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.”
Too good to be true probably is
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.
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 cash buyer price reduction %
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.
Cash House Buyer Guru