An Introduction to Quick Sale Companies: ‘We Guarantee to Buy Your House in 4 Weeks, for Cash’…Is it Too Good to be True?
Times are tough in the general economy and in the property market and they have been for a few years now. As property prices have fallen over the last few years, many people find themselves unable to remortgage onto a better interest rate and have seen their monthly payments go up.Properties are taking longer to sell than they did a few years ago, taking around four months to sell now compared with around two months in 2006 and 2007. With prices having fallen, many people are in negative equity, meaning that even if they do sell their property they will need to put extra money up to be able to pay-off their mortgage. Sadly, the economic downturn also means that there are more separations and divorces, giving people more reasons to have to sell their properties in unfortunate circumstances.
So in the midst of all this doom and gloom, many people find themselves in a position now where they need to sell their property quickly. Cue a boom in companies offering to buy your house quickly and for cash. But how can these companies make this kind of offer and is it too good to be true?
Who Are These Companies and How Can They Make This Offer?
Some of these companies offer to buy your house, for example, within 21 days and for cash. Others are offering or providing part-exchange schemes for estate agency firms where they’ll buy your property from you if you purchase another property that is on their books.
These companies are often referred to as ‘Quick Sale’ companies. They are not new. For years they operated on the periphery of the property market during the ‘boom years’. The difference back then was that they were mainly sourcing properties for ‘investors’, taking a cut of the purchase price of the property and a fee from the eventual buyer too. Now, however, the angle is less ‘get rich quick’ and more ‘we’re here to help you if you can’t move house’.
If you’re in a hurry to get your property sold, the offer of a ‘guaranteed’ purchase within a short timescale and for cash is obviously a tempting offer. But is there more than meets the eye to these companies and these offers?
No Such Thing as a Free Lunch
The offer of a guaranteed, quick purchase is only part of the story. What the adverts for these companies neglect to tell you is what price they are actually prepared to pay for your property.
It would be wrong to name or single-out any company in particular here. You can do a quick Google search yourself and find a number of them in your area. Obviously they all operate slightly differently.
However, the common theme is that when they are offering to buy your property quickly and for cash, they are not offering to buy it for the full market value. Instead, they are offering to buy for Below Market Value, or ‘BMV’, hence why many of them are called BMV companies or specialists.
Reducing Your Expectations on Price is Something That You Have to Consider When Trying to Sell Your Property Quickly. But How MUCH Do You Want to Reduce Your Expectations?
You only have to look at some review websites now to see stories of people having been offered way, way below market value for their properties. In one case I saw recently, the story goes that two reputable, local estate agents valued the property at a certain figure. The quick sale company then told the seller that the property was worth around 40% less than this if they wanted to sell it in a short time period (I won’t say what the figure is because I don’t want to identify the company in question if you do go and look for this review online). Clearly, this is a HUGE difference and a huge loss to be taking as well.
At least this seller had instructed further valuations and had something to compare these figures against. However, we come across property sellers all the time who, because they have owned their properties for such a long time, have absolutely no idea of how much their property is actually worth. These people are far more vulnerable to being told that the BMV figure that they are being offers is actually a reasonable price.
Can this approach be justified, morally? Well, at times, the answer is ‘yes’. Ultimately, there will always be some people who are in such a desperate and unfortunate situation that they cannot afford to wait to find any other type of buyer. These people would rather just get their property sold, in a few short weeks, for much less than the property is actually worth. However, even when facing repossession, there are avenues that you can go down that will buy you more time to get the property sold for closer to its actual value so I would question the advice that they are receiving. However, if that’s what a seller really wants, that’s absolutely fine.
Nevertheless, there ARE other ways to sell your property quickly AND for much, much closer to its true market value. How? Read on…!
How to Sell Your Property Quickly and For What It’s Actually Worth
If you really, really need to sell quickly and can’t wait for your property to sell in the average time frame for a property like that in your area, there is really only one thing that actually will get your house sold fast…
Lower your asking price and lower your expectations of what the selling price will be.
There are of course other factors that help to sell a property above-averagely quickly: obviously that’s our job as estate agents! Factors such as making sure that your property is above-average in terms of its presentation, making sure you choose a buyer-friendly pricing tactic (e.g. Offers in the Region Of’ rather than ‘Offers Over’), advertising the property more widely than your neighbours’ properties, having great photographs and schedules, marketing the property to a database of buyers who you know are looking for a similar property in that area etc etc. These are all things that you pay your estate agent to do anyway (or, at least, that’s what they should be doing).
However, whilst these are all incredibly helpful, nothing will help you achieve a quick sale like giving a potential buyer the feeling that they are getting a really good buy: and that comes down to the asking price and then what you are prepared to accept by way of an offer.
So, does this not just back-up what the Quick Sale companies are doing in offering Below Market Value (BMV)?
Well, no…it’s a question of scale!
I’m not suggesting that you need to drop your price by 40% or 50% to achieve a really quick sale of your property. I’m suggesting that, if you really need to sell your property quickly, you initially drop the price by 10%, 15% or even 20%. It all depends on how quickly you need to sell. If that doesn’t work, lower it by a bit more. Then a bit more. And so on. Only when you have reached the point where you’ve lowered it so much that you might as well sell it to a BMV, Quick Sale company should you actually consider selling it to them.
What About the Other Advantages That These Companies Offer?
One of the things they’ll claim is that a regular buyer could just pull-out of the purchase and leave you high and dry.
Well, so can the Quick Sale companies! There is absolutely no guarantee that they will proceed with the purchase or get the deal done within the timeframes that they actually say they will. There is always some way out of a property purchase, even once you’ve made an offer, unless your offer is absolutely, completely unconditional AND the seller doesn’t want to amend a single part of your offer. I am unaware of any solicitor who makes completely unconditional offers on their clients’ behalves, so it’s highly, highly unlikely to happen.
Another thing that they’ll claim is that they’ll pay your legal fees for you.
The reality is that in a regular sale your legal fees are paid from the proceeds of the sale. So in effect anyone who sells for a huge amount below market value is just subsidising their own legal fees: a little bit of that huge saving to the buyer is going towards the purchase conveyancing fees.
You Don’t Need to Sell for That Little!
First things first: get a second opinion! Actually, get a second AND third opinion! If you are thinking of selling, most estate agents or solicitor/estate agents will provide you with a free property valuation: a researched opinion of what your property would be likely to be worth if sold on the open market and if you had enough time to wait for it to sell within the average timeframe. At least this will give you a frame of reference to judge how good or otherwise the offer from the Quick Sale or part exchange company is.
Second: remember they’re only offering to buy because it’s such a good buy for them. The simple fact is that there is no magic to how these Quick Sale, part exchange or BMV specialists are able to buy your house quickly. They don’t have a magic formula for getting your property sold fast. They simply make you a very, very low offer for your house and, if you’re prepared to accept it, they buy your house from you.
Third: there are no guarantees. The marketing blurb will say that you are guaranteed a quick, cash purchase. Our experience of dealing with companies like that is that very often it doesn’t happen within the timescale that is originally promised anyway. Once an offer is actually made, it might complete within a short few weeks. But the length of time that it actually takes to get that offer, from when you first get in touch, can be a long, long time.
Fourth: if you’re prepared to sell below market value, sell for a BIT below market value, not a LOT below market value!
If you need to sell your property fast I’d suggest that you sell the property through a good estate agent who prices your property competitively and then reduces the price until the property sells. At least you give yourself a chance of getting something closer to what the property is actually worth. Yes, you’ll have to pay an estate agency fee. But if you were prepared to take a £40,000 hit on the sale to a Quick Sale company, is it not worth paying £2,000 to an estate agent to sell it, quickly for £10,000 below market value, and then you can pocket the remaining £28,000?
That’s a lot of money: I sure know that I would take that offer!
I hope that you have found some of this article useful. If you have any questions about this, or if you find yourself in the position of having to sell your property fast, please do drop us a line. If you’ve been made an offer by a ‘quick sale’ company and you want a second opinion about what the property is actually worth or what your options are, again please do drop us a line. We are a law firm and any enquiries are treated in the strictest of confidence. We’ll be delighted to do what we can do help.