Nested guides: Chapter 3 - We buy any house services

The quick house sale industry

The quick house sale industry refers to selling your house to a home buyer, such as companies like webuyanyhouse or webuyanyhome, or a property developer. Generally offers will be for below fair market value and range from 60-80% of the home’s open market value. As a result, home-sellers generally don’t consider them unless they are in financial distress or have a pressing reason to move on a particular timeline. For this reason they are also referred to as distressed house sales.

Quick house sales represent roughly 0.5-1% of UK house sales and there are a number of companies in the space (an Office of Fair Trading (OFT) study counted almost 120) including both legitimate home buyers and predatory players looking for vulnerable customers. The difficulty of distinguishing legitimate house buyers from those engaging in suspect practises led to the OFT investigating the industry.

This guide includes further information on the recent industry report by the OFT, when a distressed house sale might be the right choice and potential risks of using a fast sale company.

Nested

We believe that it should be possible to sell your property quickly without compromising on price. We give homeowners a guaranteed sale price for their property from day 1. We will either sell your property for more within 90 days or give you the cash ourselves. Click here to find out more if you think we can help you.

Office of Fair Trading (OFT) distressed house sale report

The OFT launched a study looking at the quick house sale industry in April 2013. They were particularly concerned about the risks to sellers in vulnerable situations, such as older people (for example when they need to move due to declining health) or those who need to clear debts and/or avoid repossession. One particular driver was the potential for people to lose a significant proportion of their personal wealth by accepting a bad deal.

The study found that when it works well the industry can help sellers to achieve a quick, guaranteed and stress-free sale in exchange for a lower sale price. However, it also uncovered a number of disturbing practises. The OFT opened an investigation into three providers engaging in business practises which potentially raised serious concern. (NB. They assessed almost 120 providers in total.)

The particular practices that gave rise to concern included (as quoted from the OFT report):

  • reducing the price offered at the last minute after the seller is financially committed to the transaction;

  • making misleading claims about the value of the property or the level of discount to be applied to the sale;

  • falsely claiming to be a cash buyer;

  • unclear fee structures, for example, imposing an unexpected fee following an initial valuation, as a condition for progressing the service;

  • inducing home sellers to enter into agreements that prevent them from selling to other buyers, with severe penalties for breach of contract.

The OFT made a number of recommendations to consumers considering whether to go ahead with a sale which we have included in our list of tips on how to pick the best quick sale company for you.

Nested

We believe that it should be possible to sell your property quickly without compromising on price. We give homeowners a guaranteed sale price for their property from day 1. We will either sell your property for more within 90 days or give you the cash ourselves. Click here to find out more if you think we can help you.

Tips on picking the best quick house sale company

The OFT guide made a number of recommendations on what to consider before deciding whether to sell to a quick house sale company or not:

Make sure you are clear about exactly what the provider is offering:

  • Will they buy it themselves or are they a broker for someone else, if so who?

  • How will the purchase be financed? Is there any chance of these funds falling through?

  • How long will the sale realistically take? What are the steps to get there and where might delays potentially arise?

  • How much are they offering? Is this guaranteed or might this change later on? And how does the final amount compare to fair market value? (NB. We suggest you get an independent view here so you can form your own opinion.)

  • What fees and charges might apply?

Treat marketing claims with caution:

  • If a company is truly offering 100% fair market value and zero fees how do they intend to profit on the deal?

  • If a company is a broker what will they do to secure a quicker sale than an estate agency? And what kind of guarantee are they able to give?

  • If a company claims to have cash funds are they able to provide proof of funds or a pre-existing and undrawn debt facility?

Carefully considering these questions should help you make the right choice on how to sell your property. It may also be useful to view our list of potential risks of using a fast sale company.

Nested

We believe that it should be possible to sell your property quickly without compromising on price. We give homeowners a guaranteed sale price for their property from day 1. We will either sell your property for more within 90 days or give you the cash ourselves. Click here to find out more if you think we can help you.

Potential risks of using a fast sale company

Quick house sale companies can be great for those looking for a quick, guaranteed and hassle-free sale. However, whilst there are a number of legitimate companies in the industry, there are also some predatory practises.

1. Undervaluing your property

The main risk is that you end up selling your property for significantly less than its true value. This is particularly worrying as houses are typically people’s largest asset so losing out on a transaction can wipe out a large amount of your personal wealth. Some home-sellers fail to disclose exactly how they are valuing your property and will just share a number.

Home buyers will often also make misleading promises on their websites. For example, promising to pay 90%, 95% or even 100% of fair market value. This is impossible to do in a profitable way if they are buying the property as they will have to pay stamp duty as well as their transaction costs and need to sell it on at a profit. They will therefore often tell you your house is worth less than it actually is and then promise to pay 95% of that smaller number.

For this reason, we strongly advise people to get valuations from multiple agents and make sure not to share any information between them. Although agents will typically inflate prices slightly to win the instruction you should get a sense of what is realistic, particularly if you get them to share the comparable past sales they have used to come up with the valuation which allow you to form your own opinion. In that vein, we would also strongly advise you to do some research yourself using free online valuation tools like ours which will also give details of all relevant recent sales in the area and Zoopla’s.

2. They reduce the offer after it’s agreed or even at the last minute

Some home-buyers will make a slightly more generous bid up-front in order to hook you in and then reduce the price later, for example after the survey. Worse still, a small number of players, once they know that you need to sell quickly will wait until the last minute when you can no longer afford to pull out and reduce the price, this is known as gazundering.

By way of example, the OFT study found reported price drops ranging from 7 per cent to 53 per cent of the initial offer (already lower than the full market value) and averaging 22 per cent across the complaints they received.

This can’t always be avoided as sometimes the survey or home inspection will genuinely turn up issues that mean the property is worth less than initially offered. To protect yourself you should ensure that the buyer is using a RICS approved surveyor and ask them to lay out the exact reasons why they believe the value has changed. Typically you would have an estate agent to help negotiate, however, when working with a home buyer there will be no agent to assist you so you should consider enlisting the help of a RICS approved surveyor (possibly the one you used when you purchased the property) to check their claims are legitimate.

3. The company won’t give you the cash as quickly as they promise

Often companies will make misleading promises on their websites about how long it will take to sell, typically reporting the shortest possible time, for example 7 days, instead of their average time of 3-4 weeks. It is also worth bearing in mind that they will often take 7 days to make you an offer meaning it is more realistically 4-6 weeks before you have thecash.

4. The company you’re dealing with is just a go between

Before you engage with a company it is important that you know if the company is going to buy your property itself, help you find a buyer or going to pass your details on to another company. This will help you understand the likelihood of them being able to help you and how long it will realistically take.

If the company guarantees the sale themselves then you know that there is less that can go wrong. By contrast there are many companies who simply act as lead generation services, collecting your details and then circulating them to a pool of potential buyers in exchange for a fee if the transaction goes ahead. These middle-men simply cut into the amount that you will receive so you should avoid them and only work with companies who will either purchase the property themselves or guarantee your sale.

5. The company doesn’t actually have the cash

Does the company have access to enough funds to purchase your property or fulfil their guarantee? Do they already have this cash or do they need to raise finance against your property? Ideally they already have the money set aside in cash or available via a pre-existing debt facility. If not, this can provide further delays as they will have to secure the finance from a 3rd party.

As outlined in the OFT report there are a number of legitimate companies in the space, providing a valuable service however, there are also a number of predatory players who you should be careful to avoid. You should do your own research before agreeing to sell to any company.

Nested

We believe that it should be possible to sell your property quickly without compromising on price. We give homeowners a guaranteed sale price for their property from day 1. We will either sell your property for more within 90 days or give you the cash ourselves. Click here to find out more if you think we can help you.