First and Final Offer ?

Mr_Moo_2

thequant wrote: »

The problem is that the places is on for £265k, all the indications are that they are looking for £250k.

I personally don't value the property at a penny over £245k, I know whatever offer I make the vendor will reject as they will aim for £250k and use the usual "I'm giving you a substantial discount as it is, plus saving you stamp duty!"

What's the best way to communicate that I not willing to pay the £250k, but the figure I am willing to pay is not too far from this.

Just state clearly what you're willing to pay, and that you will walk away. The risk is that someone else will pay £250K. The SD threshold works in your favour but also against buyers in some respects as properties valued above but in reality only worth £230 - £250 sometimes get valued up in the "I've just saved loadsa stamp duty" excitement. It's easy to lose sight of the reality of what a place is actually worth.

thequant

Better_Days wrote: »

The sucess of the tactic depends on lots of variables including:
1) How close your offer is to the AP
2) How realistic the AP is
3) Whether or not the vendor has a 'bottom line' which they must achieve
4) Whether or not the EA thinks they can get more out of you
5) How much you really want the house
6) Whether or not you are in a position to move quickly
7) The personalities involved
8) How quickly the vendor needs to move

.

1) tricky one as it's just above £250k stamp duty level, every indication is that vendor is looking for £250k, so my best offer would be £5k below this. However relative to asking price it's £20k off. Is it fair of me to treat the asking AP as essentially being £250k ?

2) I think they have been unrealistic in the past, 2 similar properties to this have sold for £245k recently, however they had this property on for £280k. Consequently this has been on for a year, however reality has started to bite and they have reduced to £265k in the autumn last year.

3) It's an inheritance by the sound of it, however my impression is that there is a psychological barrier of £250k because they have "reduced the property so much"

4) EA knows £250k is my max, whenever I look at properties slightly above the SD level, he'll decline to show me if he knows the vendor wont come down to the £250k level. He knows I will have to allocate some of my budget because of work needed on this place.

5) Quite want it, but I will NEVER overpay, it's the fact that I never overpay for anything why I am in a position in this market to be able to buy something in this market. It's a rule I wont throw away, regardless of my emotions

6) FTB, I can and am looking to move quite quickly.

7) Myself, I don't like taking the pee with cheeky offers, but equally dislike those with cheeky asking prices. The other party I don't know.

8) It's an inheritance for the vendor and is currently empty. property has languished on the market for nearly a year.

thequant

Mr_Moo wrote: »

The SD threshold works in your favour but also against buyers in some respects as properties valued above but in reality only worth £230 - £250 sometimes get valued up in the "I've just saved loadsa stamp duty" excitement. It's easy to lose sight of the reality of what a place is actually worth.

This is so true, and seems to apply to most of the properties in my price range. The one consolation is that they never sell, either they have zero interest, or if they do they then fall through on the mortgage valuation.

The problem when they do fall through for this, is that the vendor then becomes rooted to figure they were offered despite the fact no one is willing to lend that amount on the property.

The_Earl_of_Streatham

thequant wrote: »

This is what I thought, my general negotiation technique in business is too make fair offers (rather than trying to offer the lowest I think I can get away with) and communicate this face to face. This works very well for me usually, as it allows me to take the position with the other party who attempts to negotiate up of taking the proverbials!

However as you said, the face to face element will be removed and as such they will more than likely attempt higher.

The problem is that the places is on for £265k, all the indications are that they are looking for £250k.

I personally don't value the property at a penny over £245k, I know whatever offer I make the vendor will reject as they will aim for £250k and use the usual "I'm giving you a substantial discount as it is, plus saving you stamp duty!"

What's the best way to communicate that I not willing to pay the £250k, but the figure I am willing to pay is not too far from this.

BTW, I'm FTB with everything in place, huge deposit, plus property is vacant possession (dead granny I think).

One person's "fair" is another person's downright liberty, your method would be absolutely sound if there was a big book of house prices to which we all agreed to subscribe.

In economic terms you are engaged in price discovery, but you've only got one transaction to do it with, so making one offer and proceeding or walking isn't the best strategy.

The problem of only having one transaction can be diluted somewhat by making offers and and having them accepted or rejected. Consider offers to be virtual sales, many may fail, one will perhaps succeed, at that point price discovered, off you go.

There will be a price at which anything will sell, the prospect of hitting that exact number first go are going to be pretty small. However well you know the market, you'll never know the sellers mind in the matter. The probability of hitting above that number is somewhat better but with just one shot you'll never know how close you got to the threshold price. Making offers is not just a matter of acceptance or rejection it is a way of collecting information; making just the one offer means the sellers have much more information about price than you do.

I appreciate that you find the process tiresome, but how often do you buy a house? We must be thankful that other commodities aren't priced this way (though it could be argued that many are priced much less transparently).

Better_Days

OK, if similiar properties have gone for £245k recently and the property has been on the market a while then it sounds like your valuation of £245k is not unreasonable.

So, now you are into the realms of how realistic the vendor is.

If you go down the once and final offer of £245k then you could back it up by pointing out the time the property has been on the market, the sale prices of similar properties and the work that needs doing. Plus you can facilitate a quick chain free sale. I suppose you could ask on what basis the £265k valuation has been made.

It is likely that any counter offer will be £250k. So you need to decide if you are prepared to budge by say £1,000 to move a bit towards what the vendors are likely to want, but then say ask for x,y,z to be included in the sale.

thequant

Better_Days wrote: »

OK, if similiar properties have gone for £245k recently and the property has been on the market a while then it sounds like your valuation of £245k is not unreasonable.

So, now you are into the realms of how realistic the vendor is.

If you go down the once and final offer of £245k then you could back it up by pointing out the time the property has been on the market, the sale prices of similar properties and the work that needs doing. Plus you can facilitate a quick chain free sale. I suppose you could ask on what basis the £265k valuation has been made.

It is likely that any counter offer will be £250k. So you need to decide if you are prepared to budge by say £1,000 to move a bit towards what the vendors are likely to want, but then say ask for x,y,z to be included in the sale.

When making an offer is it standard practice to state the reasons for the basis of the offer, or is it just fire the figure at them and then sit back and hope ?

I'm going to go for a slightly lower offer, to give room to be pushed upto £245k. What would the typical wriggle room be ? A few £k or a round figure such as £5k ?

DRP

thequant wrote: »

When making an offer is it standard practice to state the reasons for the basis of the offer, or is it just fire the figure at them and then sit back and hope ?

it may be useful to state the 'evidence' but I would back that up in writing as i have often found that EAs don't particularly want to hear it and are just after the £bottomline to relay back to the vendor. I have my doubts that my 'favourable position' etc has even been communicated by some of these agents.

thequant wrote: »

I'm going to go for a slightly lower offer, to give room to be pushed upto £245k. What would the typical wriggle room be ? A few £k or a round figure such as £5k ?

I don'tthink there;s any such thing as typical, but perhaps non-round increments make it sound like you are looking down the bakc of the sofa for that extra £1297.63 that will make the vendors accept your offer...?

Better_Days

thequant wrote: »

When making an offer is it standard practice to state the reasons for the basis of the offer, or is it just fire the figure at them and then sit back and hope ?

I'm going to go for a slightly lower offer, to give room to be pushed upto £245k. What would the typical wriggle room be ? A few £k or a round figure such as £5k ?

I don't know if it is standard practice, but I would certainly give my reasons in this instance.

Hard to say re the wiggle room. Given that your limit is 20k below the AP I wouldn't go much lower than the £245k. Also I would ask for a counter offer, and see if there was some possibily to 'meet in the middle'. If this is a good buy at £245k, I wouldn't lose over a thousand or two, but of course everyone's finances are different.

We looked at a property last year , AP £235k. Actually went for £198k, would have happily paid that for it. Offered £245k on a property up for £290k (but had been on the market for 18 months and AP was not realistic, plus it was dated and needed new kitchen, bathroom etc) but offer was turned down. They never sold and took the property off the market. You just never know.

GL

thequant

DRP wrote: »

I don'tthink there;s any such thing as typical, but perhaps non-round increments make it sound like you are looking down the bakc of the sofa for that extra £1297.63 that will make the vendors accept your offer...?

This was what I thinking!

kidmugsy

"First and Final Offer": it worked for us but that was 30 years ago, and the circumstances were favourable. I conclude that you should find out as much as you can about the vendors' circumstances.