Offering On a Property - The Guide.

boinging_2

What to offer on a property

So you have found the property of your dreams and after viewing you want to make an offer to buy it. As there have been hundreds of these kinds of threads in the past I thought I would give you all the advice I can in one go.

Before You Offer

The first thing to do is work out exactly how much you can afford for the house, with your deposit and mortgage offer. Make sure you take into account the costs of buying a house. Stamp duty, solicitor fee’s etc. Make a note of this figure.

Next go onto www.nethouseprices.com and see what the house was bought / sold for previously. Also have a look at recent sales in the area and surrounding similar properties.

Finally try and find out as much as possible from the EA about the vendor’s situation. Have they found somewhere to move to / are they part of chain / etc etc. This can help you later when it comes to negotiation stage.

Making An Offer

Okay, so you know how much you can afford to pay and you know how much the vendor wants for the house (the asking price). When it comes to negotiations both parties will have a zone of acceptability. This is a level which they are willing to strike a deal within. The idea is to get to a zone of agreement, this is the cross over between the two parties acceptability zones and where a deal can be made.

The trick is to get the deal made as low as possible within the zone of agreement, thus saving you money. It may be that between the upper end of your zone of acceptability and the lower end of the sellers zone of acceptability there is no zone of agreement as they don’t ever cross. However, don’t forget the zones of agreement can move over time, so just because you don’t get an agreement today it doesn’t mean a deal can’t be done next week. People’s circumstances and the market may well dictate that their zone of agreement moves further down as they need to strike a deal.

So what to actually offer? This is tough as for every individual house there are individual circumstances. But as a general rule of thumb 10% below the asking price is a good place to start. This can be more like 20 – 25% if you know the house has been on the market for a while (try www.propertysnake.co.uk) or the seller wants a quick deal (builder etc).


Next Steps

Most vendors will want to maximise the offer you make, so will reject your initial offer to see if you come back with more.

In a negotiation there are also what are known as variables and these can be traded between parties to help achieve an agreement. Witin house buying this can be time to complete, fixtures and fittings, being a cash buyer etc. This can help gain an agreement without having to move your price upwards. For example, if you accept offer of X, then I will complete in 4 weeks.

Within the current market conditions I would suggest that leaving at least a week between offers, will strengthen your position. The buyers that need to sell will be forced into the reality that the a higher offer is not coming, plus with the market moving down your offer is actually increasing as time goes by.

EAs deal with people making offers on a regular basis and know when they think that you could be pushed higher. Always start your next offer with “we’ve managed somehow to get together another xK and this would push us to our limits…”. When you do reoffer, always make sure you gain something in return. i.e. offer is subject to the top of the range dishwasher being included. Take one of the vendors variables.

Getting an agreement

This may all seem like a lot of hard work, but this is the biggest purchase of your life and a few thousand pounds can be more like tens of thousands over the course of a 25 year mortgage. Hopefully you’ll have managed to get a better deal than just ringing back Kirsty and Phil style with another offer 15 minutes later.

Remember if you can’t get to an agreement walk away. This is a drastic action but again can have a positive effect against a seasoned vendor. They will know the upper limit of your agreement zone and therefore it puts pressure on them to move theirs to get a deal.

Never offer more than you can afford (the number you wrote down originally), there will always be another property, plus the one that seems perfect now could turn into a nightmare later down the road. With house prices moving downwards you could be saving yourself money just by not buying.

Doozergirl

Leaving a week between offers or walking away is impossible unless you can detach yourself emotionally from the process. Most buyers can't do that. If they can, they're probably already taking your advice.

Yes, leave as long as you can but most thing is to keep lines of communication open otherwise a vendor will genunely believe you've just walked away. If the idea is to raise offers only in small increments, leaving a week between offers would also take forever.

No doubt that vendors expectations can be managed downwards, but the psychlogical hold over them comes when they can almost touch the deal and they will shift their expectations down a few grand over a week or so of procrastination and torture in order to seal the deal. Just making offers and walking away won't grab them. It's a soft approach that you need to take. You have to engage them, make them believe that you are serious in wanting to buy and massage their egos.

Asking what the vendor is willing to accept after a first offer is rejected is likely to get you a straight answer. Then you start the game of trying to work that number down a little.

If you're happy to wait for weeks and won't be too upset to see it sell to someone else, then it's absolutely fine to wait patiently.

There seem to be a few buyers here who are surprised when their low offers aren't accepted because of what they are told here about the 'market'. It's as much, if not more, about the house and the vendor as it is about the market. "The Guide" is often the way to either secure a house at a low price or lose it completely. I'm happy to wait, have offers rejected and walk away. It isn't "the guide" for someone who has falllen in love with the place they want to have babies in They have to play a much softer game. The advice in those circumstances is to try as ahrd as you can, but make sure you can *genuinely afford the house*, never offer any more than you can afford and know that *house value doesn't come with a guarantee attached*.

Running_Horse

I agree with a lot of the above, but what the property sold for several years previously is irrelevant. What matters is the market today, what you think it's worth, and what the vendor will sell for.

Raggie

Running_Horse wrote: »

I agree with a lot of the above, but what the property sold for several years previously is irrelevant. What matters is the market today, what you think it's worth, and what the vendor will sell for.

That was my initial reaction however.. my views are changing on this.

Knowing the price the vendor paid.. and obviously the price they are marketing at can aid you in the psychology of the sale..

If they bought it years ago and are sitting on a healthy "profit" then they (IMHO) would be more likely to consider offers.. than those that bought last year and believe they are entitled to a "profit" and refuse to acknowledge market conditions etc. and find themselves in the "I must sell it for more than i paid camp".

It will also tell you on the "churn" rate of the house.. if it has changed hands many times since 2001 you need to ask yourself why.. what factors are causing people to move so quickly.. is it a FTB property that people are stepping up on.. was it “fixer upper” and people have moved on or does it have other problems not immediately obvious?

Then again that can be dealt with by the first question all viewers should ask "why are you moving?".

of course your are right the price paid before has no relevance to the price paid today.. but knowing the numbers and the possible "churn" rate will give you a good indication on how to play the negotiation..

boinging_2

As you say, the point of getting the price paid, gives you a chance to gauge the vendors situation.

IveSeenTheLight

boinging wrote: »

As you say, the point of getting the price paid, gives you a chance to gauge the vendors situation.

It does nothing of the sort.
How can you tell from a house sale price if the owner put down a large deposit, was mortgagesd to the hilt or has MEWed over the years?

It is good to see what the house prices have gone for to help with assessing the market and what other similar properties have gone for and of course as the other poster mentioned, if there is an unusually high amount of times the property has sold for