In This Guide
Apply for a mortgage
Buying at auction
Buying in Scotland
Conveyancing
Find and view
Negotiate
1. How much to offer
2. It pays to negotiate
3. Buyer and seller positions
Plan your purchase
Success and failure
Surveys and valuations
To buy or not to buy
Negotiate
How much to offer
Before you make an offer, be clear that you know the market value of the property. If you get the chance, have a look at some similar-style properties on the market in the same area. Find out how quickly properties are selling and for how much. This should give you some clue about how realistic the asking price is.
Don't forget that you are not restricted to making an offer on only a single property. Don't fry all your eggs in one pan as keeping several options open can help avoid desperation influencing your decision. Making offers on several properties at once allows you to be more rational about which one to pursue if or when the initial rejections come back. Of course if all your offers are accepted, then you will have to think quickly. Making multiple offers works best when the properties are being sold thorough different agents.
Most importantly of all, remember that this is a negotiation process. You are not walking into a shop to buy something off the shelf. It is rare for the asking price to get paid, as the price has some flexibility built into it. Estate agents deliberately mark the property value up since they know that negotiation will take place. They are usually on a commission that is a percentage of the sale value, so the higher the sale price the better for them.
You should be aware that your opening offer will often go a long way towards determining the final selling price. It is therefore common practice for the asking price to be set artificially high in order to encourage an opening offer that is higher than it would be with a lower asking price. Usually, both sides are aware that negotiation is something of a game of cat and mouse, offer and counter offer.
The first offer is usually 5%-10% below the asking price, depending on the perceived level of demand and current market conditions. The two sides then work towards some common ground with further offers and reductions in asking price. If the agent can push the initial advertised price up a few thousand, then the opening offer is likely to be slightly higher, possibly resulting in a slightly higher sale price.
It is very rare for you to get your opening offer accepted, however close to the asking price it is. Both the owner and the agent will expect you to negotiate. The more people interested in the property, the tougher the vendor and agent are likely to be in negotiations. There is no guarantee that you will get the property for less than the asking price, especially in a hot market. Don't lose out on the house of your dreams purely through stubbornness over the final couple of percent of the asking price.
Make sure that the vendor and agent are both aware of the terms of your offer:
- Which fixtures and fittings you want to be included.
- What work you want to be completed on the property before the sale is completed.
- Make sure the offer is subject to a survey and contract. If the survey shows up something that needs doing on the property, don't be afraid to renegotiate.
- Insist that the vendor takes the house off the market immediately to discourage any further offers and reduce the risk of you being gazumped.
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