How cash-buying companies work, and what they will pay
A cash-buying company is not doing you a favour and is not cheating you. It is buying at a price that leaves it a margin, and you are buying speed.
A fast-purchase company buys property directly, at a discount, and resells it. Its business model requires the discount, because it carries the cost of capital, the refurbishment risk, the transaction costs and the selling period on the other side. Typical offers are 70% to 85% of open market value.
That is a large discount and it is not unreasonable. What matters is whether the speed and certainty are worth that much to you, and whether the offer is genuinely fixed rather than a figure that moves after you have committed.
How the discount breaks down
Understanding the components helps you judge whether a particular offer is fair. The company's margin is the last component, not the whole of it.
- Transaction costs on both legs: stamp duty surcharge, legal fees, and the costs of reselling
- Refurbishment, whether or not the property needs it, because the company will want it saleable
- The cost of capital over the holding period
- The selling period and the risk that the market moves
- The company's profit margin
Comparing against a conventional sale
The comparison that matters is net proceeds, not the headline price. A conventional sale at full value involves estate agency fees, a longer period during which you carry the property's costs, and the risk that the sale falls through and you start again.
Put a figure on your carrying costs per month and multiply by the expected difference in time to completion. Add the estate agency fee and the risk of a fall-through. The gap narrows considerably, though it rarely closes entirely — a cash sale is almost always the more expensive route in pure money terms.
Protecting yourself
The main risks are a price that moves after you commit and a contract that binds you more tightly than it binds the buyer. Both are avoidable with basic precautions.
- Get the offer in writing, with the price and the completion date stated as fixed
- Ask for proof of funds before accepting, and verify it rather than accepting a verbal assurance
- Have your own solicitor review the contract, not one the buyer recommends
- Check the contract does not make you liable for the buyer's costs if they withdraw while leaving them free to
- Do not stop marketing until contracts are exchanged
Common questions
- What percentage do cash-buying companies pay?
- Typically 70% to 85% of open market value, depending on the property's condition, location and how quickly it can be resold. Offers below 70% are hard to justify on a property in reasonable condition. Always get an independent valuation before accepting, so you know what the discount actually is.
- Are cash-buying companies regulated?
- Estate agency and property buying activities are regulated, and firms must be members of a redress scheme. Sale and rent back is additionally regulated by the Financial Conduct Authority. Check that any company you deal with is registered, and be cautious about any firm that is not.