How to make an Offer on a Home
Making an Offer – Negotiating Tips. Introduction – for first-time buyers, the process of buying a flat or a house is largely exciting one. To finally get the chance to get onto the property ladder is a milestone in everybody’s life. Unfortunately, there are no schools or training courses to teach first-time buyers the pitfalls and processes involved in the negotiation process. This article explores the key areas that buyers will need to address, in order to maximise their negotiating position when making an offer on a flat or house…
Negotiating Tips – dealing with estate agents, surveyors and solicitors may seem a bit daunting for first-time buyers. To secure your dream home it is tempting to offer little bit more, in order to make sure you don’t lose the sale. Therefore, negotiating it always a balancing act between reducing the asking price versus losing the sale. The following outlines some of the main areas to think about when going through the negotiation process:-
- Readiness to Buy – obtaining a mortgage in the current credit crunch environment is a huge challenge for first-time buyers. Despite this trickle of mortgage approvals, the lucky ones who have been approved and have saved up the relevant amount of deposit, will be a high state of buying readiness. Sellers will be desperate to seek offers from buyers who have got their mortgage finance preapproved, based on their credit history and financial status. As a buyer, saving up the relevant deposits and seeking approval in principle from mortgage lender, should be a number one priority, if you want to strengthen your negotiating position.
- Compare The Asking Price – if you are new to a local area in which you are seeking to buy property, always compare the prices of similar properties, to the one advertised your interested in buying. Check the Land Registry to see how many properties sold of similar size and quality to the one you are interested in. There are also many similar online property portals, providing access to price comparison data, and within minutes you could be up to find out the average property value in the street, where the property is on sale. Ask them to justify why they are asking a premium price, compared to the other properties sold in their road. If they cannot come up with valid reasons, suggest an offer linked more to the market rate in that local area.. Ask them whether or not they have had the property professionally valued by surveyor?
- Questioning the Sellers Motives – it is vital to understand why the seller wants to sell the property at this point in time and why are so keen to move quickly? They may be needing to move to support a job move in a different area. They may be expecting a newborn baby and require the extra space. There may be a divorce situation pending which requires this property be sold as soon as possible. In particular, if the seller is caught in a chain of sales, they are more likely to drag out the sales process out, until their own situation is resolved. In this situation, you may be able to offer a lower amount, in exchange for a long period between the exchange point and completion date. Some estate agents will ask the seller to leave the property while the buyers are viewing it – specifically to avoid buyers asking sellers these difficult questions. This helps estate agent control and respond to any questions and objections in a logical and professional manner. As a buyer, try and avoid being controlled by the estate agent. Instead drop a note through the door of the seller, with your phone number on, perhaps with polite’additional questions you forgot to ask the agent during the viewing’. Find out from the estate agent how long the property has been on the market and, how many enquiries and firm offers they have had during that time.
- Seasonality – another factor could to consider is the time of year the seller is offering the property for sale. Property sales during the winter months are substantially fewer than those in the summer months. Consequently, if the seller is acting out of necessity and chooses to put the property on the market in these quieter winter months, it may be a sign of potential weakness and potential scope for a prove reduction.
- Offering a Deposit – by offering a token deposit to the seller, in exchange for removing it from the market. This demonstrates you are serious and are prepared to put your money where your mouth is. Sellers like commitment and may be persuaded by this. Estate agents are less likely to be persuaded by this and most would prefer to keep any property they advertise on the open market was long as possible (right up to the point of exchange), to maximise the chances of sale.
- Unforeseen Defects from the Survey - The results are a home-buyer survey or a full structural survey, may reveal unforeseen and unexpected defects in the property, you about to make an offer on. Despite the upfront costs, surveys are a vital process to reduce the risk of buying a property with unforeseen major problems. It also provides the perfect opportunity to quantify these problems in financial terms, by pointing towards the results and recommendations of a structural survey. By identifying the cost of potential repairs, you may impartially argue with the seller that the price should be reduced accordingly (as these defects were not obvious during the viewing process). You could argue that the property was priced by the seller, without the knowledge of these unforeseen imminent repair costs. For example, if the survey revealed that there is subsidence or major repairs required to the roof, costing around £10,000, you may wish to reduce your offer by this amount accordingly. In English law, there is nothing to stop buyers changing their offer and reducing it at any time, up to the exchange. The introduction of the Home Information Pack is aimed to assist buyers in redressing the balance of non-refundable costs prior to the sale.
- Contents – another area of negotiation is the contents of the property, which may have different perceived values between the buyer and seller. If the seller is emigrating or simply doesn’t want to take the contents with them, try and negotiate on getting some of the contents included, as part of the asking price. Furnishing your new flat or home can be a costly experience. If furniture and other contents are desirable and would save you stumping up hard earned cash buying things new, this is an ideal opportunity to save some money. It also doesn’t cost the seller any money. They also feel they are winning the negotiation, as they are avoiding having to reduce the asking price. The main areas of contents up for negotiation should be the white goods in the kitchen, tables and chairs and soft furnishings. Alternatively, you may wish to offer a nominal amount of money for some or all of the contents of the property, in exchange for slightly lower price.
The Offer – when you’re ready to make an offer, the estate agent will ask you (via your solicitor), to put it in writing,’subject to contract’, and satisfactory surveys. Around one third of offers never actually make it through to completion of the property sale, due to the negotiations breaking down. This is due to a number of problems including unexpected survey results, buyers or sellers changing their mind, problems with accessing mortgage credit, or sellers accepting offers from other buyers. To avoid these common problems, it is important that you enter the negotiation process with an open mind and all the relevant information prepared.
It is important to remember that despite the global recession and the collapse of the UK property market during 2007 and 2008, history has shown that property prices will rise as well as fall over the long term. During the current liquidity crisis, a’buyers market” exists, in which buyers will have the upper hand during the negotiation process.
Sometimes an offer is accepted straight away, and you may never know whether or not the seller would have accepted a lesser amount. Negotiations are practically conducted by telephoning estate agents who will pass information backwards and forwards between the buyer and the seller. As the estate agent’s commission is paid out of the sale of the property, they are acting on behalf of the seller. Despite this, buyers need to have a good rapport with the agent, but not disclose their negotiating squeeze points, on price or are other issues. Never tell them your budget – simple give them a range of prices. Be polite when dealing with the property agent and stay calm and reasonable and rational throughout the negotiation.
Never offer your maximum price you’re prepared to pay straight away. Instead, offer a lower amount and give some indication to the agent that this is not your best and final offer. Seasoned estate agents have heard it and seen it all before, with regards to in negotiation tactics. Therefore, by providing them with as much information to back up your argument is possible, they are more likely to take your negotiation seriously.