Being asked to sign an option agreement? We advise you DO NOT sign until you have read the below article.
Option agreements are ‘blighting’ the cash home buying industry warns Danny Luke, managing director, Quick Move Now.
Danny is warning home sellers of an unscrupulous practice that he says is unfairly damaging the reputation of ethically operating, genuine house buying companies.
What is an option agreement?
An option agreement is a legally binding agreement that ties you in to selling your property to a particular home buying company, and blocks you from selling to another buyer for a period of time – sometimes 6 months or longer.
Why would a cash home buying company use an option agreement?
Put simply, no genuine cash home buyer will use option agreements! Option agreements are usually used by companies that are masquerading as cash home buyers, but in reality are brokers who sell your house on the open market.
An option agreement gives the company time to find a buyer for your property at no financial risk to themselves, and they’ll often charge you thousands of pounds to break the contract.
Danny Luke explains:
Option agreements are used by companies that don’t have the cash funds available to buy your house outright. Instead, they will use the time afforded to them by the option agreement to sell your property on the open market, meaning they incur no financial risk.
It’s incredibly misleading for companies to be presenting themselves as cash buyers, when in reality they’re doing exactly the same as you could do yourself – putting your house on the open market – and charging you 20-30 per cent of the value of your property to do it.
A genuine cash buyer pays below market value for your property because of the financial risk they’re taking by buying your property outright, and they’re offering a valuable service; buying your house in as little as seven days, which is something you could not do without their services.
We recently had a customer come to us after a bad experience with a less reputable firm who present themselves as genuine cash home buyers. They had convinced the gentleman to sign an option agreement, saying they would buy his property from him for £195,000. The company then went on to market his property at just £180,000, when it is believed the property’s true value lies closer to £250,000.
The customer was tied into the option agreement, preventing him from selling his property through anyone else, but unless he pulled out of the agreement, and faced the hefty fines attached, he would lose tens of thousands of pounds from the amount he should have received, and would have received, for his property if he’d come to a genuine cash home buyer like Quick Move Now before signing an option agreement with the other company.
There are a few steps to take to ensure you’re engaging with a genuine cash home buyer:
Make sure you are dealing with genuine cash buyer!
A genuine cash buyer will have a balance sheet to prove they buy houses. You should expect a genuine cash buyer to have a current balance of at least £1 million and an annual turnover in excess of £4 million. You can use sites like Companies House to research a company and their credentials.
Here at Quick Move Now we pride ourselves on our transparency and the ethical standards we operate within. You can take a look at our annual accounts here
Never pay any fees!
Avoid any companies that try to charge you a fee at any stage of the house buying process. A genuine cash buyer will be purchasing your property at a discounted rate, in return for a fast, reliable and hassle-free house sale. They should also absorb any legal costs associated with the house sale like the survey, EPC and solicitor’s fees!
Never sign an option agreement!
As discussed above, option agreements are legally binding contracts that legally tie you in, however the company does not have to buy! Option agreements are usually a sign that cash funds aren’t available.
Read Customer Testimonials!
Companies that buy houses for cash should have plenty of customer testimonials available. However, there’s a risk that some companies may create fictitious reviews as a front.
Ask questions and do your research! If a company has 20 reviews in a month but their balance sheet states a turnover of under £4 million this clearly shows they are not buying directly!
Quick Move Now have bought over 5,000 houses since inception – read some Quick Move Now reviews to see what are customers say about us and our house buying service.