When it comes to selling a property, you’re never short of options. A new and already popular trend of selling to a house buying company has emerged. But the burning question on many minds is whether these house buying companies actually pay market value for properties and how they actually work.
In this article we’ll go through everything you need to know about house buying companies and when it makes the most sense to use them. We’ll also discuss how a private cash buyer should operate, so if you’re looking to purchase a property for cash, we’ve got that covered too.
Let’s get started.
Do house-buying companies pay market value?
Beyond being a fast way to get a house sold, just how much can you expect a house paying company to pay? Quite simply, a house-buying company will never pay the full market value. This is because they operate as a company, so they need to be able to make a profit. Additionally, they will have their own expenses to take into account. If they were to pay full market value for every customer’s property, they simply wouldn’t be able to sustainably function as a business.
However, what you do find is many house-buying companies will mention that they take market value into account. What this means is that the offer they provide will be based on the market value of the property.
Additionally, house-buying companies use other metrics to assess a property’s worth. While local market trends are also used, if there are significant structural issues then this may affect the final valuation and offer presented.
So an honest, well-funded house buying company will typically offer around 15% below market value. Of course, in some cases it may be lower than that. On average the lowest offer they would make is around 22% below market value. This allows them to take into account any expenses while still offering the most competitive offer possible.
Is it worth selling a house to a cash buying company?
As with any method of selling a house, there’s pros and cons that must be considered. Take a look below:
Pros of Selling to a Cash Buying Company:
Cash buying companies are able to work at speed. They will have their own employees who will work throughout the process to ensure the deal is completed on time and as required. This ensures that selling to a cash buying company means a significantly quicker closing process compared to traditional methods.
- No additional work required
Cash buyers typically accept properties in their current condition. This removes a huge burden to sellers who would otherwise have to spend time and money carrying out renovations or DIY repairs. Additionally, some sellers need to sell a property while they’re currently renting it out. It’s not always possible to get a property sold with the tenant still living there. However, a good cash-house buying company would be willing to work around this without affecting the price of the property.
- Reduced contingencies
With no financing contingencies, the sale is less likely to fall through, providing a sense of certainty for both parties. Because they have the cash funds available and don’t need authorisation from financers they can make an offer and have the funds readily available for when it’s required.
Cons of Selling to a Cash Buying Company:
- Lower offers
As mentioned earlier, cash house buying companies do not make offers at market value. So while speed is a selling point, cash buying companies may present lower offers compared to the potential market value of the property. Additionally, some people may be looking to get the highest value possible, this would require finding a buyer who would be interested in paying more than market value to secure the property.
- Limited room for negotiation
As house buying companies operate as a business, they will have their own standard operating procedure which can restrict the room for negotiation. This is especially true when it comes to the offer that is provided. They’re unlikely to offer any more than what they believe the property is worth for them. However, you can negotiate aspects like selling dates which can help.
- Research and due-diligence
Not all cash buying companies are the same. Unfortunately, as with any business, there are always bad players. So sellers need to carry out their own research to ensure the legitimacy and reputation of the company they choose.To do this, you can check if the company is a member of a trusted trade organisation like The Property Ombudsman and you can also check for reviews on Trustpilot.
With the pros and cons considered, if you need an urgent sale, don’t have the time to carry out repairs, and haven’t had luck finding buyers then a cash house buying company may be the lifeline you need.
How much less should you offer on a house when paying cash 2023?
So what if you’re looking to act as a cash house buyer yourself. How do you go about it? Offering cash as a buyer will immediately set you apart from other buyers. Many sellers may have experienced the sale falling through due to financing issues so if you make an offer in full cash, sellers will be more receptive. Even if it’s not the highest offer on the table.
However, the amount you can reasonably offer below market offer depends on a few factors. They include market conditions, the seller’s urgency and the property’s desirability. If you can provide evidence or the reasoning behind the offer is quite clear, your offer will be considered.
So the idea is to identify how much other properties have been selling for in the local area and how much this property compares. The better the property, the higher your offer should be. An offer of around 10% below market value would be considered appropriate. Of course, if the property doesn’t stack up as well compared to others then you can definitely go lower. While you may be making a lower offer, you should also be comfortable with the offer you’re making.
Can you offer 10% below house asking price?
Offering below the asking price requires skill. While a 10% reduction may seem like a good enough offer, it may not always be the case.
The best way to determine if your offer will be considered is to get an understanding of the seller. Are they motivated by a quick sale, or do they have the luxury of time?
If they have had multiple offers already then your lower offer is unlikely to be accepted. However, if the property has sat on the market for some time then the seller may be growing impatient. So if you were to make a lower offer then it may be taken more seriously.
Additionally, making a lower offer can open the door for a counter-offer. This way you can find out how much the seller actually wants. This way you can still make a purchase at a good price.
Do cash buyers offer less?
Many presume that it’s only cash buyers who offer less. But those going down the mortgage route will also look to offer less if it’s possible to do so. ‘
However, the reason cash buyers are able to offer less is because they are able to purchase the property instantly. The convenience they offer comes at a cost, and sellers will find that selling for slightly less to cash buyers provides the advantages of a swift and secure sale while minimising the risk of the sale falling through at the last minute.
Additionally, market conditions have to be taken into account. In 2023 alone, property prices have continued to remain high however, there have also been fewer recorded sales. As a result, many sellers are finding they have to wait longer to achieve a sale. So a cash buyer can purchase their property for slightly less but are definitely a qualified buyer.
Can you buy a property below market value?
It is definitely possible to buy a property below market value. However, it may take time to find the right property where it is possible to do so. Some properties may also have a lower market value due to the condition. However, once any renovations have been carried out, the property may be worth more than originally paid. Finding a property like this can be a great way to own a property that gains market value.
Another important issue that many get wrong is mistaking asking price for market value. A property can be listed at any price the seller wishes. But this doesn’t indicate the actual market value. In fact, early in 2023, there have been reports of UK home sellers having to cut £14,000 in order to get their properties sold. This goes to show that properties can be purchased at a lower price than originally requested.
Can you negotiate house price after valuation?
One of the most important stages of buying or selling a house is during the valuation stage. This is the part where appraisers arrive to determine the fair market value of a property. However, while an appraisal provides a professional estimate, the market value of the property may still be different due to the local market trends. However there are certain situations where additional negotiation is required following a valuation.
For example,a buyer can request to negotiate iif the property’s condition is significantly different with unexpected issues that affect the value of the property, Additionally, if there have been significant changes in terms of the local market trend, negotiations after valuation allows buyers and sellers to reassess the selling price in light of new trends.
Why should you choose a cash buying service over using an estate agent?
Sellers may find themselves wondering whether a cash buying service or the traditional route of using an estate agent would be better. If you find yourself in this position, it ultimately comes down to whether or not you have the time available to wait for a buyer. But can you really sell without an estate agent?
We’ve already discussed some of the pros and cons of using a cash house buyer above but here’s a quick recap:
- It’s a faster service. You can receive an offer within 24 hours and often complete a sale in a timeframe that suits you.
- There are no additional fees like estate agent fees. You get made an offer that is entirely yours.
- There’s no reliance on third-party financing so the offer made is available to you.
Cash house buying companies are most suitable for people who want to sell a house fast and who don’t want to deal with the hassle of going down the traditional route. Additionally, some people facing issues like financial difficulties or life changes such as a relocation or divorce may find a fast house buying service to be the most suitable so they can move on with their personal life.
Do estate agents over value properties?
Estate agents much like cash house buying companies are businesses. So it stands to reason that they need to be able to make money especially as they get paid a commission based on the final sale price. Some estate agents will look to bump up the value of a property to first convince the seller to work with them while later being able to use it as a negotiation tactic with potential buyers.
However, not all estate agents are the same. The reputable estate agencies out there will provide the most accurate value possible as it sets realistic expectations with the seller. As mentioned earlier, market value and asking price are two different things. So an estate agent may communicate the true market value and then work with the seller to set the best asking price.
If you’re looking for a cash house buying service or an online estate agent, you’re in the right place. Here at Sold.co.uk, we provide both services to help make your selling journey seamless. Get in touch to find out the market value of your property through our enquiry form.