First Offer - Strategy

FTBinthedark

Hi all - first time buyer here. Saw a property we liked at the weekend. Asking price £500k (reduced from £525k in February). Was previously on the market at 525k a couple of years ago. We like it, and it's in good decorative order. Small kitchen and no upstairs bathrooms are downsides. Limited scope to extend (small garden, no real loft space) also a downside.

We want to make an offer but rather than just going in with a blanket X% below, I wanted to compare previous selling prices but wanted to test this logic as an initial offer...

So here goes:

-There are ten houses on this road, all close to identical. There are house price records for six sales since 2000. 
-I've worked out the selling price per square meter for all six sales. I've adjusted to today's value using the House Price Index (just used Nationwide's online calculator). 
-For four of the sales, the houses had some additional features that the one we want doesn't - one of them had an open plan kitchen diner space, and three had upstairs bathrooms. So for our calculations, we've assumed this gave them roughly 5% higher value than the property we're looking at.

So when we take all that together, and average out the price per square meter, including a 5% reduction for those with additional features, it suggests the property we want should be in the region of £450k. 

We really like the house, and it is in very good condition, so we propose to bump offer to £460k.

Does that logic make sense - is there anything obvious we're missing? We're FTBs with a decision in principle in place, no chain so hopefully reasonably attractive as buyers.

youth_leader

You can only try, but as a seller I'd assume you couldn't afford it and were trying your luck.  Bear in mind in their eyes they have already dropped £25K - with your offer that would be a loss of £65K and it does affect their forward purchase.

TheJP

It's good that you have a logical approach to the offer, i guess you could;

1. Make your offer along with your reasoning and see what they say, they may say yes they may say no or they may come back with a counter offer.

2. I would make sure you have a top figure that you would rise to should your offer not be accepted an you want the property.

3. Also make sure you have the mindset regarding anything that crops up in any surveys you commission, the seller may not entertain any more reductions on the price so you might want to factor that into how high you go on your offer.

Be prepared that you may have to walk away from this house, go into the process with your mind not your heart (at this stage)

peterhjohnson

It does seem to be overpriced. Your offer of £460k may be right. I was in a similar buying situation years ago and they took my sensible offer - but it took them some time to accept. You do run the risk that instead they'll withdraw from the market hoping the market will improve. An offer of £475 might make them bite immediately

RHemmings

It makes a difference whether you really, really, really, want and can afford the house at its current potentially overpriced value. Or if you don't mind missing out on the house if you don't get it for less or simply can't afford it right now. 

If you offer £460 and the seller is insulted (justifiably or not justifiably) and rules you out, is this a disaster for you? Or a 'ho hum, where's the next one' moment? 

housebuyer143

If you as a buyer offered on my house and have this huge breakdown of how you came to the price I really wouldn't be interested - as in it really wouldn't sway whether I was accepting your offer or not.
All these figures are estimates and it doesn't really matter what a house sold in 2000 might be worth today - all that matters is, is the house competitively priced in today's market alongside the other houses up for sale or sold?
If the answer is no, then offer what you think it's worth. If you really want it then you need to consider if it's worth losing the house by going in too low and either the seller is no longer interested or someone else buys it 

Albermarle

A downstairs bathroom will put some buyers off, regardless of any price difference.
So in theory at least there will be less people interested in buying the property ( compared to those with upstairs bathrooms) unless it was at a really knockdown price ( which it is not) .
So again in theory there should be less competition and you are proceedable, so your £460K looks a good starting point.

RHemmings

housebuyer143 said:

If you as a buyer offered on my house and have this huge breakdown of how you came to the price I really wouldn't be interested - as in it really wouldn't sway whether I was accepting your offer or not.
All these figures are estimates and it doesn't really matter what a house sold in 2000 might be worth today - all that matters is, is the house competitively priced in today's market alongside the other houses up for sale or sold?
If the answer is no, then offer what you think it's worth. If you really want it then you need to consider if it's worth losing the house by going in too low and either the seller is no longer interested or someone else buys it 

In the OP's situation and after reading other advice here, I would be tempted to include a simple statement like the following:

"Based on my evaluation of this property including comparable sales, I feel that my offer of £460,000 is fair and reasonable."

That doesn't suggest that it's all that the OP can afford, and therefore might be less likely to lead to the seller ruling the OP out. Maybe. 

I'd go on to include any other positives, such as demonstrating available funds, mentioning if I don't need a mortgage, etc. But, I'd only include the above sentence to explain my offer. 

Slinky

Chances are the vendor won't see what you've written. They will receive the offer verbally via the estate agent, who could say absolutely anything!

RHemmings

Slinky said:

Chances are the vendor won't see what you've written. They will receive the offer verbally via the estate agent, who could say absolutely anything!

But, still probably better to send an offer that is less likely to have the EA say 'this buyer sounds like hard work'. 

lincroft1710

If a prospective buyer came to me saying they had used NW HPC to arrive at their offer price, I would just reject the offer.