Negotiating house prices may be thrilling for some and cause an unimaginable amount of stress to others. However, it’s important to remember that there’s nothing wrong with haggling for the best house price possible.
Negotiations are an essential part of any deal, and a house purchase is not an exception. In the worst-case scenario, your offer will be rejected. However, it doesn’t mean that you won’t be able to purchase the home you desire by making another offer.
Although sometimes it’s not an easy feat to achieve, there are plenty of properties that have been sold below the asking price. Negotiations usually require well-developed soft skills, coupled with some strategic thinking. Even if you are not a naturally strong negotiator, you can still cut a good deal by doing some research beforehand and using a few tricks.
Before making an offer, you need to get a better understanding of the local market. Look for other similar properties in the area and check how much they are selling for. You can find up-to-date prices of all new build homes on https://korter.co.uk/ and see the difference between the one you’re considering buying and other properties, located in the same neighbourhood. Make sure that the seller doesn’t overprice their real estate. While a low price might seem appealing, don’t forget to keep a critical mind and find the reason behind it.
Apart from the price, pay attention to how long it usually takes for a property to be sold. If the area isn’t in high demand and the neighbouring properties tend to be sold below the asking price, there is a high chance that you’ll be able to succeed with a lower offer.
At first, you need to determine the amount of money you are ready to spend. Sellers usually look for someone they are certain about. Therefore, you can benefit from having a mortgage agreement in principle and deposit. Even if your offer isn’t as high as the seller had hoped, the estate agent might suggest choosing you as a safe option if there is evidence indicating that you are ready to make a purchase right away.
When asked by an estate agent about the amount you’re willing to spend, it’s better to understate it. Estate agents often show you options that slightly exceed your limit so it’s better to be prepared.
Be careful to not appear too keen when viewing a property even if it’s your dream house. Sellers and estate agents might get the impression that you are ready to pay more. Furthermore, don’t be afraid to tactfully point out some drawbacks you notice that may have an impact on your offer but don’t act rude or dismissive.
Making an Offer
To put in an offer, you need to inform the estate agent about it, who will then pass it on to the seller. To avoid “he said, she said” situations, make sure to put the offer in writing and express your intentions in a clear and unambiguous way, leaving no room for misinterpretation.
Provide as many details as you can, such as proof of your mortgage offer. If you are a first-time buyer or a renter, let it be known. It may increase your chances as sellers prefer to avoid any delays and long chains. Some buyers even attach a personalized letter to their offer, telling the seller why they love the house and sharing their plans on raising a family there. It may sound cheesy but if you’re purchasing a family house, the seller might feel emotional about selling it and choose someone with a strong connection to the property over the highest bidder.
If your offer is accepted, make sure that the house is taken off the market as soon as possible. Also, don’t forget to make a written list of all fixtures and fittings that come with your purchase. Remember that a deal can fall through at any time up until the exchange of contracts.
When to Negotiate
Sometimes trying to negotiate a house price too hard may insult the seller. So, when is it appropriate to offer a bid lower than the asking price? There is no definite answer to that question, however, there are some circumstances that can significantly increase your chances of success:
- If the seller has been trying to sell the property for a very long time, but to no avail, there is a higher chance that they will agree to accept a lower bid.
- If you know that the seller’s move is time-sensitive, and they want to sell the house as quickly as possible.
- If you know that there are no other buyers who have expressed interest in purchasing the house.
- If you can prove that you are a more certain buyer than the rest.
- If you are chain-free, meaning that the seller doesn’t need to wait for you to sell your old home before buying theirs.
- If you see that the estate agent is eager to sell the property as fast as possible.
How Much to Bid
If you have never participated in a bidding process, you may feel way out of your depth. Don’t worry, there are some general guidelines you can follow to ensure that you’ll get the best price.
If you’re participating in open negotiations, start with a low bid first. To make sure that you don’t go too low, we suggest making an offer 5% to 10% lower than the asking price. More often than not, sellers put a higher price tag on their property that exceeds the amount they actually expect to get.
You’ll be notified if there are any bids that trump yours, allowing you to make another offer after that. However, don’t get carried away and make sure to always stay within your budget. Tread carefully when offering more than the asking price. It’s important to not appear too keen or show your eagerness. Remember that your behaviour may affect the final price, and some politeness can also go a long way.
If you are negotiating the price of a new build home, you can be a bit bolder in your negotiations. However, be careful when making an offer to buy someone’s cherished family home. When trying to get a discount, don’t criticize it too harshly as the seller has probably put a lot of effort into the building and has a strong sentimental attachment to the place.
You can also try negotiating directly with the seller if you think that they will be more inclined to accept your offer when speaking in person rather than communicating via the estate agent.
If the bidding process is conducted via sealed bids, you will have to submit your offer in a sealed envelope. Afterwards, the seller will examine all the offers and choose the one they deem best. This type of bidding is aimed to get the highest price possible. Going in blind, buyers tend to submit the highest offer they can afford in fear of being outbid. Quite often, properties sold via sealed bidding bring the sellers bigger amounts of money than they were listed for.
Participating in sealed bidding is considered to be more nerve-wracking than engaging in open negotiations. In fear of losing a bid, people overestimate their budget and write down a sum they wouldn’t be comfortable with otherwise. It’s crucial to keep a level head and be aware of your financial limitations.
When writing down the offer, avoid using round numbers and add a few more pounds and pence. In that case, you can secure your win, even if it’s by a small margin. In addition, if you know the exact number of bidders, it may be easier for you to decide how much to bid.
Things to Know About a Holding Deposit
When you submit an offer, the seller might ask you to make a deposit to confirm your intentions. Many estate agents oppose using such measures. However, in volatile markets, sellers tend to ask for holding deposits to assess the seriousness of buyers’ intentions.
Before giving a holding deposit, make sure that you know the exact terms and conditions of the procedure. Some deposits are refundable no matter who decides to call the deal off. Such terms are preferable, for obvious reasons.
In an attempt to secure the deal, the seller might insist on making the sum non-refundable if you are the one to pull out. Meanwhile, if the seller pulls out, you will get your money back. Before submitting such a deposit, you need to be absolutely certain that you are ready to make a purchase.
Do not agree to make a deposit if it’s non-refundable at all. There are too many risks, and it’s not worth the headache. Also, don’t submit a deposit directly to the seller. There must be an escrow account to safeguard your funds.
There may seem to be too many things to keep in mind during your first price negotiations. However, remember to stay calm and refrain from making any rash decisions. Negotiations take a lot of time, and decisions concerning matters of such importance should not be made in haste. It can be easy to forget, but both parties strive to reach an agreement, and sometimes it’s best to meet each other somewhere in the middle.