How to negotiate a great deal on a property.
Put forward an offer in excess of the asking price to guarantee success, but potentially risk paying over the odds? Or perhaps go low with a cheeky offer but risk losing the perfect house to a higher bidder? Negotiate a great deal with this guide.
Buying a house is a stressful process. There is no way to sugarcoat the fact that most elements of the buying process will drive you crazy. However, there are also some exciting moments that will get your adrenaline flowing and make the whole thing worthwhile. One of the most rewarding but nerve wracking stages will be viewing property and making an offer on the one that catches your eye. If you can negotiate a great deal this will save you a lot of stress.
Ensuring that you achieve the best deal possible will ultimately depend on what the seller is willing to accept. In many cases, a seller will be led to believe that their property is worth more than it really is. Overcome this, and many other hurdles with our awesome guide below and negotiate like a true pirate.
Check recently sold prices in the local area.
Before making any offer on a property you would like to buy, check out the recently sold property in the local area using a website such as Rightmove or Zoopla. Here you can find data for similar property and what sale price was actually achieved. Be mindful that the data could be up to 6 months old. There is always a gap between parties agreeing an offer price and the keys officially changing hands.
Be aware of similar property currently on the market which can be used as a price comparison. They will show differences in condition, decor and perhaps the amount of work to be done. This can all be used when negotiating.
For example, two detached houses were for sale on the same street with a price difference of £40,000. The only difference between them being that one was a 3 bed and the other a 4 bed. Apart from that, the physical dimensions were identical. They were broadly similar in condition as the houses were less than 10 years old. I pointed out to a buyer interested in the 4 bed version that the cheaper 3 bed could be converted. This would change it to the exact same layout as the more expensive 4 bedroom version for around £3,000.
The saving was £42,000 in total (as they also reduced the asking price by £5,000). This meant that they had plenty left over for the partition of the 3rd bedroom.
Be confident of your financial position.
Before you start viewing properties you should have a good idea of what your budget will be. This includes how much mortgage you could obtain, and what the monthly repayments will be. Estate agents and vendors like to know that you are in a position to afford the property you enquire about. Plus they may check you will have the necessary deposit available. Having everything in place beforehand shows that you are serious and have done your homework.
If you are a cash buyer you may be asked to provide evidence of funds. If you require a mortgage to purchase a property, have an agreement in principle ready to confirm you can proceed. It is important not to give your game away regarding the amount you are willing or able to spend. Some agreements in principle show your maximum borrowing amount. Unfortunately this tells the estate agent that they could possibly squeeze you for a higher offer. Showing them just enough for the property in question is perfect.
A broker can provide a letter confirming a lower mortgage limit if this helps. You will have peace of mind that you can offer higher if you need to. Especially in case you become caught up in a bidding war.
Estate agents recommend viewing homes a little above your limit as they know that a deal can be done. Having all of the financial groundwork in place will put you in a stronger position when it comes to negotiation. Don’t forget to include the costs of legal work and any stamp duty when working out your finances. These can often catch people out further down the line.
Stay Icy.
Remember to play it cool when viewing property. If you are overly keen to tell the estate agent that you love the property, you risk signalling to them that you will pay whatever you can to secure the house and erode your bargaining power in the process. Instead inform them of your interest and ask probing questions about the sellers plans and their position.
Put the oneness on the agent by asking for details of the boiler service dates, when the windows were fitted, if there are guarantees for any recent work, and if the property is leasehold, what the service charges and lease length are. This shows you are interested and also covers off important queries that you are likely to have further along the process. You never know, some of the answers may provide you with clout to try a lower offer.
Check how long a property has been on the market and why it isn’t selling.
Some property websites show the date a property was listed for sale. They may also tell you if it has been reduced in price since being listed. Estate agents will look to “test the market” initially by listing the property at the higher end of its estimate. If the property hasn’t sold or had much in the way of viewings / offers after 6-8 weeks, the agents may approach the seller to suggest a price reduction in order to generate more interest.
Checking the length of time a house has been on the market may potentially tell you if it has been overpriced, if there is something wrong with the property, or if it is due a price reduction imminently. Use this information to quiz agents why the property hasn’t sold and work out a strategy using that info. Generally the longer the property has been on the market, the more room for manoeuvre on the price.
In some cases the seller may be in a position financially that they cannot accept anything less than what the property is advertised for. This will be regardless of whether or not it is priced competitively. In cases such as this you will probably hit a brick wall fairly quickly and you may be resigned to paying the asking price if the property is perfect for you.
When to make an offer on your chosen property.
As long as time pressures allow it is always a good idea to second view a property before placing an offer. This gives you a chance to compare it to any alternatives you have seen and also take more time to inspect any details you may have missed before. Using the time in between the first and second viewings to carry out your research is a good idea. You will be able to check your finances and formulate a plan. Also if you would like any third parties to carry out checks of the house this is also a good time i.e have an electrician check the wiring etc.
Once you are ready to make a formal offer this is what you need to do:
- Contact the estate agent with your offer. Also drop them an email so that there is a record of the offer and any conditions attached to it i.e. to include fixtures and fittings or to remove from the market once agreed.
- Remind them of your position. If you are not in a chain or do not have a property to sell this is seen as a big plus as it can speed the process along. Cash buyers and first time buyers are also preferable in some cases.
- The seller will consider your offer. In a lot of cases they will reject the first offer as they are assuming you will be testing them with a lower sum to start with.
- Negotiate if you need to. Have a second offer figure in mind from the start and know where your limit lies. If the first offer is rejected, take your time before offering more and emphasise reasons why you are offering that amount i.e. similar cheaper houses, condition, time on the market etc.
- Get it in writing. Purchase price and conditions agreed. Always ensure that the estate agent confirm this to you in writing. This avoids any later confusion.
Get cheeky !
The advice I always give is to go low when making an offer. Everyone has to start somewhere and the general direction will always be upwards. Offering a higher figure and then revising it downwards won’t do you any favours in the eyes of the seller. There will be occasions where the margins will be narrow when it comes to just how cheeky you can be, however everything is negotiable on any property so its better to ask and be rejected than to not even try. Try asking for between 5 and 10% off of the asking price as a first offer.
It is worth remembering that if the seller is also purchasing another property, they too will be trying to tie up the lowest cost deal possible at the other end. They may also be reading the same tips on this page.
There are times when a lower offer is more likely to succeed.
- If the house has had little interest, or has been on the market for some time with no offers. Sometimes a house on the market with more than one agent can indicate that the sellers are keen to sell ASAP or that there have been problems with other interested parties.
- If you can fit in with the sellers timeframe. Sometimes a quick or even a slow sale process will suit the seller better. See if you can accommodate their needs in return for a discount on the asking price.
- If the property is in poor condition or if it has some other issues that the seller can’t resolve. Properties in need of repair work or modernising won’t appeal to everyone but if you are comfortable with this a deal can be done.
- Property sold as part of probate. If a property is part of a bereavement agreement, those charged with its sale may be looking for a quick turnaround. Estates in probate can take time to administer so if you can be flexible to accomodate this you may stand a better chance of securing a deal. Chain free is good here.
- The estate agent wants a quick sale. Estate agents receive commission at the end of the process. Once the keys have exchanged. Sometimes they could encourage a seller to accept an offer because it means an easy sale and a quick pay day.
- New build houses have a brochure price. This is negotiable. Developers or their agents have a profit margin in mind and already know what the lowest price is that they can accept to meet this. If you don’t need to use any of their other incentives such as cashback, legal fees, or deposit help etc, you can instead negotiate to the lowest possible price. When only a few plots remain, a deal can be done at a reduced price. This allows the developers to move onto their next site.
How to navigate a negotiation.
- Keep cool and don’t panic. Polite negotiations are better for everyone. If you are asked to increase your offer, ask for time to think about it and don’t feel rushed. Do this even if you already have a second offer in mind.
- If your first offer is rejected ask for a counter offer from the seller. This gives you an idea where their head is at price wise and it gives you a way to meet them in the middle.
- Remember that the estate agents are working for the seller. In many cases their commission is percentage based so the higher the sale price the more they earn. Take what they say with a tiny pinch of salt and hold your ground.
- You should only offer more than the asking price if you absolutely have to have that property, or if you know for certain that someone else has already offered the asking price.
- In a lot of cases, sellers receiving a low offer take it personally. Their knee-jerk reaction is based on emotion. Making an offer towards the end of a working day or just before the weekend will give the seller time to mull the figures over once the emotional shock has passed.
- Concentrate on the purchase price as a priority. Additional fixtures and fittings add convenience but are of little real value. If someone offers to leave their AGA cooker, you are probably doing them a favour. They are lovely items but are a pain to move and cost a small fortune to run.
- Be wary of pricing terminology used by the agents. Estate agents often use terms such as “Offers in excess of” or “Guide Price”. In reality these mean nothing and are terms used to generate interest for property that may have lacked interest under a normal listing. Feel free to offer below the marketed price on these.
Full and final offers or sealed bids.
In cases where there is substantial interest in a property, agents may look to simplify the process by asking each interested party to submit their best and final offer. Often this is done as a sealed bid and can be thought of as an amount written inside an envelope ready to be considered.This means that the seller can select which offer they would like to go for without flip flopping between offer and counter offer. Once agreed the property should be removed from market and the normal process resumed.
Anyone wishing to put an offer forward will be asked to provide the final price they want to pay. This amount can be anything, even an amount lower than a previous offer. As it will probably be the last offer made it is important to ensure that it is financially sound and remains affordable.
As you will be competing with a number of other people there will be an element of guesswork. You may decide to offer well in excess of the asking price in an attempt to guarantee the purchase above all others. However, you may also choose to offer lower than before in the hope of securing a great deal and on assumption that the other parties will also offer lower amounts with the same goal. Whichever option you choose the risks are that you could either miss out on the property or you end up paying too much for it.
When in this situation try to:
- Stick within your budget and avoid the temptation to overspend. A mortgage lender also has to agreed that the price is realistic.
- Find out if there is anything else the seller needs apart from the £’s and pence.
- Offer odd sums i.e. £340,150 in case the odd £150 makes a difference.
- Remember that you can still revise an offer if a survey highlights an issue you weren’t aware of.
- Don’t be afraid to walk away. Not everyone who may has offered previously will do so again. Full and final offers can be stressful and it’s not for everyone.
Post compiled by Grant Carpenter CeMAP, CeFA – 15 years of regulated mortgage advice.
Please note that the content listed within this remortgage guide is purely for information purposes only and does not constitute advice.
