Once you have found the property of your dreams, you will need to decide how to make an offer on it. Do you put in a high initial offer to secure it the first time around and risk wasting money? Or go in with a low offer to risk losing out on the property completely? What are the best ways to ensure you get the perfect property at the best possible price?
First meeting with the estate agent, try not to give too much away with regards to the amount you are genuinely willing to spend. Agents tend to show you homes that are slightly above your spending limit, and this will inevitably put you in a stronger position when it comes to negotiation.
If you fall in love with a property when viewing it, try not to give away that you have just found the home of your dreams. If you’re too keen the seller will assume you are willing to pay more. Play it cool, ask questions that will set you in good stead for the negotiation process.
Keep an eye on the market, and be aware how much similar properties in the area have actually sold for, and how quickly they are selling. If they are moving slowly, and going below the asking price, then you are in a stronger position to put in a lower offer than the marketed price.
Agree a written list of which fixtures and fittings will be included with the agent. Having it in writing reduces the chances of disagreements later in the sales process.
Making an offer…
Give the offer to the instructed estate agent. By law, all estate agents have to pass on every single offer they receive to the seller, even if it’s £1! Some buyers try and unnerve sellers by putting in very low offers to start negotiations with.
It is a good idea to put the offer in writing (a telephone call followed up by an email will suffice).
If the sellers are interested in your offer then the negotiations will start. These are conducted by the estate agent.
When would I consider putting forward a lower offer?…
While bidding for a house can seem intimidating, keep in mind that the seller is also probably quite concerned whether will get the price they had in mind. Circumstances can be in your favour, making it more likely the seller will accept a bid lower than the asking price.
This can be the case:
If the seller is using more than one agent. The agent will be more likely to persuade the seller to accept a lower figure, to guarantee they get the commission rather than the other agent.
If the house has been on the market for a long time, which suggests they are having problems selling. Check if the asking price dropped since it initially went on the market?
If the seller wants to sell swiftly. For example, this would be the case if they are looking to buy a specific house but are caught in a chain, or if they are having to move for work.
If you are the only person who has expressed interest the seller will realise you are probably their only chance to sell and get moving.
If you suggest a moving/completion date that works for the seller.
If you can show you can act quickly and are a more certain buyer. The seller will be less interested in someone who will take a long time, may not be able to raise the funds, and could pull out later. If you have your finances in place with a large deposit, then you will be much more attractive to the seller.
If you are not in a chain, because you are a first-time buyer or have already sold your home without the accompanying risk it might all fall through.
Before entering into either negotiations or a sealed bidding process, decide on how much you want to spend and think hard before exceeding that amount. Do not forget the extra costs of buying a property…
This depends on the bidding process – whether they are open negotiations (more common), or sealed bids.
As with all negotiating, always start low. A good rule of thumb though is to offer 5% to 10% lower than the asking price. Sellers often take this into account and deliberately put their house on the market for more than they anticipate or would accept.
The agent will normally tell you of any bids that exceed your offer, and give you a chance to offer. You should only offer more than the asking price if you know the seller has already been offered the asking price or more and if you are really worried about not getting your once-in-a-lifetime dream home. Bear in mind you’ll only isolate everybody if you get aggressive. Stay polite and stay calm. Don’t be too influenced by other things thrown in with the deal. For example, unless very new, second-hand white goods are usually worth very little and it’s often less hassle to sell them with the house than move with them.
If offers are being considered through sealed bids you will have to write down your offer and seal it in an envelope. The estate agent will give all the bids to the seller who will usually choose the highest.
This is intended to get a high price because buyers, worried they will be outbid, put in their best bid.
Sealed bids consequently get the seller more than they asked.
Sealed bids can benefit buyers…
There is no pressure as long as you overcome the temptation to overpay, you only pay what you think the property is worth.
Find out from the estate agent or seller how many other people are bidding because you may be able to make a more educated guess at how much to offer.
Offer a few more pounds or pence rather than a round sum. For example, £375,050 rather than £375,000 just in case another bidder offers that round figure.
Some sellers insist that that buyer put forward a small amount of money to accompany their offer – this is called a “holding deposit”. This is to show that they are serious enough about the offer. Not all sellers insist on holding deposits. Those that do tend to be in more volatile markets.
Different types of holding deposits:
o Sometimes it is refundable regardless of which party pulls out.
o Normally this is non-refundable if you – the buyer – pulls out, but is refunded if the seller decides to pull out.
o Sometimes it is totally non-refundable. Avoid these because it means that the seller can sell to somebody else and the only way to get your money back would be a not so nice legal route of lawsuits.
o Many agents discourage them believing that they unnecessarily prolong the process.
o Do not give a holding deposit directly to the seller. Normal practice is the seller’s solicitor would hold the deposit in an escrow account.
Your offer has been accepted…
Even after an offer has been accepted by the seller, it is not legally binding to either party. Up until the exchange of contracts, either party can still pull out (although the buyer might lose their holding deposit). 1 in 10 people have experienced the seller pulling out of the deal after accepting their offer because they have received a higher offer from elsewhere. This is called ‘gazumping’ which is more likely if your offer is on the low side.
If you are “gazumped” you can potentially lose hundreds or even thousands of pounds in survey fees, land search and legal fees. There isn’t much you can do about it apart from counter-offer. Once a seller has accepted your offer, ask them to take the property off the market, which they should do if they are serious about accepting your offer. They do not have to, but if they do this will prevent other potential buyers butting into your purchase. If they don’t, then ask why they are still marketing their property, and be careful about spending thousands of pounds on surveys, solicitors and arranging mortgages.
We do hope this has helped you plan on your negotiation tactics. If you have a property to sell and would like to arrange a no obligation Valuation with one of us or would like further information, call us on 01932 22 21 20. Or join the Walton Property Community Group on Facebook or you can subscribe to our YouTube channel for free property advice, local property news and market updates.
If you want to find out the value of your property, you can get a free and instant valuation here.
Article sources: Homeowners Alliance & Land Registry.