HOUSES BOUGHT FOR CASH
Differences & Legals you Need to know Before Selling
In this article, we will help you understand the key differences between a traditional property sale and a cash house sale. We will look at how the legals, process and timescale differ, allowing you to make the right decision for your situation.
All this information combined will provide you with enough knowledge to pick the best cash buyers and avoid the few unethical quick sale firms with bad reviews.
We will cover all of the following topics:
- How Does the House Conveyancing Process Change with a Cash Sale?
- Legal Protection for Traditional Sellers via Estate Agent
- What Protections do Sellers have When Selling to a Quick House Sale Firm
- How Should your Approach Change When Selling for Cash Instead of an Estate Agent
- Checklist for Proceeding with a Quick Cash Sale
- Questions to Ask a Quick Buying Company
- Other Differences in the Cash Selling Process
- A Final Word: How the Stats Make House Buying Firms Competitive
1) How Does the House Buying Process Change?
Typically, selling a home involves working with several different parties - the buyers, estate agents, mortgage lenders and conveyancing solicitors, to name a few. However, suppose the interested buyer is a cash buyer. Does the process change when the mortgage is taken out of the equation?
Of course it does. When an interested buyer pays with cash, the estate agent’s valuations and listing are surpluses to requirements, as is a mortgage provider. As you can imagine, cash buying speeds up the process considerably and removes the chance of something going wrong in the house-buying chain.
Typically, once you as a seller decide to accept an offer from a buyer, you will find yourself inundated with documents to fill out, which range from basic forms to complex paperwork issued by your solicitor for you to read, understand and then sign.
The same goes if you're buying a house; once the paperwork has been completed for a proposed sale, the mortgage provider will arrange a homebuyer’s survey and valuation, as well as send off the formal requirements, transforming the mortgage into an offer.
Without proof of funds, the involved parties cannot exchange contracts, and the deal cannot be completed. However, getting an offer in writing can often take several weeks or longer during busy periods.
To summarise, when the loan is removed from the equation, and a cash buyer is purchasing the property, a mortgage lender is no longer required. For this reason, the conveyancing can be expedited as no external factors are delaying the process.
In all likelihood, any sensible house buyers will still check that your property is structurally sound and establish a market value. However, while conveyancing is still necessary, it shouldn’t take as long as it would if a mortgage provider is involved. As a matter of fact, genuine cash buyers should have surveys done within 7 days at the most.
2) Legal Protection for Traditional Sellers vs Estate Agents
In the traditional house sale process, estate agents, conveyancers, mortgage lenders, and others have to follow specific rules. For example, when selling your home, estate agents need to provide a legal contract that sets out the terms. If they fail to meet this, you can take action.
Estate agents must be registered with one of the government’s two approved complaints redress schemes:
- The Property Ombudsman
- The Property Redress Scheme
Note: In Scotland only, most houses which are sold will be legally required to have a Home Report✕
3) What Protections do Homeowners have When Selling to a Quick House Sale Company?
It is worth noting that the quick house sale market is unregulated. Therefore, homeowners are not as protected when selling their properties for cash as when using an estate agent. This makes research vital to ensure you choose a good cash buyer.
However, companies that buy houses can register with The Property Ombudsman (TPOS). Once registered with TPOS, members must adhere to its Code of Practice. Going through a TPOS-registered company enables homeowners to access its independent redress should a dispute arise.
Other regulatory bodies firms are encouraged to register to boost credibility are below. The NAPB (National Association of Property Buyers) & Tradings Standards.
4) How Should your Approach Change When Selling for Cash Instead of a Traditional Estate Agent?
The process is very different. Therefore your approach to the sale should be different too. When going through a traditional sale process, you have guidance from estate agents, solicitors and mortgage advisors on valuations and the process.
When dealing with a buy my house company, there is more emphasis on you deciding if the deal is right for you and making checks that you are dealing with a reputable cash buyer.
When it comes to the best time of the year to sell to an estate agent, there is significant evidence to suggest spring/summer is the best time to sell. The same does not apply to quick buy firms - they will buy your house at any time of the year.
Here are the checks you should run and the process you should follow when selling your home for cash.
5) Checklist for Proceeding with a Quick House Sale
- Check Credentials: Never use a broker (someone who connects you to prospective buyers) as they are simply trying to find a buyer and have no control. Many companies promote managed and assisted sales, which are decorated to make them look different compared to an estate agent, but in reality, they are trying to find buyers and thus take months with a high fall-through rate.
- Don't forget to negotiate: There is always some wiggle room, so don’t be afraid to negotiate the price and/or the terms.
- Consider enlisting a quick sale company: Which has TPOS & NAPB accreditation.
- Take your time: Don’t let your provider rush you or pressure you into a buying decision.
- Get it in writing: It seems obvious, but you would be surprised.
- Take care when reading the agreement: Never sign anything unless you fully understand it. If you aren’t sure about something, ask your legal advisor to clarify it for you. Genuine cash buyers go direct to solicitors, and thus you should never sign any documents with a company direct as you have no protection.
- Don’t get tied in: Some quick sale firms may ask you to sign an agreement binding you to the company for longer than necessary. If they ask you to do this, stay clear as they are brokers, not cash buyers.
- Honesty is the best policy: Don’t give incorrect information or omit important details. At best, this will cause hold-ups, but it could lead to a reduction in price.
- Don’t commit: Until you have a final offer in writing.
- Ask for the firm name and the registered number: Check that the company has been established on companies’ house with a valid name & registered number.
- Check the company: Has been established for at least 5 years under the same name to ensure no dissolving or changing names.
- Check the key financials: Ensure their net value is over £1 million.
6) Questions to Ask a Quick Buying Firm
- Who will be conducting the property valuation, and how?
- Is the quick sale company purchasing your property themselves, or are they buying it on behalf of someone else?
- How long is the house sale expected to take? What stages are involved, and when does each step happen?
- Is there anything that might throw the timescale off-kilter?
- If your chosen quick sale firm is buying the property, how do they intend to pay for it? Ask for proof of funds. If the buyer is genuine, they will provide you with proof of funds, no questions asked.
- Is a third party buying your property? A genuine quick sale company should buy directly with their own funds, so this situation should never arise.
- Are there additional fees, such as surveyors and legal fees?
- Are there fees if you pull out of the sale?
- Are there any factors which might cause the offer price to change? Is the offer ‘subject to survey and contract’?
7) Other Key Differences in the Cash Selling Process
- A genuine cash buyer can release the funds to you within 7-10.
- Realistic offers will usually be around 75%-80% of your property’s market value. Companies that offer you 90% are brokers and not cash buyers, and those that start at 85% do this to get their foot through the door and then start chipping the price down the line on more than one occasion and especially 2 days before completion – the last minute chipping for no reason!
- If you try to sell through other methods first, this might impact your property’s value.
8) A Final Word: How the Stats Make House Buying Firms Competitive
Currently, traditional house sales are falling below the asking price (as the stats below show). With cash buyers, you get an offer quickly and don’t have to wait to see what offer comes in. Only you can decide if accepting a lower cash offer is better than waiting and potentially getting less than your asking price on the open market.
- 81% of homes sold in May 2019 failed to make their asking price. We look at what this means if you're buying and selling at the moment. (Source: HOA)
- On average, the gap between the asking price and sale price across UK cities is up from 3.3 per cent in 2018 to 3.9 per cent.
- The time frames can be much longer, and traditional sales can depend on the time of year, as this article shows.
The key takeaway is to go with the option that best suits your personal needs and circumstances, and for many, a quick house sale is a great option.