Everything You Need To Know:​

What is a cash homebuying company? (2024)

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You clearly know enough about cash homebuyers to have come here to seek out help and advice from the Property Sale Watchdog. But how much do you actually know about the cash homebuying business?

No doubt you’ll have heard stories, both good and bad, about the industry. You may even know people who were able to sell a home fast using a cash homebuyer. Or you may know someone who has been taken for a ride at a time when they were at their most vulnerable.

Understanding exactly what is a cash homebuying company, and how they operate, is essential if you are to make this process work for you, and make sure it doesn’t work against you.

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In this article, we’ll look at exactly what is a cash homebuying company, why you would want to use one, what it costs and what you can expect to get for your money. Spending a few minutes to understand the people and the process could save you months of anguish and thousands of pounds. So, pour yourself a cup of tea and let the Watchdog explain everything…

What is a cash homebuying company?

It might sound obvious, but a cash house buying company is an company that buys homes for cash. They do this as a business, and they make a reasonable living doing so. 

A cash homebuying company will buy your home fast, in return for offering you a lower price. We’ll explain how fast and how much lower below.

The service is not right for everyone, or even right for most home sellers. However, in certain circumstances, it can be a good option to get your home sold quicker. We’ll look at why you might want to use a cash home buyer a little later on.

What is the difference between a cash buyer and a cash buying company?

A cash home buying company is different from a cash buyer on the open market. You may be lucky enough to find a cash buyer when you sell your home through an estate agent, such as someone who has sold an existing home that they owned outright. 

An open market cash buyer will make the sale process quicker, as you won’t be held up by mortgage applications, or stymied by mortgage issues after survey. However, they won’t be able to buy your home as fast as a cash homebuying company.

Cash homebuying companies have the people and the processes to buy your home in just a few weeks, instead of the many months an open market sale can take, even with a cash buyer. They should also have the cash funds to buy without the need for a mortgage or a secondary sale.

How does cash homebuying work?

Cash homebuyers buy homes cheap, usually at around 80% of the market value, in the hope of selling them at full price at a later stage. In exchange for this discount, they will buy your home fast, in as little as seven days, and will usually cover all your legal costs when they do.

Cash homebuying companies will buy almost any home, in any condition. They have the funds and the workforce to make any repairs or improvements, and they can usually do this quicker and cheaper than you can yourself.

Their aim is to resell your property at the highest possible price, and they have the luxury of time in which to do this. They can wait for the right buyer without pressure from mortgage lenders, ex-partners or siblings who want their inheritance sooner rather than later.

They’re open about how the process works. They’re not doing anything sneaky or underhand, they’re just buying and selling like any other merchant, hoping to make a little profit along the way. 

The cash buying process step by step

If you choose a reputable cash house buyer, then the process should be simple and straightforward. You should have your home sold and your cash in the bank within just a few weeks, or even sooner under some circumstances. 

The process works like this:

  • You contact the cash buyer to express your interest in a quick sale
  • They will ask you some questions about your home
  • They will make you an initial offer based in this information
  • They will do further research and confirm their initial offer within 24-48hours
  • If you accept this offer, they will arrange a survey and start the conveyancing process
  • Unless the survey finds a serious defect, one that you haven’t already pointed out, your offer should not change
  • If all goes well, they will exchange contracts and complete the sale within two to three weeks

You can get a quick cash sale in as little as seven days, but this will cost you more. With such a swift sale, the buyer doesn’t have time to fully investigate your property, and so they will be taking a risk on an largely unknown home. They will need to insure against any possible problems and the cost of this insurance, as well as the level of risk on the part of the buyer, will inevitably mean a lower offer price.

Some companies even offer to buy in just 24/48 hours, but such deals are best avoided. You are unlikely to get much more than half of the market value of your home for such a fast sale.

Can a cash buyer buy too fast?

Some people are concerned that using a cash homebuyer will mean that they’re forced out of their home too fast, before they’re ready to move. The idea of selling in just two or three weeks makes their head spin, and they have no idea how they’ll find alternative accommodation in such a short time.

But relax! This is not something that you need to worry about. Your cash homebuying company will always agree a timescale to suit you and your individual circumstances. They will set the completion date for whenever you want, to coordinate with your moving schedule. 

You can organise your fast house sale as quickly or as slowly as you want it. If you need cash fast, or you’re against the clock to avoid repossession, then they can move very quickly indeed to complete the sale. However, if you need a little more time to get your life together, they can work with that too.

With a fast cash homebuyer, you stay in control of the sale throughout, and you will never have to do anything that you don’t want to.

Why use a cash homebuyer?

With the average UK house price sitting at £282,000, a 20% discount for a fast sale is £56,400. That’s a great deal of money to give up, so why would anyone choose to use a fast cash homebuying company? 

You may want, or need, a swift home sale for a number of reasons:

  • Financial difficulties – selling your home fast can generate cash to clear your debts and give you a fresh start. The quicker you sell, the less interest you’ll pay on your debts and the less chance there is of defaulting and facing the bailiffs
  • Pending repossession – if you’re struggling with your mortgage, your lender may apply for repossession. Selling fast can stop repossession and save you money. If your home is repossessed, your lender will charge you all the fees for selling it, as well as any maintenance fees incurred while they try to sell. Chances are they won’t get the best price for it, as many lenders sell at auction.
  • Divorce or separation – when a relationship breaks down, you may want to get things over and done with as quickly as possible. A quick cash sale stops things dragging out for months and allows you both to walk away and start afresh.
  • Bereavement – if you and your siblings have inherited a property, a quick cash sale gives everyone their cut quicker, without you having to spend time and money managing and selling the home yourself.
  • Relocation – if you need to move fast for a new job, a quick cash home sale can set you on your way sooner. You may even get a little more for your home if stamp duty doesn’t apply, and your new company may pay towards your relocation expenses.
  • Dream home – if you find that ‘once in a lifetime’ property, you don’t want to risk it being bought by someone else while you wait to sell your old home. Selling fast means you can move fast to secure that dream home.
  • Pure simplicity – some people choose a fast cash sale simply because they can’t be bothered with the long, drawn-out slog of a traditional sale. A fast cash sale means no repairs and redecorating, no critical viewers and no failed sales. It’s smooth and hassle free and it’s all done and dusted in a matter of weeks.

Cash homebuyers are not right for everyone

As we touched on earlier, using a cash homebuyer is not the right choice for everyone, or even for most people. The slow pace of the property market can be frustrating at times, and most sellers would love to get moving sooner, but this speed and convenience isn’t normally worth losing 20% of the value of your home for.

A reputable cash homebuyer should be honest about whether or not their service is right for you and your current circumstances. If it is, then the benefits will be clear and the trade off between price and speed of sale will be obvious and worthwhile.

It should always be your choice whether or not to go ahead. If the deal works well for you, then it should sell itself. There should be no need for any hard sell or high-pressure sales tactics. If you feel you’re being pressured or persuaded into doing a deal, then you should step back and seriously consider if this is a company you want to be working with.

Who can set up as a cash homebuyer?

Anyone can set up as a cash homebuyer. You don’t need any special qualifications or training, and you don’t need to be registered or licenced.

Unfortunately, because anyone can set up as a cash homebuyer, an awful lot of people do, often with no idea about the industry or how to help customers to get the right deal.

Many people set up as cash homebuyers just to make a quick buck from buying low and selling high. They’re often only in business for a short while, then they disappear, taking your money and your dreams with them.

To find out more about read our article on how to check you are dealing with a legitimate cash house buyer. You can also see all of this information in our comprehensive, independent reviews.

What can a cash homebuying company do for you?

A reputable cash homebuyer will buy your home fast, with no hassle and a guaranteed sale. This is in stark contrast to selling a home on the open market. 

There are many advantages of using a cash homebuyer, including:

  • No need to repair, redecorate or renovate your property
  • No waiting around for months to find a buyer
  • No estate agency fees – usually between 1% and 3% of the sale price
  • No need to stay viewer-ready for months on end
  • No viewers poking around finding fault with your home
  • No risk of a failed sale or a broken chain stopping the sale
  • No haggling about tiny faults after your survey
  • No legal fees (with most of the better homebuyers)

What a cash homebuying company can’t do for you

While there are many benefits of using a cash homebuying company, their service can only go so far. They are in business to make money, and they’re not a charity. If they make you an offer that sounds too good to be true, then chances are it probably is.

A cash homebuying company will not be able to:

  • Offer you more than 80% for your home (except in special circumstances where stamp duty exemptions apply)
  • Buy your home in less than a few weeks at the full 80%
  • Buy your home in 24/48hours for more than about 50%
  • Offer you a value that is based on your estate agents’ asking price
  • Buy a dilapidated home at the same price as a well-maintained home

To find out how a cash homebuying company values your home and how much a cash homebuyer will actually pay for your home in exchange for a quick sale, read our articles in the Expert Advice section of the Property Sale Watchdog website.

What does it cost to use a cash homebuyer?

As we’ve discussed, a quick cash sale will cost you 20% of your property’s value. That might seem like a lot, but when you put those figures into the context of a home sale, it is not as much as it first seems.

For example, when selling your home to a cash buyer, you won’t have to pay any estate agency fees. These range from 1% to 3% plus VAT. On the average home we talked about earlier, that’s £3,384 to £10,152. 

In addition, you’ll also have to pay solicitors fees for your conveyancing, which are generally over £1,000. A reputable cash buyer will normally pay your legal fees if you use their recommended solicitors, or they will make a substantial contribution to the costs if you choose your own.

Repairing, redecorating and renovating your home ready for sale can costs thousands of pounds more. Even if you do-it-yourself, it will still cost you money for materials and take up a lot of your time. 

Finally, Rightmove statistics show that as many as three quarters of home sales go through at less than the final asking price. This is because buyers will expect to haggle and negotiate to try and get the best price, especially when they’re armed with the results of their survey to bargain with. Once again, this can cost you thousands of pounds. 

Finally, you could find that your buyer drops their offer price at the last minute, when it is too late, or too costly, to pull out.  This is known as gazundering. Less reputable cash homebuyers will often lower their price at the last minute too, but a trusted homebuyer will usually stick to their offer price.

Are cash homebuyers regulated?

There is no formal regulation for the cash homebuying industry and no formal government oversight. This has led to something of a ‘Wild West’ where anyone can operate in any way that they want. A damning Office of Fair Trading report in 2013 raised serious concerns about the industry and the way in which some companies were operating.

However, there are a number of honest and decent cash homebuyers out there, many of whom are incredibly frustrated by how these ‘cowboys’ operate and the reputational damage they do to the sector.

These reputable cash homebuyers got together in 2013 to form their own self-regulation body called the National Association of Property Buyers (NAPB). This is a voluntary organisation dedicated to working to improve the image of the industry and raise standards amongst its members.

Just like the Property Sale Watchdog, the NAPB works to educate sellers about the cash homebuying process. Like us, their aim is to help people to avoid the traps and tricksters, and to find a genuine quick sale deal that works for both them and their buyer.

It should be noted that the NAPB doesn’t have any powers to enforce its standards or to punish members who bend or break the rules. However, one of the key benefits of choosing a member of the NAPB is that to become a member, you need to also be registered with The Property Ombudsman.

The Property Ombudsman is a government backed regulator that does have authority. They publish a ‘Code of Practice for Residential Buying Companies’. They also offer independent and impartial mediation in any disputes. The government ‘how to sell a home guide’ recommends that you should always make sure that any cash homebuyer is registered with The Property Ombudsman as the bare minimum qualification for making your shortlist.

How to choose the right cash homebuyer

Choosing the right cash buyer is absolutely crucial if you want to make the cash buying process work for you, and not get ripped off in the process. You can read in detail how to choose a cash homebuyer in a separate article, but here are a few of the questions that you need to ask:

  • Are they a genuine company? Check their listing with Companies House
  • How long have they been established? Check their history with Companies House
  • Do they have a track record? Ask for proof of previous transactions
  • Can they show you proof of funds? Make sure they have the money to buy your home
  • Are they NAPB or TPO members? Check directly on the organisation’s website, don’t just trust a logo
  • Are they registered with ICO and GDPR compliant? Again, check directly, don’t just trust a logo
  • Do they have a published complaints policy? Make sure you can have any grievances addressed promptly and formally
  • Do they have positive independent reviews? Check on independent review sites, don’t just take the buyer’s word for their reputation
  • Are they making an unrealistic offer? Any more than 80% is unrealistic in most cases
  • Do they ask you to sign a contract? NEVER sign a contract with a cash homebuyer
  • How do you feel when you talk to them? Trust your gut about whether this is a company you feel comfortable working with.

You’ll find the answers to all of these questions, including the response times to our ‘mystery shopper’ calls, in the Property Sale Watchdog reviews. These are independent and impartial, and they’re deigned to give you all the information you need to make a sound, and safe, choice when it comes to picking the right cash homebuyer

Conclusion

To answer our original question, ‘what is a cash homebuying company?’, the bottom line is that they are exactly what it says on the tin – and every word of that title matters.

They buy for cash, which means they can act fast, without the drag of mortgage applications, buying your home in a matter of weeks rather than months. Their business is homebuying, taking on homes of all shapes and sizes, in any condition, so you can sell straight away without spending time and money making your home market ready. 

Above all, they are a company, which means that they need to cover their running costs and make a profit, or there is no point in them being in business.

Understanding these fundamentals will help you to know exactly what a cash homebuying company can offer you, and it will help you to spot when they’re making promises that they have no intention of keeping. 

While the cash homebuying sector may have a bad reputation, even the Government admits that it can be the right thing for some people under some circumstances. Their How to Sell a Home guide sums it up perfectly:

‘One option to sell your home may be to consider a company offering an instant cash purchase, but make sure you understand the trade-off involved; these firms may offer a quick sale, but they may pay well below the market price for your home.

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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