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Get in contact with the seller’s estate agent when you are ready to make an offer on a property. All estate agents are required to pass on offers to the seller by law, no matter how ridiculous the offer might be.
Deciding on the amount you wish to spend on a house depends largely on a number of factors, including:
· The local property market
· Interest in the property
· Offers already received
· Time spent on the market, and;
· Your own financial situation
Whether you put in a high offer and risk wasting money, or offer a low price and potentially lose out on your dream home will be based on your own tactics.
There are things you can do to give you the upper hand first, before even making an offer:
· Downplay the amount you are willing to spend – Estate agents will often show homes that are more expensive than your budget will allow. Doing so will also give you the upper hand when it comes to negotiating.
· Play it cool when you find the right property – Finding the perfect property can be extremely exciting, but it is more important than ever to put on your poker face. Don’t dance around declaring your love for the property; doing so will reveal to the seller that you’re willing to pay more.
· Keep an eye on the property market – Pay close attention to similar properties in the area and how well they are selling. You will be in a stronger position to put in a lower offer if the market is moving slowly.
· Agree on a written list of fixtures and fittings – Having a list in writing will reduce the chance of disagreements later down the road.
There are certain circumstances in which a low bid may be accepted by the seller. This is the case if:
· The house has been on the market for a while – This often suggests the owner is having a problem with selling the property, which gives you the upper hand. They may have already lowered the price of the property since it was on the market.
· The property has received little interest – The owner may realise that you are the only person willing to buy their property.
· The owner wants to sell quickly – This may be the case if you are a cash buyer or have a large deposit and not in a chain. They may want to move quickly for a new job or looking to buy a specific house themselves.
· The estate agent wants a quick sale – You may be able to get the estate agent on your side as they often want to get their commission and move onto the next property.
· The owner is using multiple agents – An estate agent is more likely to persuade the owner to accept your low offer as they are competing against other agents for the commission.
There are two main bidding processes; open negotiations and sealed bids.
More common between the two processes, open negotiations will require the buyer to put in an offer and wait to hear back from the seller if it was successful.
As with most negotiations, you should start low, generally 5%-10% lower than the asking price. Don’t forget that sellers will often put their property on the market for a higher price than they would expect to achieve.
When placing a bid, agents will normally inform you if there are any other bids that counter your own, often giving you the chance to put in a second or third bid.
When negotiating, you should stay calm and polite, and only offer above the asking price if you know the owner has already been offered that, or if you are worried there are lots of buyers.
Remember: Try not to be influenced by anything that is added to the deal, such as second-hand white goods. These are usually low value and is often just because it can be hassle to move white goods.
With sealed bidding, you will have to write down your offer and seal it in an envelope to be send to the owner. This type of bidding process is being used more and more in higher demand areas, such as London. In fact, one estate agent revealed that 90% of sales in Hammersmith were via sealed bids.
This type of process is designed to get the best offer for the owner, with bids often a lot higher than the initial asking price.
While you do not want to lose a property you like, it is important to stay within your budget and factor in the extra costs that come with buying and moving house. You may also not be covered by your mortgage provider if paying above the asking price.
While sealed bids seem to be tipped in favour of the owner, there are still plenty of benefits for the buyer that come with this buying process:
· You only pay as much as you think the property is worth, so long as you resist the temptation to overpay.
· You can make a more educated guess on what to pay if you are able to find out how many other people are bidding.
· You may still be able to negotiate on a property after the sealed bidding process; accepting an offer is not legally binding until contracts have been signed.
Remember: It is recommended to add a few more pounds to your offer, if it is a round number. For example, you should offer £210,050 instead of £210,000, as others may offer a bid at the same amount.
Some sellers may require buyers to pay a small amount of cash along with their offer, known as a holding deposit. This is to ensure the buyer is serious about their bid.
Not all sellers insist on a holding deposit and many estate agents actually discourage it, as it slows down the whole buying process.
Some holding deposits are refundable, although some may not if you pull out of the process. It is best to avoid completely non-refundable holding deposits as you can lose your money even if it is the seller that pulls out of the process.
Remember: Do not pay holding deposits directly to the seller. If required to pay, you should submit deposits to the seller’s solicitor who will place the amount in an escrow account.
An accepted offer is not legally binding until contracts have been signed; either party can pull out at any stage.
Sellers will most often pull out of a deal when they receive a higher offer from someone else, which is known as gazumping. Being gazumped is an unfortunate situation to find yourself in, as you can easily loose thousands of pounds from surveys and solicitor fees.
The only thing you can do to stop this is to counter-gazump and make a higher offer. When making an offer, ask the owner to take the property off the market as part of your agreement. They are under no obligation to do so, but you are able to question why the want to continue marketing the property, even after receiving an accepted offer.