Cash Buyer Investor Companies vs. Property Auctions: A Review of Advantages and Disadvantages

When looking to sell your property quickly, two common alternatives to the traditional real estate market are cash buyer investor companies (such as “We Buy Any House” firms) and property auctions. Both options can provide a fast sale, but each comes with its own benefits and drawbacks. Below is an evaluation of both, along with a comparison of their pros and cons.

Cash Buyer Investor Companies

Advantages of ‘We Buy Any House’ Option

1. Speed of Sale
   • Cash buyer companies offer fast transactions, often closing deals within days or weeks. This is ideal if you need to sell urgently, whether due to financial difficulties, relocation, or other time-sensitive reasons.
2. Guaranteed Cash Offers
   • The sale is not contingent on financing, as these companies pay cash. This eliminates the risk of the buyer’s mortgage application being rejected, which can delay or cancel a sale in traditional markets.
3. No Repairs Needed
   • These companies purchase homes in as-is condition, so you don’t need to invest time or money in repairs or upgrades, even if the property is in poor shape.
4. Simplified and Certainty of Sale
   • The process is streamlined with fewer contingencies (no financing approval, fewer inspections), making the sale certain once an offer is accepted.
5. No Estate Agent Fees or Commissions
   • By avoiding the traditional route, sellers save on estate agent’s commissions, which are typically 1-3% of the sale price. While the overall sale price may be lower, you do avoid some costs associated with the traditional method.

Disadvantages

1. Lower Sale Price
   • Cash buyer companies generally offer below market value, often between 70-85% of the property’s true worth. This trade-off is for the convenience and speed they provide.
2. Limited Negotiation
   • Most offers have tight room for price negotiations. If you’re looking to maximize your profit, this lack of flexibility can be a significant downside.
3. Potential for Less Reputable Companies
   • The industry is not highly regulated, so there’s a risk of dealing with less credible or even unscrupulous firms. Research and reputation checks are crucial to avoid being undercut or scammed. Someone who shows membership to Scheme Regulators tends to be acting in transparent way.
4. Selective Buying
   • Despite the “We Buy Any House” claim, some companies are selective about the types of properties or locations they are interested in. Homes in certain areas or conditions might not be considered.

Property Auctions

Advantages

1. Quick Sale Process
   • Property auctions are also fast. Once your property is listed in an auction, the sale typically occurs within 28 days of a successful bid, but you need to add original marketing timing , hence 56days is more realistic. This makes auctions a good option for homeowners seeking ‘slightly slower’ speed without having to settle for a pre-determined price.
2. Potential for Competitive Bidding
   • Unlike cash buyer companies, auctions can generate a competitive atmosphere, where multiple buyers bid on the property, potentially driving up the sale price above expectations. This offers a chance to achieve higher value, but not ever case is equal.
3. Transparency
   • Auctions tend to be transparent. Buyers are aware of the process and terms, and sellers know that once the hammer falls, the sale is legally binding.
4. No Need for Repairs
   • Like cash buyer firms, auction properties are often sold as-is, meaning you don’t need to fix up the home before listing it.

Disadvantages

1. Uncertainty of Final Sale Price
   • While auctions can sometimes lead to a bidding war and a higher-than-expected price, there’s also a risk that your property could sell for less than market value. Setting a low starting bid may attract more buyers, but it also creates a risk of underpricing the property.
2. Auction Fees
   • Auction houses charge fees and commissions, often between 2-4% of the sale price. You may also have to cover marketing costs, which can add to the overall expense of using an auction service.
3. Risk of No Sale
   • If the reserve price (the minimum you’re willing to accept) isn’t met, the property may not sell at all, meaning you’ll have to relist it or pursue other sales methods.
4. Buyer Due Diligence
   • Potential buyers are expected to carry out their due diligence before the auction. If there are any issues with the property (e.g., legal complications, structural problems), it may reduce the number of interested bidders, leading to fewer offers. This may limit offering and price achieved.

Comparison: Cash Buyer Companies vs. Property Auctions

Speed of Sale

• Cash Buyer Companies: Generally the quickest option, often completing sales within a week or two.
• Property Auctions: Fast, but typically take around 4-6 weeks from listing to completion.

Certainty of Sale

• Cash Buyer Companies: Offer guaranteed sales once an offer is made, providing a sense of certainty.
• Property Auctions: Sales are not guaranteed unless the reserve price is met. Even then, the final price may be uncertain until the auction concludes.

Sale Price

• Cash Buyer Companies: Typically offer below market value (70-85%), focusing on quick transactions and convenience.
• Property Auctions: Have the potential for competitive bidding, which can sometimes result in a higher sale price, though there’s a risk the property could sell below market value.

Costs

• Cash Buyer Companies: No realtor fees or commissions, but the lower sale price often outweighs this benefit.
• Property Auctions: Auction fees (2-3%) plus marketing costs apply, but the final sale price may be closer to market value if competitive bidding occurs.

Suitability

• Cash Buyer Companies: Best for sellers in urgent situations who prioritize speed and ease over profit.
• Property Auctions: Suitable for sellers looking for a quicker sale than traditional methods, with the possibility of achieving a fair or competitive price. However, they carry some risk if the reserve is not met or the auction fails to attract buyers.

Conclusion

Both cash buyer companies and property auctions offer distinct benefits depending on your needs. Cash buyer investors are ideal if you need a guaranteed and fast sale, are willing to accept a lower price, and want to avoid the hassle of repairs or dealing with uncertain buyers. Property auctions, on the other hand, offer a quick sale with the potential to achieve a potentially higher market price, though they come with risks like auction fees, and the uncertainty of the final bid price. Once you deduct those difference might not be that tempting.

The choice between the two ultimately depends on your specific circumstances—if speed and certainty are paramount, a cash buyer investor may be the better option. If you’re willing to take some risks in hopes of securing a higher price, an auction could be more suitable. We are one stop place for that and we can assist here too. There are auctions which offer Dedicated Service and we can refer you to one of them if this is what you prefer just contact us to start the process.