Making an Offer and Negotiating

When you have found a home you are happy with, you are nearly ready to make an offer.

Before Making The Offer

There are just a few things you should check first:

  • Check that the house is worth roughly the price that you are willing to pay, and that is being asked. Do this by getting details of as many similar properties in the same area that are either on sale (what are their asking prices?) or have been sold recently (what price did they sell for?). How do they compare with yours? This will be particularly easy to check if you are buying a property on an estate where there are lots of similar houses.
    When making comparisons between houses, bear in mind that its value can be increased by factors such as extensions, loft conversions, fitted kitchens, being in a good location, or being a brand new house. Similarly, the value can decrease, for example, due to extensions that fill the whole garden or being in a bad location.
  • Check whether the property is freehold or leasehold
  • Agree what fixtures and fittings will be included. Draw up a list of all items with the seller as this will avoid later confusion
  • You can also check things like planning permission, whether there are plans for new developments nearby (roads, new houses etc), and covenants, though these should be looked at by your solicitor later on during conveyancing

How Much Should I Offer?

Remember that properties do not have fixed price tags – you can make substantial savings with a good bit of haggling over the price. It is important to get the opening offer right as this will play a big part in determining the amount you eventually pay. Normally, the opening is offer is about 5-10% lower than the asking price, and the two parties take this as a starting point for further offers and reductions in asking price until an agreement is reached. Be aware that the asking price is often set high to encourage a higher opening offer than would be given with a lower asking price, and you are expected to negotiate.

The negotiation will be affected by various factors, and you will do better if you take these into account:

  • How many other people are interested in the same property. If you are the only one, you are in a strong negotiating position and the seller is likely to accept a lower price. If there are two or more parties making offers, the seller and their agent will be far tougher during negotiations and you may be sensible to offer the asking price.
  • How quickly the seller needs to sell. If they need to sell quickly, they will be more likely to accept a lower sum than the asking price.
  • How long the house has been on the market. If the seller is having difficulty selling the house, they are more likely to accept a lower price. Check whether the asking price has dropped since it went on the market.
  • What season it is. Demand for houses is higher in spring and summer so prices will be slightly higher at these times of year.

Your own position will also affect the negotiation. A couple of factors could be to your advantage:

  • Are you part of a chain of sales? If not, the seller can be more certain that everything will be completed on time. First time buyers, people who have already sold or exchanged contracts on their own property and people who have nothing to sell all have this advantage.
  • Can you show the seller that you can borrow enough money to buy the property? It is a good idea to get a written agreement in principle from a mortgage lender to show the seller that you will have enough money to pay them. This demonstrates that you are serious about buying and that the process will be able to take place quickly once you have both agreed on the sale.

Remember, if you don’t think the property is worth as much as is being asked, you can introduce this into negotiations. For example, if some repair work is needed and you think this should bring the price down, you can try to persuade the seller that their property is overpriced.

Negotiating Tips

Negotiation is a skill which pays. Here are a few ways you can become a better negotiator:

  • Make sure you know what you are talking about and show you know it. Let everybody know that you have viewed plenty homes and that you understand the property market and how much the home should be worth. Asking well-informed questions is one way of showing you are not a customer who can be easily conned.
  • Keep cool and don’t look overly keen. If the seller sees how much you are in love with a home, they know you will be willing to pay more. Play a bit hard to get and make sure they know you have seen a lot of houses. Don’t rush into making offer, take time to think about it.
  • Stay polite, however stressed or angry you feel. Aggression will not get you anywhere. Remember that if a seller has two equal offers, they will probably go for the buyers with whom they are on good terms.
  • It is best to negotiate in person, not over the phone. This way you can better gauge the other person’s reactions to what you say and respond accordingly.
  • Estate agents are hard-nosed professional negotiators – be prepared for their ruthless bargaining tactics and don’t let yourself be bullied. Take what they say with a pinch of salt and try to look and feel confident.
  • It can be worth contacting the seller directly, and there is nothing stopping you from doing so. Just remember they might be even tougher than the agent.
  • While it is good to play it cool, don’t be overly cautious or evasive, especially if you know the seller has received other offers or needs to sell very quickly. Assess your own and the seller’s positions and act accordingly – if your position is not that strong worrying over a relatively small sum of money could lose you your dream home.

The Offer

Once your offer has been accepted, it must be made formally, in writing, and subject to certain terms and conditions. Ensure that the agent and seller understand the terms of your offer.

  • Your offer must be “subject to contract and to survey”. This means that you are not legally bound to proceed until a survey has been satisfactorily completed and signed contracts have been exchanged. This is very important.
  • Specify what fixtures and fittings you want to be included, and what work on the property you want to be undertaken before the sale has gone through.
  • It is a good idea to demand that the property be taken off the market as soon as your offer has been accepted, to avoid the danger of gazumping. Putting down a deposit as an act of good will can help to show your good intentions.