How do these "we buy any house" companies work? Specifically "SmoothSale"?

silvercar

They will have convinced the sellers to sell to them and to continue to show the property. They’ve probably done a deal where they will give the sellers more money if a buyer is found before they leave. 

Either way on the day the sellers exchange contracts with the smooth sellers, the smooth sellers will find a reason to drop the price.

I doubt it could be a sell and rent deal as major restrictions were put on this practice years ago.

NameUnavailable

Interesting, Smoothsale's last filed accounts show 'cash at hand and in bank' of £15,512.

I wonder how many properties they can buy with that?

eddddy

I don't know the company mentioned, so I can't comment about them - but many other "we buy any house" companies work like this:


Generally, "we buy any house" companies don't have any money themselves. They are just "middle men".

They tend to work like this: They often use 2 different companies...

• Company 1 advertises "We buy any house"

• Company 2 advertises "Investors - join our mailing list to buy cheap houses."

There goal is to do something like this...

• Find a home owner in financial distress who's desperate and prepared to accept a cheap price of, say, £200k for their house

• Find an investor who's prepared to pay, say, £240k for the house

• Then do a "back to back" transaction. i.e. they buy for £200k and resell for £240k, at exactly the same moment. So they don't actually need any money.

• So they walk away with, say, £40k - for doing relatively little.

The companies I've come across seem to mislead prospective sellers, as well as misleading prospective 'investors' / buyers - in order to maximise the money they make.  They sometimes play very nasty tricks - especially on sellers.


But as I say, I don't know the company mentioned in this thread - so I can't comment on what they might do.

BobT36

silvercar said:

I doubt it could be a sell and rent deal as these were out lawed years ago.

My landlord did that with the current rental I'm in (?). 
They bought the property from the previous owners, but they were going to a new build so needed a bit more time, so my landlord bought it but rented it back to them for a few months (I viewed while they were still present, but the landlord owned the house at that point). 

Of course they'd moved on by the time I moved in, then the landlord began renting to me. 

eddddy

BobT36 said:

silvercar said:

I doubt it could be a sell and rent deal as these were out lawed years ago.

My landlord did that with the current rental I'm in (?). 
They bought the property from the previous owners, but they were going to a new build so needed a bit more time, so my landlord bought it but rented it back to them for a few months (I viewed while they were still present, but the landlord owned the house at that point). 

Of course they'd moved on by the time I moved in, then the landlord began renting to me. 

I suspect that your landlord did that secretly, without telling solicitors etc.

In order to do "sale and rent back" for homes, you have to be regulated by the Financial Conduct Authority - even if you just want to do it once. It's extremely unlikely that your landlord is regulated, so they were probably breaking the law.

It became heavily regulated because so many homeowners were getting ripped-off and left homeless by these schemes.

silvercar

BobT36 said:

silvercar said:

I doubt it could be a sell and rent deal as these were out lawed years ago.

My landlord did that with the current rental I'm in (?). 
They bought the property from the previous owners, but they were going to a new build so needed a bit more time, so my landlord bought it but rented it back to them for a few months (I viewed while they were still present, but the landlord owned the house at that point). 

Of course they'd moved on by the time I moved in, then the landlord began renting to me. 

Possibly under the radar. The companies that used to do this have regulations put in their way that effectively this has  been stopped, I suspect an individual could quietly get away with it for a few months.

The dodgy dealers would promise that the sellers could stay there as long as they want but need to issue a short AST to get their finance in place, then they would evict and the sellers would lose their home. Now regulations require the buyers give a 5 year minimum term and are themselves regulated by the FCA.
https://www.citizensadvice.org.uk/debt-and-money/mortgage-problems-debt-and-money/mortgage-problems/sale-and-rent-back-schemes/

heckmondwike06

Edddy is correct. However, many of these companies offer you 'an assisted sale' option, whereby they tie up very little cash and sell the property for more profit.

They must have made the seller sign an option agreement. We shopped around when selling our inherited bungalow and found that even those 'self-regulated' property buying companies buying at 80% of value still end up renegotiating their price at the survey stage or just before the exchange of contracts after they have built a bit of rapport with you and got to know your situation.

If you need the best price, go to an estate agent. Find an agent who sold most properties in your area and ask them to give you a realistic value. Tell them NOT to withdraw property from the market until buyers have exchanged contracts and to keep on viewings.

If you get multiple offers, and they are close to each other, accept both and let the buyers know that the first one to finish to complete will become the proud new owner.

As long you are transparent with your buyers, it shouldn't be an issue.  The last thing you want is for a buyer to waste six months of your time, then change their mind and leave with abortive fees!

Incentivise your agent and offer them an extra fee for pushing the sale through. Don't sign up to a six month tie in period.  A good agent shouldn't tie you into a contract for more than a month. If they don't perform, let them go. No hard feelings here.

We are still weighing up our options - after the first abortive sale with one of these 'cash house buying companies' who couldn't get a mortgage!  We found out that they were borrowing money through a bridging loan, and as our property had an old kitchen, wiring that needed updating and an old (but working) boiler, it wasn't 'safe' to live in.

As these companies aren't formally regulated by the Government, ask for their proof of funds, check their reviews, and demand to speak with previous sellers before you agree to sell.  They shouldn't force you to sign 'exclusivity agreements' whereby they can sell the property on, etc., or may not even buy it.

Albermarle

They tend to work like this: They often use 2 different companies...

• Company 1 advertises "We buy any house"

• Company 2 advertises "Investors - join our mailing list to buy cheap houses."
• 
  
• Then maybe Company 3 promotes rip off training courses on 'how to make easy money from property'

RHemmings

Smoothsale have surprisingly (to me, personally) good feedback on TrustPilot for a 'we buy any house' company

https://uk.trustpilot.com/review/smoothsale.co.uk

Their Google reviews are good as well. (I'm not sure how to direct link.) 4.8/5

On Trustpilot they have only flagged three reviews, one of which was a 3* review, and two were removed for non-response. They have 154 reviews up, so it's not like some companies that in reality receive huge number of negative reviews and flag the lot. 

I'm sure we all know that reviews are not proof, but their overall feedback does look good. 

The answer they gave to a 1* review looks interesting. If what the company says is true, then they seem to make reasonable offers.

This post is not a recommendation to use the company, nor a recommendation not to. Just a comment on what I found. 

Millsandovis

Does anyone know how a part exchange element works with them? House I’m buying has been sold by a couple to a company like this and have been told by my conveyancer it’s a ‘part exchange property’

bit confused as to what this actually means, have they taken the property and paid for the couples care costs? What constitutes a part exchange in this scenario? Rather than just owning the property outright and selling it on.