How much below market value do house buying companies offer

There are many advantages to using a cash house buying company. You’ll sell your home fast, without the endless stream of tyre-kicking viewers, and you can set the timescale of the sale to suit you, instead of waiting around for months for conveyancing then having to run around like a mad thing when it finally all goes through. Of course, there’s no such thing as a free lunch, and this service comes at a cost. It’s up to you to decide if that cost is worth the speed and convenience of a cash home sale.

In this article, we’ll look at cash buyer price reductions in detail, explaining what you can expect from your buyer in terms of price, and why you should be wary of cash house buyers pulling unrealistically generous offers out of their hat.

what price reduction should you expect from a cash house buyer

Published OnJune 23, 2023/Updated OnOctober 14, 2024

Why do cash buying companies offer less in the first place

You might be wondering why you have to sacrifice any amount of money in order to sell your house to a company in the first place, after all they want to buy your house and you are willing to sell it to them.

The simple fact of the matter is that these companies, like most companies in the world, are in the business of making money, in this case they do this by purchasing properties below market value and then selling them on at market value. So the profit that they make is the difference between what they buy a house for and what they sell it for minus costs.

If you look at a breakdown of the costs it quickly becomes clear why house buyers can’t pay anywhere near full price for your house.

The average cash house buyer price reduction

A genuine, reputable cash house buyer will offer you around 80% of the full market value of your property.

This might seem like a crazy drop in price to accept and it’s certainly not right for everyone. If you can’t face losing 20% of your property value, then look away now (although remember, it’s probably gone up by that much in the last few years alone!).

However, if you need to sell your house fast, following divorce or bereavement, to avoid repossession, to facilitate a move for work, or even just for the sheer convenience of a quick sale, then it could be worth it for you.

“The standard offer is around 80% of the market value of your property”

Full Market Value
£100,000
£200,000
£300,000
£400,000
£500,000

House Buying Company Offer
£80,000
£160,000
£240,000
£320,000
£400,000

Do house buying companies pay what they say they will?

A company saying that they will pay you 80% of your properties value is all well and good but we have all heard the stories about companies reducing offers at the 11th hour leaving the seller with a tricky decision, either accept the revised lower offer or pull out and start the process all over again with a different company, we have a full case study from someone that ended up in this exact situation in our best cash house buying companies article. So how often does this happen?

From our own independent research, which you can read in full here, we have found that the average purchase price for cash buying companies works out at just over 80% (80.18% to be precise). So all in all house buyers are paying a fair amount, although this only takes into account the final price achieved, not what was initially offered, a company might have offered a higher amount, say 90% and then reduced to 80% at the last minute. This is a common tactic for disreputable house buying companies. The way to avoid this is that the companies that plan on doing this will always send you out a contract to sign so as long as you never sign a contract with a cash house buying company you should be able to avoid the worst offenders.

To find out more about why you should never sign a contract with a house buying company you can read our article. If you want to find a genuine house buying company it is also worth reading our free step by step guide to finding a legitimate house buying company. Simply sign up with your email and we’ll send you a copy.

Reasons you might accept so much below market value

Now we know how much we are going to be offered by a house buying company and that we will get that amount if we pick the right company to use but why would you accept a reduced amount for your house in the first place?

A below market value offer on your house from a reputable house buying company comes with several benefits, otherwise why would you do it right. Some of the main benefits are;

Speed – If you need to sell your house fast, a house buying company can complete in as fast as 14 – 21 days if needed which is in huge contrast to an open market sale which can take months and months.

Condition – If your property is not in a condition to appeal to an open market buyer it is going to be tricky to sell. House buying companies don’t care about condition, it just factors into the market value of the property, they are willing to buy a property in any condition, this even includes major issues such as subsidence.

Convenience – If you have equity in your home and you are planning on downsizing so you don’t really need to squeeze the maximum amount of cash from your sale, the idea of selling a house by going through the rigmarole of an open market sale could put you off. Dealing with estate agents, photographers, viewings, negotiations and fall throughs can seem like a lot of hassle before you can ride off into the sunset. Selling to a house buying company cuts out all of the middlemen and fast forwards the process, once you have accepted their offer and appointed a solicitor everything else is taken care of.

Certainty – It is impossible to know how long a property will take to sell on the open market and even after a sale is agreed 1 in 3 of all open market sales falls through before completion. Once you have agreed an offer with a house buying company it is guaranteed, unless any previously unknown issues with the property are discovered and even if this is the case in most cases the company will still be willing to buy the property after a price adjustment. So once you find the right house buying company you have a definite buyer.

If a house buying company sale sounds like something that might work for you use our free cash buyer matching service tool by clicking the button below. You will be asked a few questions about the property and show you an indicative offer, if it works for you we will match you to a vetted and approved buyer based on the property and circumstances to ensure that you get the best, 100% trustworth offer on the market.

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What is the ‘full market value’ of a property

How much is your property worth is like asking ‘how long is a piece of string?’ (Twice as long as half of it, as my Dad used to say!). The value of a property varies wildly based on the local and national market conditions at the time. If there are more buyers than sellers, then the value of your property goes up as buyers fight amongst themselves to purchase the property. If there are more properties available than potential buyers, then the value of your property comes down to try and attract attention and give you a competitive edge in a crowded market.

Most cash house buying companies will use local estate agents to value your property, as they know the local market conditions better than anyone. We ask them what would be the full market value of your property after six months on the open market. This isn’t the nice shiny asking price that the agent initially tells you, in order to blow smoke up your whatsit and secure your business. This is the real-life, realistic price that you could actually end up selling for. If you’ve ever sold a property before, you’ll know how different these two figures can be.

“‘Full market value’ is often different from the initial asking price”

Full market value includes potential reductions along the way to boost the sale, as well as the kind of price that you would consider a reasonable offer from a buyer. It also takes into account the condition of the property and any problems you have, such as damp, subsidence, Japanese Knotweed etc.

Beware of companies who undervalue your property

It is a common trick in the cash house buying industry to undervalue a home so that the buyer can appear to offer you a more attractive cash buyer price reduction. The standard 80% offer on a property worth £250,000 is £200,000, but if that property is undervalued at £200,000, then the cash buyer can bait the trap with an attractive headline price of 90% – way better than a reputable company can offer – yet in reality they’re only giving you £180,000 – £20,000 less.

“Companies that undervalue your home can appear to offer a more generous %”

You need to deal with a cash buying company that is open and honest in their valuation process to give you confidence in their offer. Of course, you may still have your doubts; it’s a big call to make. If so, you can get an independent valuation of your own from a local estate agent. Just remember to ask them to be realistic about the actual price your home would sell for, not what they’d start marketing it at to make you feel good. Few homes ultimately achieve their full asking price.

In a competitive market, it’s simply not worth a genuine cash house buying company undervaluing your home, as the Buying Director of a cash house buying company explains:

“Our business is based on buying and selling homes, so we want our offers to be accepted. If we undervalue your home, it makes our offer less attractive and you are less likely to sell to us.”

Cash offers that are too good to be true probably are

Another sleight of hand to watch out for is the unrealistic offer. Some less reputable cash house buying companies will offer you a lower cash buyer price reduction %, often claiming to give you a full 90% or more of your property value. But you need to be absolutely clear that this never actually happens in the end, and there is zero chance that you will get anything like that amount. It’s simply not viable for a cash home buyer to offer that much and still make a profit after all their costs.

“If an offer seems too good to be true, it probably is!”

High offers are a classic ‘bait and switch’ con, where what you see is most definitely not what you get. Once you’re hooked in, you’ll discover hidden fees that add to the cost of a quick sale, or you’ll find that the offer price is suddenly dropped significantly at the eleventh hour, when it’s too late to change your mind. Many of these companies will ask you to sign a contract, tying you in to these fees and changes so you have no choice but to pay them as the trap closes. No reputable house buying company will ask you to sign a contract.

What about cash house buying companies offers that are too low?

Along with offering too high for your property to entice you in and get you to sign in to a nasty contract. Another tactic is to do the opposite and offer too low, usually around 70% of market value.

This seems stupid since you obviously won’t take such a low offer but the thing to understand is that not all companies claiming to be cash house buyers are, some are trying to switch you to another service, sometimes without your knowledge!

Usually if this is the case they will mention that they could get you more because they have ‘investors’ ready to buy properties so you could get around x amount for your property and it will still be a faster sale. This is rarely the case and what they will do is get you to sign a contract for a certain amount, known as an option agreement, and what they will do is try to sell your property to an open market buyer before the tie-in runs out on the contract (which are usually up to 6 months!). After signing up for such a service people often discover their property advertised on Rightmove the next day and even have to accommodate viewings! Whatever the company can sell your house for above the agreed amount they pocket. So essentially you could be paying tens of thousands for the same job that an estate agent would have done for far less.

For more detail about this underhand tactic and many others used by disreputable house buying companies you can read our article here.

Genuine higher offers

In some very specific circumstances, it can be possible to get a genuine offer of more than 80% from a reputable cash buyer. This is because of Stamp Duty Relief. Cash house buyers have to pay an additional 3% Stamp Duty on every purchase they make, however, Stamp Duty Relief is available in some situations, including:

· Probate properties

· Chain repair

· Facilitating the purchase of a new build home

· Relocation for work purposes

In these circumstances, the cash buyer price reduction % will be less, as they have less costs to pay. The stamp duty relief is added to the offer to make it more attractive. However, these higher offers are dealt with on a case-by-case basis and there are no guarantees of a better deal.

Off setting the price of selling to a house buying company

If the cash buyer price reduction % makes your eyes water, then you need to remember than a lot of the cost is offset by savings you make by selling your home quickly. There are several costs that you’d have to pay for an open market sale, that don’t apply when selling fast to a cash home buyer. These include:

· Estate agent fees – 1%-3% (plus VAT) of your sale price – £3,000 – £9,000 on a typical £250,000 home

· Legal fees – around £1,000 on a typical sale, plus disbursements

· Repairs and redecorating – the cost of making your home viewer-ready

· Accepting an offer – buyers usually offer less than the asking price

· Reducing after survey – there will often be faults that you need to compensate for

· Ongoing property costs – such as council tax, fuel bills and maintenance

Once you add up the additional savings, the difference in price between an open market sale and a quick cash buyer is not so eye-watering after all.

“You need to include all the costs of an open market sale, when considering a cost-free cash offer”

You also have to consider what your time is worth. Simply avoiding the hassle and heartache of a sale on the open market is worth the cash buyer price reduction % for many sellers. Selling a property on the open market is never a fun experience even with the smoothest sales, and how many of us honestly have a smooth sale? For some, it’s worth the cost to be able to get on with their life right now, getting their hands on their inheritance, splitting property in a divorce, or even moving on to exciting pastures new, rather than waiting six months or more in limbo and uncertainty.

You get what you pay for

At the end of the day, cash house buying companies are in business to provide a service, and like any other service, that comes at a cost. Think of it like mowing your lawn: you can pay a gardener to come in and mow your lawn today for a price and it will be done and dusted and look great. You’ll have your weekend free to relax and you won’t have to maintain your own mower.

Alternatively, you can go to the DIY store and buy a mower, pay for the fuel or electricity to run it, set aside time in your weekend to do the job and inevitably not do it as well as the professionals. Mowing your own lawn may save you money but paying for the services of a gardener is quicker, easier and much less hassle!

You can read our article on how much a cash house buyer can actually pay for your house here.

Conclusion

If you use a genuine house buying company you are likely to get in offer that is around 20% below what you could achieve on the open market. In some circumstances that could be reduced to 15% (or 85% of the open market value of your home).

“you can expect to receive around 80% of the open market value of your property when selling to a we buy any house company”

If those numbers work for you then a quick house sale could be a good solution but be sure to choose the right company, the industry is unregulated so be sure to do your due diligence and if a company offers you an offer that is too good to be true, remember that it probably is.

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