Property buying companies have been around since the early 00’s, offering homeowners the chance to sell their property quickly for cash.
What initially seems like a legitimate (yet subprime) market very similar to the ‘we buy any car’ franchise; the quick house sale industry has come under scrutiny over the years for various scams, false advertising and illegal activities.
Due to the nature of the industry, selling a property for cash can’t be regulated, and although the now defunct OFT (Office of Fair Trading) stepped in to investigate the marketplace in 2003; it is almost without question there are still a number of shady practices continuing to be practiced.
Predominately aimed at homeowners who are financially motivated, be it going through divorce, facing repossession or unable to sell for another reason on the open market; cash buying companies advertise as a quick solution to alleviate the stress being caused by a property sale.
As with anything of this nature, the speed and guarantee of a buyer comes at a cost to the seller; usually an expected discount of 25% from market value.
Although this ‘quick cash’ model doesn’t suit every homeowner, it does have its place within the property industry.
However, what potential customers of property buying companies need to realise is without any form of regulation other than an association set up by a number of companies within the industry, namely the NAPB (National Association of Property Buyers), they run the risk of dealing with a potential scam company, or a company advertising falsely.
What do homeowners need to look out for?
1) Quick sale companies who aren’t cash buyers.
There are a number of companies advertising as ‘quick buyers’ who don’t actually have the funds available to purchase a property directly from a vendor. What these companies tend to do is agree a price with a vendor and look to either sell this as a brokered deal to an investor, or simply list it as an estate agent on the portals like Rightmove and Zoopla.
It has to be noted a number of these companies offering a ‘quick sale’ can’t be considered a scam, however when a vendor is expecting a sale in 7 days, they require a cash buyer. Vendor’s can ask a company to provide proof of funds to ensure they are genuine cash buyers and not looking to do anything else with their property.
2) Last minute price drops.
A number of cash buying companies will agree a price with a vendor in the first instance that the vendor is happy with. They will then proceed to valuation, instruct solicitors and see everything through until the day of completion.
On the day of completion the cash buying company will call the vendor, and threaten to pull out of the sale unless they agree a last minute price drop.
These unscrupulous companies know a vendor is most vulnerable when they are expecting to be vacating a property and probably have everything arranged to move on with their lives. We suggest anyone dealing with a cash buying firm ensures they are:-
- Members of the NAPB.
- Members of the Property Ombudsmen.
- Offer a full and written guarantee that the price will not be adjusted on the day of completion.
3) Unfair fee structures and contracts.
Some cash buying companies will expect a vendor to sign a contract which ties them in for a certain period, sometimes up to 12 months. This means the vendor is unable to sell their property to anyone else in that time, even if a better offer comes in from the open market.
Some quick sale companies will also ask vendors to pay upfront valuation fees.
Any cash buying firm asking to sign an agreement longer than 2 weeks can’t be buying for cash, as a genuine cash sale would be completed within this timeframe.
4) Unfair valuations.
A number of quick sale companies have been known to use their own ‘valuation team’ to assess the value of a property in order for them to make their judgement of a cash offer.
The only valuation that should be considered genuine by a vendor is a RICS valuation which usually comes at a cost of around £500. Any genuine cash buying company should offer a free RICS valuation which is independent of the company.
What can a customer ask for and do to protect themselves?
1) Can the cash buying company provide proof of funds?
If a cash buyer can’t provide proof of funds in the form of a solicitors letter or printed bank statement the chances are they are hiding the fact they aren’t genuine cash buyers.
2) Are they registered with the Property Ombudsmen and NAPB?
Any genuine cash buying firm should be registered with both governing bodies.
3) Check out reviews.
Although some reviews are easily faked, a number of companies use independent review sites which take feedback directly from customers.
Check out companies house.
It’s fast and free to check if a company is registered and how long they have been registered for.
Cash buying companies will forever be under scrutiny for the nature of their business however some vendors do need quick cash from their property and a cash buying company is one method of doing so.
Any customer looking to use a quick sale firm should do their full research and due diligence on the particular company they are thinking of using.
As well as the information provided above, industry specialists Ready Steady Sell have provided a very detailed 21 point checklist for homeowners who are still unsure about using a cash buying service.