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How do cash buyers value your home? (2024)

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Property values are a weird and wonderful thing. Even in the most stable political and economic times, they can still vary wildly from month to month. Property prices can be unpredictable, reacting to everything from changes in interest rates to confidence in the market, and they can fly up or crash down on a whim.

Anyone who experienced the seismic effects of Liz Truss’s brief stint as prime minister will know just how fickle property values can be. According to The Independent, Britain’s homeowners collectively lost more than £300bn in a year as a result of her 59 days in office.

So how do cash buyers value your home in such a complex and volatile market, and how do you know if you are getting a fair deal or getting ripped off? 

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In this guide, we’ll explain exactly how a cash buyer values your home, and more importantly, why this may be different from what you think your home is worth. We’ll also show you some of the tricks used by the less reputable companies when it comes to valuations and offers, and why the highest offer isn’t always your best option.

Your home is probably worth a little less than you think it is, but it may still be worth a bit more than some cash buyers would have you believe.

About home valuations

Deciding how to value a property in the UK takes skill and judgment, research and understanding. It might feel like it’s done by sticking a finger in the wind sometimes, but to get a fair and accurate valuation for your home takes years of experience and expertise. 

This is one of the reasons why we look at the length of time a company has been in business when we assess cash homebuyers in our comprehensive reviews. The longer they have been valuing homes, the better they are going to be at getting it right.

It’s not just in your interests for a cash homebuyer to value your home accurately, it’s a crucial part of their business too. Get it wrong and they could end up making nothing at all on the deal, or even making a loss.

What is home value all about?

Value is a strange thing, and it means different things to different people. The same kind of house, in the same kind of area, can be worth radically different amounts in the North compared to the South, or even between one area of a town and another. 

Understanding the myriad influences on the value of a home is not easy, but it is vital for both you and your buyer that the right valuation is reached.

Alongside the practical stuff, like the number of bedrooms, the size of the garden etc, there are also a whole host of less tangible things that have to be considered. This includes hard to pin down factors like how fashionable an area has become, or how popular and sought after a certain development or village is.

Once again, these trends can come and go, so how a cash buyer values your home needs to be based on the very latest information and trends. As anyone who has ever listed their home and had to reduce the price later will tell you, it’s quite an art to get a home valuation right first time.

What is your home actually worth?

The bottom line is that your home is not worth what you think it is, or what your estate agent, your neighbours or your friends and family tell you. At the end of the day, your home is only worth what someone is prepared to pay for it. 

If your estate agent values your property at £250,000, but you don’t get any interest, chances are you’ll have to reduce the price to £240,000.

When all the haggling is over, and it finally sells for £236,000, 

THIS is the actual value of your home. 

It may have appeared that your home was worth £250,000, but the real market value is actually £14,000 less than this.

Think of it like an eBay purchase. We all know someone who has snapped up a ‘bargain’ on eBay for a few pounds, convinced that it’s worth much more and that they’ll be able to make their fortune by reselling it at a huge profit. But the truth is that in most cases, if the item only sold for a few pounds, then that’s really all that it’s worth. They might think it’s worth more, but if it was, it would’ve sold for more. 

The same is true for property prices. If your home was really worth what your estate agent told you, and this was a fair price to pay for it, then it would’ve sold by now and you wouldn’t need to think about using a cash home buyer.

Once again – your home is only worth what someone is prepared to pay and not a penny more.

Why are cash buyer valuations lower than estate agents?

An estate agent will almost always value your home higher than a cash homebuyer. This is because the estate agent is valuing high to get your business, while the cash homebuyer is valuing more realistically to make sure their figures add up.

Estate agency is a very competitive sector and agents have targets to meet when it comes to listings. That means that they’ll tell you whatever you want to hear when it comes to the value of your property, even if they know you’ll never get that much. 

Think about it; if one agent says they can get more for your home than another, who are you going to choose to market your property? It’s worth having a go at the higher price, right? What have you got to lose?

Well, for a start, you will lose weeks, or even months of your time waiting for a sale that will never happen. Then your agent will advise you to drop the price to spark fresh interest, and only then will you be selling at a realistic price.

Inevitably, your estate agent will ask you to sign an exclusivity contract, tying you in to them for several months, even if you don’t get any interest and have to reduce the price. That means that, unlike you, they really do have nothing to lose in over-valuing your home. They’ll still have your listing when the price is forced down to a more realistic level and they’ll still collect the bulk of their commission.

How a cash buyer values your home is based on a completely different way of thinking. If they overvalue it, then they will end up paying you more, and that means their profit margin will shrink. 

In the example above, if the cash house buyer offered 80% of the original £250,000 valuation, then that would be £200,000, giving them £50,000 to cover all their costs and make a small profit.

However, since the property only actually sold for £236,000, 80% of the true market value is only £188,800 – that’s £11,200 less. Cash homebuyers rarely make more than £10,000 profit on a transaction, so using the asking price, rather than the true market value, could actually lead to a loss.

Asking price is not the value of your home

Chances are you will not get anything like what your estate agent values your home at. Their valuation is the very most you’ll get from your home, and it’s widely accepted that the final figure you sell for will be less than this, unless the local market is incredibly strong, and demand is exceptionally high.

Rightmove statistics show that just 23% of properties on their website sold for their final asking price between 2005 and 2021. (And bear in mind that this is the final asking price, not what they were first listed at.) While this figure has improved recently, as people have become more reasonable in their pricing, still just a third of properties sold for final asking price in 2021.

Most buyers and sellers do a dance, in which the seller asks for a high price, the buyer pitches in low, and they agree on a compromise somewhere in the middle. This compromise is baked into the initial asking price, allowing some room for negotiation, and many buyers will automatically offer 10% below as a starting bid.

How the market affects the value

Of course, just like an eBay auction, what someone is prepared to pay for something will depend on how many people want to buy it. If there are lots of buyers, then the price will go up. If there are fewer buyers competing, then the price will be much lower.

The same is true for the value of your home. In a sellers’ market, where there are more buyers than there are homes available, your home will be worth more. In a buyers’ market, where supply exceeds demand and buyers have more choice, then you’ll need to reduce the price to make your home more attractive than your competition.

The property market ebbs and flows between a buyers’ and a sellers’ market depending on mortgage rates, the cost of living, wages and a host of other financial factors. It can also be affected by less tangible things like how confident buyers feel about the future.

Keeping abreast of both the local and the national housing market is essential when it comes to understanding how do cash buyers value your home.

Why is an accurate valuation important?

It’s important to understand the true value of your home so that you don’t expect too much or accept too little. After all, how a cash buyer values your home will affect how much you get when they apply their percentage cut.

Most cash homebuyers will offer 80% of the value of your home, so if it’s undervalued, you will be offered less. When you are already giving up 20% of the value, every penny counts. Some sneaky cash buyers will offer a higher headline percentage to get your attention, but then claw back the difference with a lower valuation so you actually end up with less. 

You can get an idea of the true value by talking to an estate agent, but remember to ask them for a realistic valuation, not an optimistic one.

You can also keep an eye out for other sales in your area. Once again, make sure you find out the actual sale price, and not the original asking price. Property portals such as Rightmove will show you the value of home sales in your area based on the final price agreed.

How a cash buyer values your home

A cash homebuyer valuation comes in several stages, and you should expect it to change a little as each stage unfolds. How much it changes will depend a lot on the integrity of the cash buyer. The more reputable the buyer, the less likely it is that they will change their offer. You will usually get three different offers:

Provisional offer – your cash buyer will make you a provisional offer based on what you tell them when you first make contact to see if that sort of figure would work for you. This is a ballpark figure, and the more experienced the cash homebuyer, the closer this will be to their final offer.

Confirmed offer – if you can work with their initial estimate, your cash buyer will then do some further research to confirm their provisional offer. This is the firm offer you will be asked to accept or reject.

Revised offer – the buyer will then arrange a survey of the property, and just like any other home sale, you could well find the offer price is reduced to cover the costs of putting right any problems.

The more reputable cash homebuyers will usually stick to their confirmed offer price unless there is something seriously wrong with the property. Unlike a buyer on the open market, they will not haggle about every broken fence panel or blown bit of double glazing. This sort of issue is par for the course for them, and they will have teams of contractors ready to sort things out quickly and cheaply. 

If your cash buyer significantly drops their price after a reasonable survey, this is a red flag. You should walk away from the deal if you are in a position to do so.

Providing the details of your home

The best way to get an accurate provisional and confirmed offer is to be open and honest about your home and to give your cash buyer as much detail as possible. When you first get in touch, they will ask you a series of questions to establish the basics, such as number of bedrooms, size of plot etc. 

It’s important to provide as much information as possible here, and to stick to the facts. Don’t be tempted to exaggerate how good your home is to get a better price, and never try to hide problems to avoid getting a lower one. 

Cash buyers will always find out the truth in the end, and they will adjust their offer accordingly. There’s absolutely nothing to gain by getting a falsely high valuation that will only drop when the buyer takes a closer look at your home.

If you’re honest with your cash buyer about the condition of your property, and upfront about any problems that you have, then they should be honest with you in return and stick to their confirmed offer.

Comparing similar properties

Just like estate agents, cash homebuyers value properties by looking at what other similar homes have sold for in the area. They will consult local estate agents for their opinion, but once again they will be asking for a realistic selling price, not an optimistic asking price.

Cash buyers will often use those same agents to sell the properties that they buy, so it’s in the agent’s best interests to provide an honest appraisal. Despite what they may tell you to win your listing, estate agents generally know their area, and the properties within it, very well and they will have a very good idea what these properties would actually sell for.

Using their experience

Naturally, for an established cash buyer, an estate agent’s valuation is just part of the process. They will also do their own research and use their own knowledge and experience, to come up with a price.

The cash home buying market is different from the open property market, and there are a number of unique factors that they need to take into account.

The condition will be considered

One of the benefits of using a cash homebuyer is that you don’t have to spend time and money fixing up your home to make it viewer ready. They will buy your home as is, without you going through all of the expense or hassle, or any of the delays, that come with getting work done. 

That said, they are a business and not a charity, so if you need a new kitchen or bathroom, this will be factored into their offer. In the same way that a normal buyer will ask you to reduce your price to pay for any repairs or renovations needed, a cash buyer will offer a little less if your home needs significant work. 

However, since they handle a lot of properties, they can get work done cheaper, so the reduction may be less. A certain amount of refurbishment, such as decorating or new carpets, is factored into their 20% price reduction already, so you may not lose anything from your offer price.

How a survey affects the value

Unless your survey reveals major problems, then it shouldn’t change the offer price by much, if at all. Major problems include anything that would make your home un-mortgageable, such as subsidence, septic tank issues, serious damp or major structural problems.

Cash buyers want to get the best possible price for your home when they sell it on, so they need to be able to sell to the widest possible market – not just cash buyers and builders.

The best price isn’t always the best deal

It’s important to remember that the best headline offer isn’t always the best deal. Just like an estate agency, cash homebuying is a very competitive market, and companies will always try to out-bid each other, even when they know they won’t actually pay that much for your home.

An honest offer, based on a fair valuation, is much better than a dishonest one based on an inflated valuation. These offers will usually come crashing down, often as late as the day you plan to exchange contracts.

It’s easy to offer sellers a fantastic deal, especially when they’re often in desperate circumstances with their backs against the wall. But even in a distress sale, you still want to make as much as possible, and the shady operators know that. They will offer you the world to get your business, with no intention of ever paying you that much.

Why you should never sign a contract with a cash buyer

This is why you should never, under any circumstances, sign a contract with a cash homebuyer. By signing a contract, you are essentially giving them permission to change their offer and mess you about, because you’ll have to pay a fee if you decide not to sell at this new lower rate.

Even if the contract says that no fee is payable if the offer changes, you’ll still be caught. You won’t have to pay the fee, but you will still have to accept the lower price or start all over again. 

People who need to sell fast don’t usually have the time to start again, and the shady cash buyers know this. They offer high prices to lure you in, then drop that price when it’s too late to walk away.

A fair price from a reputable company may not seem like as good a deal, but it is usually your best bet in the end. If an offer seems too good to be true, then it probably is.

Conclusion

Understanding how a cash buyer values your home is vital if you are going to get the best possible deal. It will also help you to understand that you are not being ripped off.

On the face of it, getting just 80% of a valuation that is thousands of pounds less that your estate agent told you, can feel like a very bad deal. However, once you understand the real value of your home, and understand why a cash buyer can only offer you 80% if they want to stay in business, you’ll feel much better about the process.

Here at the Property Sale Watchdog, we aim to help you to fully understand the process, including how much a cash buyer will pay for your home and how a cash buyer values your home in the first place, so that you can not only spot the conmen, but also appreciate a good deal from a reputable buyer.

You don't have to do this alone

To understand why going through us is both better and safer, instead of going directly to your home buying company of choice, click the button below.

We want to help out as many people as possible. That’s why we created this comprehensive article. Depending on your preference and circumstances, we’ll connect you for free with one of our strictly vetted, ethical partners.

They will help you sell your property for the best offer you can realistically achieve. They will take care of all of the legal processes and fees and you’ll get the cash straight into your bank account.

With our partners you can achieve a very fast sale or a slower one if you’re not pressed on time. Faster sales usually yield a lesser price but they save you time. It all depends on your circumstances and preference.

Final Thoughts

We hope this guide has given you ample guidance on how to stop the repossession of your home. We’ve aimed to arm you with as much knowledge as possible. We hope you feel better prepared for any eventuality. 

Remember – your financial health is important, but mental health must always come first. 

Wherever you are in the process, make sure you talk to people regularly, whether it’s friends, family, trusted coworkers, or helpful agencies. Taking time away from dealing with phone calls and paperwork is crucial for clearing your mind, and keeping your sanity in tough times. 

 

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