Companies that buy houses

It is not unknown for companies to want to purchase second hand items directly from sellers; think gold, jewellery, electronics, clothes, video games and just about everything else you can own! So you won’t be surprised that this list also includes houses. Yes there are companies that buy houses directly from people that want to sell up and move on, usually in double quick time.

In this article we’ll take a look at companies that buy houses, looking at their origins, how they operate and seeing if they offer a good deal to people looking to sell their property.

Around one in 3 of all property transactions in the UK are cash sales. Most of these purchases are made by private individuals and property investors but around 1% of all cash transactions are made by companies, often referred to as quick sale or ‘we buy any house’ companies.

What are home buying companies?

There is not much mystery hidden in the name, a home buying company is a business that’s main function is to purchase properties directly from homeowners that are looking to sell and a traditional open market sale is not a good option either due to time constraints or issues with the property.

The history of companies that buy houses

Cash sales have been going on since people first started building houses and deciding to sell them but companies purchasing properties directly from buyers in an institutional fashion is a fairly recent phenomenon.

It was the late 90’s when shrewd estate agents realised that there are people willing to accept a discount to market value in exchange for a fast and convenient ‘off market’ sale, this wasn’t exactly an original concept since property investors have been making similar deals for decades, but the innovation was to create a customer facing company that’s sole purpose was to purchase properties directly from sellers.

Other companies soon sprung up embracing this model further innovating and refining the house buying process and the quick house sale market was born and has grown steadily ever since.

It hasn’t always been a smooth ride, drawn by the opportunity of buying ‘cheap’ properties every wannabe property investor clamoured to part sellers from their properties by any means necessary. This led to the industry earning a reputation for sharky practices such as the ‘chip’ where unscrupulous buyers make high offers only to reduce them further down the line usually at the very last minute putting the seller in an impossible decision to either accept thousands of pounds less or start the whole process all over again.

It wasn’t long before the industry came to be known to the office of fair trading (OFT) who back in 2013 carried out an investigation into the ‘quick house sales’ sector due to concerns over the risk to sellers. The study found that although the service was beneficial to home sellers looking for a ‘quick, guaranteed and hassle-free sale’ they did identify that some businesses were using business practices that fall short of expected standards and some that may not comply with the law. This led to a letter being sent to nearly 120 providers suggesting improved practices and also led to further investigations into the 4 worst cases where they had serious concerns.

On the back of this the home buying companies got together and some of them went on to form the self regulatory organisation known as the National Association Of Property Buyers (NAPB) to hold its members accountable for better practices and higher standards. Today, over a decade on from the initial investigation around 50% of national quick house sale companies are registered with the NAPB and just over 52% are registered with the Property Ombudsman (TPOS).

Despite the ‘clean up’ a lack of regulation and oversight means that you don’t have to look too far before you find companies that are still falling short of best practices. Whether that be lying about credentials (over 20% of companies claiming on their website to be registered with the property ombudsman actually weren’t) or continuing to use legal but morally questionable practices (almost 1 in 3 independent house buying company customer reviews mention such practices).

In fact only 7% of all of the house buying companies we investigated passed our 16 point checklist that we believe any home buying company should pass to be considered the best cash house buying companies.

Is it worth selling your house to a house buying company?

Your individual circumstances will weigh heavily on whether it is ‘worth’ using a company that will buy your house. If time is on your side and you can afford for it to take between 6 – 9 months for your house sale to complete then the house buying company option is likely not for you. If you need the sale to complete in a short time period, such as a couple of months or even weeks then it could be one of your only options.

Some of the most common reasons people sell their house to a quick sale company are;

They need a quick sale
The property has structural issues
The property needs to be renovated
Selling an inherited property
Downsizing
Selling due to ill health
Selling to stop repossession
Emigrating
Selling a house with tenants in it

If you are in any of these circumstances and many others, then companies that purchase houses have their advantages.

Find A Company To Buy Your House

Advantages of selling to a house buying company

Companies that buy houses for cash bypass conventional finance for buying a house (i.e. they don’t use a mortgage) this has benefits to you as a seller including speed. At this point you are probably wondering how fast can a cash house buying company actually buy your house?. Well the truth is that the fastest a company can buy your house is in about 14 days if you are selling a freehold property with no legal issues that might cause added complexity, for example selling a house with possessory title or selling a flat with a short lease. Even with issues house buying companies can buy your house much faster than an individual buyer would be able to in their wildest dreams.

Another serious advantage of not relying on conventional finance is that they can buy houses that mortgage lenders wouldn’t touch with a barge pole. Lenders have criteria that houses must comply with for them to feel confident that they will get a return on their investment if worse comes to worse and they need to take possession of the property, if a house doesn’t fit within a lenders criteria it would be classed as unmortgageable. So what makes a property unmortgageable? There are a multitude of issues that can give lenders cold feet, these range from selling a house with subsidence, to Japanese knotweed and even spray foam insulation. Despite the reason making a property unmortgageable there are companies that will buy your house, so if selling a house at auction seems like too much of a gamble you can get a guaranteed, hassle free sale from a company.

For those that don’t like the idea of countless strangers poking around their home; taking pictures, scrutinising viewings, for sale signs advertising to the whole world that you are selling your house then the idea of selling your house privately might sound appealing. True house buying companies have no need to market your property, since they are the ones buying it and they will only need photos for their own valuation purposes so no for sale signs and no parade of strangers snooping around your property.

Disadvantages of selling to a house buying company

You are probably thinking that all of this sounds too good to be true, there must be a catch otherwise selling on the open market would be a thing of the past and everyone would just sell their house to a company.

Well there is a catch and it’s to do with the price that a house buying company will offer you for your house, so how much do cash house buyers actually pay? This will depend on certain factors but the average price paid by companies that buy houses is around 80%. In fact we recently independently verified this figure in our study (are cash house buying companies lying thieves?) where the average price paid by the major home buying companies came to 80.16%. Be wary if any company is offering you substantially more than this, it is almost certain that they are not looking to pay that amount at the end of the sales process.

Taking a 20% hit on the price of your property won’t work for everyone which is why sales to companies that buy houses only account for about 1% of the overall cash sales market.

How companies that purchase houses compare to alternative methods

The main difference between choosing to sell your house to a company versus more traditional sales methods such as through an estate agent or via a property auction is that the property never needs to be marketed.

If you sell your house on the open market or by auction you will need to have pictures taken, floor plans produced and provide details of the property in order for the selling agent to produce marketing materials which they will then distribute through various channels such as their highstreet store windows, online platforms like Rightmove or Zoopla, brochures, newspapers and various others in order to get your property in front of as many potential buyers as possible. On top of this you will have a for sale sign placed outside your house and any interested parties will want to see the property for themselves so you will need to make yourself scarce while the agent shows complete strangers around your house.

This isn’t the case when selling to a company that buys houses. They are going to be buying the property from you directly. It’s the difference between selling your jewellery on ebay or walking into a specialist jewellers and selling it to them directly. If you are looking for a private sale away from prying eyes then selling to a house buying company is a great option.

Another big difference as mentioned in the disadvantages is the price that you are going to achieve. If we call what your house would sell for on the open market in 6-9 months 100% of it’s ‘full market value’, when looking to sell to a company you will be walking away with around 80% of that amount.

So you will be getting less money but you will make a huge saving in another area and that is time. The average sale time from instruction of estate agents to finding a buyer and them actually going through with the transaction is around 9 months. A house buying company can buy your house in a breezy 2 weeks if you really need them to or at any date of your choice after that meaning that you can make future plans accordingly and not be at the whim of flakey open market buyers that change their minds more than they change their socks.

Are house buying companies regulated?

Companies that buy houses are not regulated by any official body. However there are certain organisations that house buying companies can voluntarily sign up to and that you should look for when deciding on which company to use. The most important of these is that a company should be registered with the property ombudsman (TPOS), which you can check by doing a search on the ombudsman website here, if a house buying company is registered with TPOS it means that they have signed up to the TPOS code of conduct for house buying companies. Any company signed up to the code should follow the best practice guidelines and if they don’t you can seek redress through the ombudsman. If you use a company that is not registered with TPOS you leave yourself open to companies that use underhand practices and have no way to seek recourse if things go wrong. There is no good reason that a house buying company wouldn’t voluntarily sign up to the TPOS scheme but despite this only around 50% actually are.

Another body that a house buying company can join is the National Association Of Property Buyers (NAPB) this is a self regulatory body set up in reaction to the OFT investigation and has been in operation since 2014 and since then has grown to 42 members. To become a member of the NAPB house buying companies must be registered with The Property Ombudsman (TPOS), pay an annual fee of £265 and must purchase properties directly from homeowners, although they only have to supply evidence of 1 purchase in the last 6 months. The NAPB doesn’t really have powers to do much more than remove a company as a member if they are found to breach its rules so is secondary to TPOS when looking for a company to buy your house.

Where do house buying companies operate

You can categorise house buying companies in one of 2 categories;

National house buyers – these house buying companies will tend to be larger operations and will buy houses in any area of England & Wales.
Regional house buyers – these house buying companies are usually smaller operations or individuals that have a particular interest in buying properties in a particular city, county or region of the UK.

The majority of companies that buy houses operate exclusively in England & Wales but there are some that also include Scotland as well. The reason for this is that the laws around property purchases in Scotland are different than England and Wales. There are several Scottish regional companies that specialise in buying houses north of the border and there will also be similar operations in Northern Ireland.

How much do house buying companies offer

If you are wondering how much less than market value house buying companies offer that figure is around 20% less than the ‘full market value’ of your property. There are several factors behind this but the main one is the business model that companies that purchase homes use.

They make money by buying houses below market value and then selling them on at full market value, you might be thinking that this sounds pretty simple but actually buying a house is an expensive business and so is selling one so when you add up all of the costs such as solicitor fees, surveyor fees, bills, agents and the additional stamp duty that companies have to pay it quickly becomes clear why 80% is at the upper limit of what they can pay and still turn a profit. So while these companies certainly aren’t charities they do offer a fair price for a service that can be extremely valuable to homeowners in difficult situations.

Are there any companies that buy houses for cash

There is a common misconception that all house buying companies have a big vault full of cash at their disposal which they bundle into a suitcase and give it to you in exchange for your house. Dispute ‘cash house buying companies’ being a commonly used industry term it is actually quite rare for a house buying company to use its own cash to purchase properties.

More commonly companies are using some sort of financial facility, such as a line of credit with a financial institution such as a bank, or they use a bridging loan to fund the purchase. The difference between these financial vehicles and a traditional mortgage is that they are not bound to a mortgage lenders criteria and have already gone through compliance and other checks which all mean that they have the access to the funds immediately, unlike a mortgage buyer whose application can take many months to be approved.

It is these funding mechanisms that enable companies that buy houses to purchase at breakneck speed, just as fast as if they were to have the cash in their bank account.

are there any companies that buy houses for cash

How do quick sale companies make money

When property buying companies purchase houses at a discount to market value their intention is to sell them on and realise the ‘full market value’ of that property. For example if a house buying company purchases a house for £80,000 they will be looking to sell it for around £100,000 in 6 months or less on the open market. If it takes significantly longer to sell then they risk losing money on the transaction.

This might seem like a significant margin but when the costs of purchasing a property and then reselling it soon add up meaning that margins of around 6% are the norm. There is also a significant element of risk involved. It only takes a small error in valuing a property or the housing market to take a downturn and any potential profit can easily be wiped out leaving the company at a loss.

This is why many companies that buy houses go out of business and why you should always use an established house buying company that has strong financials otherwise you run the risk of a company going bankrupt while they are in the process of buying your house, leaving you in the lurch.

Finding a company to buy your house

Companies that buy houses are not hard to find, they often have a strong presence online, market in local news publications and some will even post flyers through your door. The difficulty lies in finding a company that can deliver on their promises and that you can trust.

To do this you need to make sure that you carry out your thorough due diligence, our free ‘step by step guide to finding a legitimate house buying company’ is a good place to start. If you don’t have hours of free time to research dozens of companies you can use our buyer matching service where you answer a few questions about your property and we will match you to a vetted house buying company that has passed our rigorous checks, you can use this service by clicking on the ‘find a buyer’ button below.

If you are still in the early stages and want to know what sort of offer you can expect from a house buying company then you can use our ‘cash offer calculator’ by clicking below.

Get An Estimated Cash Offer With Our Free Calculator

Answer a few simple questions to find out what a cash offer from a genuine buyer might look like by clicking the ‘cash offer calculator’ button below or if you want the gurus help finding the best house buying company for your property you can use our buyer matching service by clicking on the ‘find a buyer’ button.

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