These contracts are a con in so many ways. And when you think about it, why would they be anything else? A cash house buyer is not going to create a contract that works to your advantage are they? They are looking after their own interests first and foremost (and last and hindmost and everything in between).
Here are two of the biggest contract cons:
The tie-in – the first thing these contracts do is tie you in to the company and bind you to their terms. They often contain clauses that if you withdraw from the sale for any reason, then you have to pay them around £1000 to cover their ‘costs’.
Once you’ve signed a contract with this kind of expensive get-out clause, there’s no incentive for them to do a good job to keep your business. In fact, exactly the opposite is true. What you are actually giving them is free reign to drag their heels or deliver abysmal service, because you are powerless to do anything about it. You have to grit your teeth and go along with it all, because if you go elsewhere, you’ll have to pay them £1000 of your hard-earned cash.
Even if you try walking away and refusing to pay, that won’t stop them. If you withdraw from the sale, most contracts give the company the right to register a charge on your property’s deeds. That means you won’t be able to sell your own home to another cash house buyer until the company has received the money that they claim that they’re owed.
Many disreputable companies sell these contracts by agreeing that if they reduce their offer, then you don’t have to pay the withdrawal fee. This sounds like a price guarantee, but in fact it isn’t worth the paper it’s printed on. Most dodgy companies save their price drop for moving day, when you don’t have the will, the energy or the flexibility to walk away, even if there’s no longer a financial penalty for doing so.
The ‘option agreement’ – If you thought the first contract con was bad, then brace yourself, because you ain’t seen nothing yet! Unbelievably, you’ll find that many of these contracts aren’t actually for buying your house in the first place.
Hidden deep in the small print, you’ll find that the company aren’t agreeing to buy your house at all. What you’re really doing is giving them the right to sell your property to a third party. They agree a price with you, and then they work behind the scenes to sell your house at a higher price and pocket the difference (which could be tens of thousands of pounds). They never actually buy your property, and most of them don’t have the funds to do so even if they wanted to. All most of them do is list the property on Rightmove and hope for the best.
Like breaking wind in a lift, this is wrong on so many levels. While they appear to be offering you one service – a quick, reliable house sale – what they’re actually delivering is something entirely different, and far less useful. What you’re essentially signing up to is a regular house sale, with all the delays and problems that come with it. Your buyer will still have to go through the standard house buying process which can take months. Conveyancing alone can take 8-12 weeks, and there’s nothing the so-called house ‘buying’ company can do to speed this up. However, instead of paying your estate agent 1-2% to handle your sale, you end up paying your cash house buyer 10%-20% for what amounts to the same service.
With these dodgy secondary sale deals, there’s no guarantee that your sale will go through any quicker than normal. When you sell your house fast to a genuine cash buyer, they will have the cash to buy it themselves before selling it on. That means things will move so much faster.
If you were looking for a fast sale, you can kiss goodbye to any chances of it actually happening if you sign a contract.