agent fees to pay. These sites may be a useful alternative to losing your home altogether because repossession fees are sky-high and lenders may fail to get the best price.
But the focus of these property websites is on a quick sale and if that’s of ultimate importance a small loss is to be expected, however, experts say that more often than not homeowners are making a considerable sacrifice.
Dean Heaviside, a director of Fine Estate Agents, says;
This is disturbance selling at its worst. These websites focus entirely on the negative news out there and then prey on those unnerved by their skewed version of events. Vendors need to realise that an offer to pay ’90 per cent of the current market value’ is only 90 per cent of its interpretation of the property’s market value – which is often far lower than its real worth – sometimes by as much as 30 per cent.
As with the much-maligned SRB industry, this is an unregulated business. The Financial Services Authority essentially closed down SRB last year after it found many transactions were unsuitable for homeowners and should not have gone ahead. Many firms were out to make a quick buck and some smaller companies took on properties and passed them to buy-to-let landlords. If those landlords then went bust the original homeowners were made homeless, having sold well below their home’s true value.
However, there are quick sale firms which say they stand apart from competitors, including Quick Move Now which maintains it is a genuine cash buyer, instead of a broker passing properties on to third party investors.
Danny Luke from Quick Move Now, says;
It is of great concern to us that there is such a high number of charlatans in the industry. We are particularly worried by the number of companies that pose as ‘instant’ cash buyers when a simple check proves they don’t have the cash reserves available to enable this.
Quick Move Now says it buys direct, with no third party investors or mortgages, and then sells the homes on the open market instead of at auction or through sale-and-rent-back schemes.
Kate Faulkner who runs property advice site Designsonproperty.co.uk says;
If you are going to go down the quick-sale route, big companies such as Quick Move Now are a safer bet. You can check on Companieshouse.co.uk to see if a company is registered – if it isn’t it may have something to hide. The check will also tell you how long the company has been trading and accounts will reveal its annual turnover. Alarm bells should ring if you’re dealing with an unprofitable firm that has only been around for a short time but even if you are satisfied it has the expertise you need, tread carefully. You should never have to sell for anything less than 20 per cent of what your home is worth. And never do this without a contract, which you should take to a solicitor. What you want is assurance that it has the cash available to buy and are not going to renegotiate.
Otherwise, consider all your other options before taking any loss on your home. If you need a quick sale because you are struggling with debt, talk to your mortgage lender. It may agree to move you onto an interest-only loan to avoid a complicated and pricey repossession, or it may offer a payment holiday to give you some breathing space and the time to sell on the open market. But beware that interest will still accrue during the holiday and will be added to the mortgage, so your monthly payments will increase when payments restart.
If you need to sell to relocate, renting your home out is another option and with demand outstripping supply, rents have risen considerably in many parts of the country.
If you are determined to have a quick sale and you have sufficient equity, consider going through an auction house. Once the hammer falls, the bidder is legally contracted to buy your home and put a 10 per cent deposit down immediately, with the balance cleared within 28 days. Before the big day you should obtain a valuation and set a reserve price. The auctioneer will decide on the guide price (which may not be the same as your reserve) and you will have to cover advertisement costs and commission at around 2.5 per cent.
Although there are disadvantages to auctions, namely volatile bidding and the risk of selling below market value, there is potential to make more if enough buyers are interested.
Roger Lake, the founding director of Auction House, says;
Selling through a busy regional auction room is the real alternative to quick-sell property websites. The process is speedy and the seller is guaranteed the best price possible on the day. They are a highly viable alternative to these websites.