How do cash house buying companies make money?
How can cash home buying companies complete a sale so fast, and what is in it for them? Put simply, your cash house buying company makes a small profit by buying your home below market value, and then selling it on for full price on the open market. There is nothing underhand about this, and they are open and honest about how it works. They have the luxury of time to sell your property at full price, and you don’t. They also have the budget and the craftsmen to make any improvements or updates that are required to obtain the best possible price. The lower price you receive pays for the speed and simplicity of a quick sale, saving you a lot of time and trouble compared with selling your property yourself. For many people, this convenience is well worth the cost.
How does the process work?
Cash house buying companies will usually be able to give you an estimated offer on the phone or online when you initially enquire. They will then do some further research into your property and your local market, before confirming this offer within 24-48 hours.
A reputable cash house buying company will not charge you for your valuation, and you should be under no obligation to accept the offer, so it costs you nothing to find out. If you do accept their offer, they will proceed with the purchase and you will normally have the cash from your sale in two to three weeks.
“A cash sale will take a lot less time, for just a little less money”
Your house sale may be much quicker than normal, but don’t worry, you will remain in control. A fast house sale does not mean you will be out on your ear before you’re ready. With you can ask most cash house buying companies to move as quickly or as slowly as you need. They will be happy to arrange completion to suit your schedule.
Most cash house buying companies will ask you to use their solicitors for the transaction. This not only gives them greater control, keeping things moving along, but it also means the case is being dealt with by a firm that specialises in rapid conveyancing, ensuring a swift and smooth sale. Many cash house buying companies, including My Homebuyers, will pay for your legal costs as part of the deal if you use their recommended solicitors.
What does it cost to use a cash house buying company?
There should be no additional fees, deposits or other payments for using a cash house buying company. Their profit is in the sale price and they shouldn’t ask you for anything else. If you are asked for a ‘deal fee’, a ‘valuation fee’ or any other cash upfront, you should walk away and find another company, even if they claim that these fees are refundable on completion. Once they have your money, it can be difficult to get it back.
“It should cost you nothing to use a cash house buying company”
Reputable cash house buying companies do not charge upfront fees. What’s more, they should cover your expenses in completing the sale, including valuation fees, survey fees and legal fees.
Are cash house buying companies worth it?
You may initially think that using a cash house buying company, who pay less than the market value of your home, is an expensive way to sell. However, when you factor in all the costs involved in a standard sale, the difference could be less than you think. For example, with a cash house buying company there are:
· No estate agency fees – usually between 1.5% and 3% +VAT
· No costs to repair or refurbish your home
· No haggling or last-minute reductions
· No reductions after survey
· No risk of the buyer pulling out generating extra costs
· No legal fees
*When you consider the costs of a regular home sale, a fast cash sale is good value for the service you get*
Take a look at the direct comparison on MyHomebuyers.co.uk, and you will see that on a property worth £150,000, the initial difference in offer price from a cash house buying company appears to be £30,000,. However, when all the extra costs are factored in, that difference reduces to just £8,400 – a small price to pay for selling in a few weeks rather than waiting six or eight months.
The problem with many cash house buying companies
The opportunity to make a quick buck has led to an explosion of cash house buying companies, with many of them falling short of the standards and the service you deserve. This means that you need to choose your cash house buying company with care, looking out for the tell-tale warning signs.
“Don’t rush into a fast home sale. Choose your cash house buying company carefully”
Unfortunately, in an unregulated industry, there are many companies who are only too eager to take advantage of your situation. Some companies will offer an attractive figure for your home, only to reduce it significantly close to completion, when it is often too late to change your mind. As discussed above, some companies make their money by charging fees to people, with no real intention of ever buying their home. All too often, cash house buying companies use high pressure sales tactics to exploit people when they are desperate, bullying them into agreeing an unrealistically low price.
Regulation of cash house buying companies
With no compulsory regulation for cash house buying companies, anyone can set up in the business and offer to purchase properties. However, there is voluntary regulation from the likes of the Property Ombudsman, the National Association of Property Buyers and Trading Standards.
How to choose the right cash house buying company
Before making any big decision it is important to do your research and do your due diligence on any company you are thinking of dealing with.
Reading reviews and carrying out some background research is the bare minimum that you need to do when you are engaging with an unregulated industry. Fortunately help is at hand and we have done a lot of the hard work for you, reviewing the biggest players in the industry and providing detailed impartial insights so you are armed with the information you need to make the decision that is right for you.
You can find a list of our comprehensive reviews here.