What does a house purchase cost for a cash house buyer?
If you’ve ever bought or sold a house, then you’ll know that it’s an extremely expensive business. And doing this as a limited company costs even more, with extra taxes on top of the normal expenses. The costs for a cash house buyer can add up to over 10% of the property value, and include:
- Stamp duty on purchase
- Additional stamp duty for limited companies +3%
- Three sets of solicitor fees at around 2%
- Acquisition and holding costs of around 4.2%
- Estate agent fees of around 2%
That 20% difference in price doesn’t feel so greedy now, does it?
Let’s take a closer look at each of these costs…
- Stamp duty
Companies that buy property are required to pay additional stamp duty on each of their purchases over £40,000. The rate is 3% above the standard stamp duty rate for each price bracket, so if the standard rate is 0% then they pay 3%, if the standard rate is 5% then they pay 8%.
- Solicitor fees
House buying companies need to pay solicitors’ fees on when they buy your property and again when they come to sell it. In addition most reputable companies will also pay your legal fees for the sale, so they actually have to cough up for three sets of legal fees on every transaction. These fees range anywhere between £500 – £1500 for each stage, coming to over £2500 in total.
- Acquisition costs
The house buying company also has to pay the cost of their banking facilities to provide the funds they need. On top of this, they have to pay for a RICs survey, at around £450 to £600 depending on the property value, and they have to pay this before they’ve even bought your property.
- Holding costs
These are all the expenses involved in owning the property until it sells. This includes bills, such as council tax and insurance, as well as energy costs to prevent damp, maintenance costs to keep the property in good condition and security costs if it is vacant. You need to bear in mind that, by the very nature of the business, cash buyer properties are unlikely to sell fast. If they did, then there would be no need to use a cash buyer in the first place. That means that the buyer often has to carry the costs of owning the property for at least six months, and often much longer while issues are resolved.
- Estate Agent Fees
Cash home buyers have to use estate agents to resell their properties, and this costs them the same as it costs you – around 2-3% plus VAT.
When you see all the costs for cash house buying companies laid out like this, it’s easy to see how they can quickly add up and chip away at what you thought was a ‘greedy’ profit margin. Don’t forget, you also have to factor in the costs of running their business, such as staff, marketing and premises, insurance, equipment and phones. Even with a 20% mark up, there is surprisingly little left in the pot as profit.
When you do the maths, it’s obvious that any offer of over 80% simply isn’t realistic and is highly unlikely to be honoured. Either the buyer is a ‘busy fool’, who is making a miniscule profit on every property that they handle, or they think that you’re the fool who won’t question their unrealistic offer. Which do you think is more likely?
How can you get a higher offer from a Cash House Buyer?
Of course, it’s in the house buying company’s best interest to offer as much as they can for your home. It’s a very competitive market and they need to attract sellers. After all, if they don’t buy houses, they don’t make any money.
But with costs as high as I’ve described above, there’s little wriggle room within their already tight profit margins. However, there are occasions where they can cut those costs, and the more reputable companies will pass the savings on to you in the form of a better offer.
Another way of getting the best offer is by choosing the right company for your property. Companies will have preferences on things such as location, property type and a whole host of other factors. If your property closely matches their ideal buying criteria then you are more likely to get a better offer for your property.
That’s why our buyer matching tool is such a useful service, answer a few questions about your property and it will match you to a buyer that has not only passed our rigorous approval process but also the buyer that will be the best for your property and circumstances. To use this tool you can click on the button below.
