After you’ve found the perfect property you need to decide how you will bid for it. To clinch the property, do you make a high bid and risk losing money? Or do you accept a lower offer and risk losing your dream house? How can you ensure that the property is at its best price?
It can be difficult enough to make an offer on your dream house. The housing market can become even more complicated during a global pandemic.
People are reassessing what they want in their homes, and looking for more space and gardens as a result of the pandemic. This has created a buyers market where there is plenty of competition for properties.
These are our top tips for making a winning offer on a house.
You can research local house prices and sell prices to find out how much houses similar to yours are selling for. This will help you to feel confident that you’re not paying too much.
Keep an eye on the property market and pay attention to how similar properties are selling in your area and the speed at which they sell. If they are slow to sell and are selling below the asking price, you will be able to make a lower offer.
Before you begin house hunting, you need to know how much money you can borrow and what you can afford. When you make an offer, estate agents will be impressed that you have a mortgage agreement in principle with a deposit.
Begin by lowering the amount that you are willing and able to spend when first speaking with local estate agents. You will be able to negotiate if estate agents show you homes that are slightly less expensive than you have budgeted.
Do not declare that you are in love with the property after viewing it. You will not be able to show too much enthusiasm. The agent and seller will already know that you are willing to pay more. Ask questions that will help you negotiate. Check out Top Tips for clever questions to ask an estate agent and Top Tips for things to remember when you view a property.
Inform the estate agent. Estate agents must pass every offer to the seller they receive, no matter how ridiculous. Sellers are often unnerved by buyers who make very low initial offers.
To reduce confusion and disputes later, you can send the offer by writing (a phone call followed up with an email is fine).
Your position should be highlighted. Sellers who are looking to avoid lengthy chains and delays will be more inclined to renters and first-time buyers. Your case will be easier if you seem like you are on the ball and eager to move quickly.
Prepare for negotiations. Negotiations are done through the estate agent if the seller is interested in accepting your offer. This puts buyers in a disadvantage as the seller has an agent (an expert negotiator) working for them, while the buyer is left to his or her own devices. You can also appoint a buyer’s agent if you are concerned about this. Continue reading to learn more about the different methods of negotiation.
You should protect your purchase. Accept your offer and ask to have the property taken off the market. With the agent, agree to a written listing of fixtures and fittings that will be included. It reduces chances of disputes and delays later on. Consider home buyer’s protection insurance. Either party can withdraw from the contract until they exchange it.
Although negotiating for a house may seem overwhelming, the seller will likely be very concerned about getting the right price. Sometimes the circumstances are in your favor, so it is more likely that the seller will accept a lower offer than the asking price. This is especially true for:
It is possible for the house to have been on the market for quite some time. This could indicate that they are having difficulty selling the property and others think the asking price is too high. Is the asking price lower than it was before it was placed on the market?
If the seller is looking to sell quickly. This could be true if the seller is looking to purchase a particular house, but are stuck in a chain or are forced to move because of a job.
The seller will realize that you are likely their only hope if you are the only one who expressed an interest in the property.
You can suggest a date for completion that is convenient for the seller
You will be more likely to buy if you are able to show that you can quickly act. A buyer who takes too long, isn’t able to raise funds or could withdraw from the sale later on will not be as attractive to the seller. The seller will be more interested in you if you have your finances in order with a large deposit and a firm that can handle conveyancing. Learn How and when to get a mortgage
You can also sell your house if you’re not in a buyer chain. You won’t have to wait to sell your home before they can offer you theirs. However, there is a risk that it could all go wrong. See Should I sell my home before buying a new one.
The estate agent may be keen to sell quickly. The agent may work for the seller and want to sell the property for as much money as possible. However, they often seek to make a quick sale to get their commission.
Multiple agents may be used by the seller. If the seller is using multiple agents, the estate agent will be more likely want to convince them to accept a lower amount to ensure they get the commission.
Decide how much you are willing to spend before entering into negotiations or a sealed bidding procedure. Think carefully about your options and don’t exceed that amount. Remember to consider the additional costs associated with buying a property. (See The costs of owning and buying a property).
It all depends on the bidding process, whether it is open negotiations (more common) or sealed bids.
Start low, as with all negotiations. It is a good rule of thumb to offer 5%-10% less than the asking price.
Remember that sellers will often deliberately place their house on the marketplace for more than they are willing to accept or expect.
The agent will usually inform you about any other bids that are higher than yours and offer you the chance to submit a second or third bid.
If you’re certain that the seller has offered more, or if there are other buyers interested in your dream home, you should not offer more than the asking prices.
Keep calm and polite at all times. If you become irritable, it will only cause everyone to be alienated
Be realistic and don’t try to win everything. It is not in your best interest to be too eager if the seller seems desperate.
You might try to contact the seller personally and have a personal negotiation. They might be more difficult to negotiate with than an estate agent who wants to close the deal quickly.
Do not be influenced by any other items that are included in the deal. Second hand white goods, especially if they aren’t very new, are often worth very little. It’s usually easier to sell them than it is to move them.
You will need to make sure you have a sealed bid. All bids will be given to the seller by the estate agent. The seller will typically choose the highest.
This is to ensure buyers are not outbid and put in their highest offers
Sellers get more when they receive sealed bids.
Sealed bids are more frequent in areas with high demand
It can be stressful to bid via sealed bids, especially if you don’t avoid certain pitfalls.
It is tempting to offer a higher bid than you would have paid if you were to win the bid. However, it is important that you stick to your budget.
You may lose your mortgage coverage if you bid higher than the asking price.
However, sealed bids may also prove to be beneficial for the buyer.
Estate agents and sellers are not going to pressure you. As long as you resist the temptation to pay more, you will only pay what the property is worth.
You may be able make an educated guess about the price of the auction if you ask the seller or estate agent.
Although it is not common, you can still negotiate even if the bid is rejected. Accepting a bid does NOT end the sale.
Offer a few extra pounds and pence over a round number. In case someone offers PS375,050, you can offer PS375,050 instead of PS375,000.
Some sellers demand that the buyer pays a small amount of money to support their offer. This is called a “holding deposit”.
This is to prove that they are serious about the offer and are ready to spend their money.
Some sellers do not require deposits. Sellers that insist on holding deposits tend to be in volatile markets or central London markets where there are many foreign buyers and investor buyers
There are many types of holding deposits:
It is sometimes refundable, regardless of who pulls out.
It is possible that the purchase price will not be refundable if you, the buyer, decide to withdraw. However, the seller can get a full refund if they do so. This eliminates the frivolous buyers who do not intend to purchase.
Sometimes, it’s irrevocable. These are to be avoided as the seller may sell the property to someone else. The only way to recover your money would be to sue the seller
Many estate agents discourage holding deposits. Some even discourage them from believing they will unnecessarily prolong a transaction.
Never give a seller a holding deposit. The seller’s solicitor will usually hold the deposit in an account that is escrow.
Even after an offer is made and accepted by the seller it is not binding on either party (in England or Wales, there are different rules for Scotland). Either party can withdraw before the contracts are exchanged. However, the buyer may lose their holding deposit if one was required.
One in 10 people has experienced a seller withdrawing from a deal after they accepted their offer. This is because they received a better offer elsewhere. Gazumping is a term that refers to the act of “gazumping”. This happens more if you offer is too low.
You could lose hundreds, if not thousands of pounds in useless survey fees, land searches fees, and solicitor’s fees if you are “gazumped”.
It is impossible to do anything except counter-gazump (putting up a higher offer than the gazumper).
After a seller accepts your offer, you should ask them to remove the property from the market. This is a good idea if they are serious about your offer. You don’t have to ask them, but they should if they are serious about your offer. This will keep other potential buyers away from your property. Ask them why they aren’t marketing the property. Also, be cautious about spending thousands on surveys, solicitors, and arranging mortgages.