Discounts For Cash
If a company is offering you cash for your property, they will always have to buy at a discount. This is because they have additional expenses to consider, for instance:
* They have to pay an additional three percent Stamp Duty on top of the current rates for each band. So, for instance, a cash property buyer paying for a £230,000 property would also have to pay £9,000 in Stamp Duty to the government.
* Legal fees and conveyancing for both parties. This could be in the region of £3,000.
* Business overheads for employees, offices, marketing costs etc
* Market fluctuation risks – the value of property might go down as well as up, a risk the buying company has to take into consideration.
* Costs of ownership and renovation. This could include utility bills, council tax, regular maintenance, cost of renovations before reselling, property insurance, interest on bank loans, and fees to estate agents when the property is being re-sold.
Commonly, a cash buying company will offer you up to 85 percent of the market value of the property. This isn’t a fixed figure – it will vary according to the condition and situation of the property. But why would you take this sort of offer rather than hold out for the full market price?
You may have a property which is difficult to sell because of its location or condition, or may be reluctant to pay estate agent fees (which are usually 0.75-3.5% of the final sales price).
Cash home buying services may not be for everyone, but if you want to avoid the stress and uncertainty of the volatile property market, they might be your best bet, offering benefits that outweigh the cost of the discounted sale price.
For a start, a cash offer saves you time on arranging viewings and dealing with estate agents. But it also saves you all sorts of expenses, such as:
* Estate agent fees. Although this can be subject to the contract with the estate agent, in many cases no fee is paid when the sale is to a cash buyer.
* Legal and conveyancing fees. In most cases these are covered by the cash buyer.
* Bridging loans. Many house buyers have to get a bridging loan to tide them over until their property is sold. A fast cash sale avoids this, as well as avoiding the Stamp Duty costs of owning two homes at once.
* Mortgage repayments. You may still have mortgage payments to make on a property, as well as maintenance costs and Council Tax. These can be avoided with a quick sale to a cash buyer.
*Loss of rental income. If the property is tenanted, it may delay a sale, but if you ask the tenants to leave, you may lose rental income. A genuine cash buyer can purchase immediately the property is vacated, avoiding loss of rental income.
You might find that you are being offered figures of up to 90 percent upwards for your property, but it’s unlikely that any company doing this is a genuine cash offer company, as they would not be able to cover their expenses. It’s more likely that they are acting as a lead generator or broker for an estate agency.
One thing to check is that the company you are dealing with does actually have its own cash funds.. There are significant financial risks if they do not. You should be suspicious for instance of any company that makes an offer on your property before inspecting it.
Some may ask you to sign an ‘option agreement’ which will tie you into using their services for a set period of time, perhaps 6-12 months. This means that the selling process will take longer than the 7-28 days usually promised, while the company tries to find a third party buyer. In that case you will not have gained anything over using a good local agent.
Lack of regulation in the quick house sale market is definitely a problem, so you should make sure that you are dealing with a company with its own cash funds. But if you decide that dealing with a cash buying company is right for you, it can save you a lot of stress and hassle, and that’s worth anyone’s money.