How to Negotiate the House Price

If you are making an offer on a property, you may be wondering how to maximise the negotiation and get the best price. Offering on a property is a lot like playing poker, you will need to know the strength of the cards you hold and guess how the seller will behave and react to your offer.

The good news is that in most circumstances you can offer below the marketed price of a property. The bad news is in some cases this will be difficult for a vendor to accept. Knowing when to negotiate and when you are unable can be the difference between you securing your dream home at the right price.

This guide outlines all aspects of property negotiation and how to get the best possible outcome when you make your offer.

What is an Offer?

An offer is different in England and Wales compared to Scotland. When you offer on a property in Scotland you should be aware that once the offer is agreed you are committing yourself to purchase the property at that price.

In England and Wales, offers are non-binding and you can pull out of the sale at a later point if something untoward happens or you no longer wish to purchase the property.

For clarity, negotiating is limited in Scotland as there is not as much back and forth and the seller holds the power. This guide will instead concentrate on offering in England and Wales.

What to Consider When Negotiating on House Price

When making your offer you must have a good understanding of the situation you are offering in.
There is no point whatsoever trying to negotiate down the price on a property if a vendor has already received more than one offer at or above the marketed price. All this will do is lead to disappointment when your offer is rejected in favour of the buyers willing to pay more.

In situations you can negotiate you should do the following.

Research Local House Prices

Look at local house prices, both advertised prices for similar properties in the immediate area and previous sold prices. The closer you can focus in on the property area the better your negotiating position.

Remember some towns have huge populations and areas which differ in affluence. It is fruitless to compare a property in a medium income area to one in a low-income area.

Once you have a good idea of how much similar properties in the immediate area sell for, you will understand whether the marketed price reflects good value for money.

Estate agents tend to market properties at least 5% over the market value in the hope of duping buyers into paying more and maximising their commission. With this in mind, you should be able to save at least 5% on any list price if the property is not highly sought after.

Understand the Sellers Position

Some sellers are happy to overvalue their property and wait for years to achieve that value. Other vendors will want to sell and move as quickly as possible.

You should ask the estate agent why the seller is selling the property to gauge where they fit into the above equation.

Trying to negotiate with stubborn sellers is going to be painful, especially if they are happy to wait for the right offer. On the flipside, if a seller is desperate to sell, you can use this to your advantage and even be cheeky by offering undervalue.

It’s also wise to check the listing history for the property from websites like Zoopla and Rightmove. If the property’s price has been reduced frequently over a short period of time, it indicates that the vendor is struggling to sell and wants to move quickly. This gives further power to you as the buyer.

Know Your Financial Position

When you are looking for properties, you should have a Mortgage in Principle outlining how much you can borrow.

You should ideally be looking for properties well within your borrowing limit. This allows you the scope to negotiate up from your initial offer if necessary.

How to Put an Offer on a House

Negotiating is easy when you are armed with information. You should follow the steps listed below to get your offer accepted.

• Complete your due diligence and find out the seller’s position and local property prices.
• Look around the property and highlight any work that needs to be done. For example, is the energy efficiency poor and will you need to replace windows?
• Cost up any urgent work. Deduct that from the market price if the agent has not factored it into the marketed price.
• Now deduct 5% depending on the seller and make an offer.

Here is an example of how that works in practice.

You see a property valued at £300,000 and notice it needs a new roof. Deduct the rough cost of replacing the roof (£30,000) to reach the maximum value you will offer at – £270,000.

Once you have further deducted 5% you have an offer price of £256,500. Be sure to outline exactly why you are offering this price.

A good explanation is to state, the property needs X work and we have budgeted this amount to complete. We also feel the property was slightly overpriced to begin with and this is how we have arrived at our offer price.

Remember, a property is only as valuable as someone is willing to pay for it. A seller can have pie in the sky expectations about their property value, but it will not materialise unless a buyer is willing to spend that money.

What Happens if Your Offer is Rejected?

It is likely your offer will be rejected at this point. However, you should not be disheartened. You have simply put in an offer at the minimum price you believe will be accepted.

In cases where the offer is rejected, you should ask the agent a key question.

Has the seller indicated a price they will accept?

For most sellers they will then consider how much they are prepared to discount the property by. For example, they may find £190,000 unacceptable but indicate to you that £200,000 is acceptable. Irrespective of if you decide to negotiate further, you have already secured a discounted price.

It is still a good idea to make a counteroffer and try to meet as close to halfway between your initial offer and their discounted price. You may have a bit of back and forth at this point, but eventually, both you and the seller should reach a price you are both happy with.

If you do not reach a price that you are happy with, walk away. This is also a fantastic way to achieve your desired price. If a seller rejects your offer, walk away from the deal.

There are numerous instances of sellers believing they have lost a buyer and compromising further to get the sale done, especially if they are desperate to sell. In times of economic hardship for a country, such as during recessionary periods, buyers usually have great bargaining power in negotiations as they know that the vendor is keen to sell. For example, in times where vendors are unable to afford their mortgage payments for the property, they are incentivised to sell quickly.

Offer Accepted – Time to Arrange a Mortgage Application

When you have had your offer accepted you will need to progress your mortgage application.

Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Broker. Boon Brokers provides fee free mortgage advice and will arrange a mortgage in principle to help your negotiations.

Contact Boon Brokers to discuss your upcoming property purchasetoday.