House price negotiation is a skill which pays. Making sure you know what you are talking about and show you know it is the most effective way of getting a good deal when negotiating a house price. Follow this advice when deciding on your house price offer strategy.
The asking price of a house is nearly always more than the seller expects to get. It is often set high in order to encourage a higher opening offer than would be given with a more realistic asking price. Take this into consideration when making formulating your house price offer strategy and what make your opening offer accordingly.
Get a written agreement in principle from a mortgage lender to show the seller that you will have enough money to pay them. This demonstrates that you are serious about buying and that the process will be able to take place quickly once you have both agreed on the sale.At viewings ask questions. Why are the owners selling? What are their timescales? Do they need to sell quickly?
House price negotiation tip. Whatever the current state of the housing market try and establish your main strengths before starting the negotiation. Consider:
- How many other people are interested in the same property. If you are the only one, you are in a strong negotiating position and the seller is likely to accept a lower price. If there are two or more parties making offers, the seller and their agent will be far tougher during negotiations and you may be sensible to offer closer to the asking price.
- How desperate is the seller to make a sale. If they need to sell quickly (maybe a job move or a marriage breakdown), they will be more likely to accept a lower sum than the asking price. When talking to the vendor try an find out as much background information as possible which will help you in the negotiations.
- How long the house has been on the market. The longer it has been for sale the better chance you have of getting a low offer accepted.
- Try and find out if the asking price has dropped since it went on the market. There are now websites which track the asking price of houses.
- Demand for houses is higher in spring and summer so prices will be slightly higher at these times of year. You are likely to be in a much stronger position if buying in the middle of winter.
- How strong is your own position as a purchaser? You will be in a stronger bargaining position if you are not in part of a chain of sales. If you are a cash buyer you can negotiate very hard indeed. First time buyers who have a firm mortgage offer and anyone who has already sold or exchanged contracts on their own property also have a strong advantage.
The Opening Offer – Crucial to setting the tone of the negotiations
It is important to get the opening offer right, as this will play a big part in determining the amount you eventually pay. Normally, the opening offer in a house price negotiation is about 5-10% lower than the asking price. In a weak housing market consider offering up to 20% below asking price as an opening offer.
- Make a number of viewings before making an offer. This builds a relationship and makes the seller want you more. Negotiating begins as soon as you view a property not when the first offer is made.
- Don’t get too attached to one property. Desperately wanting one property puts negotiating power in the hands of the seller. Have a handful of properties in mind and make sure the seller and their agent knows you have a number of options.
- Let everybody know that you have viewed plenty of homes, and that you understand the property market and how much the home should be worth. Asking well-informed questions is one way of showing you are not a customer who can be easily conned. Ask the agent and the seller to justify the price. How is it based? Probing questions can undermine the seller’s confidence in their asking price during the property price negotiation.
- Don’t look overly keen. If the seller sees how much you are in love with a home, they know you will be willing to pay more. Play a bit hard to get, and make sure they know you have seen a lot of houses.
Why are the owners selling? What are their timescales? Do they need to sell quickly? Find out as much as possible about the property and the sellers. Perhaps also ask other estate agents about the property. Look for discounts. If the seller still wants more than your offer consider asking for discounts or other incentives. These could include paying stamp duty or for new carpets and fittings.
- Don’t rush into making an offer; take the time to think about it. Stay polite, however stressed or angry you feel. Aggression will not get you anywhere. Remember that if a seller has two equal offers, they will probably go for the buyers with whom they are on good terms.
- Negotiate in person, not over the phone. This way you can better gauge the other person’s reactions to what you say and respond accordingly. Estate agents are hard-nosed professional house price negotiators – be prepared for their ruthless bargaining tactics and don’t let yourself be bullied. Take what they say with a pinch of salt, and try to look and feel confident.
- It can be worth contacting the seller directly, and there is nothing to stop you from doing so. Just remember they might be even tougher than the agent. While it is good to play it cool, don’t be overly cautious or evasive, especially if you know the seller has received other offers or needs to sell very quickly.
- Assess your own and the seller’s negotiating positions and act accordingly – if your position is not that strong, worrying over a relatively small sum of money could lose you your dream home.
During a house price boom things can be rather different as offers are accepted on properties within hours of coming onto the market. Be prepared for disappointment. It is important not to pin your hopes on one property.
If you don’t think the property is worth as much as is being asked, you can introduce this into negotiations. If some repair work is needed you can try to persuade the seller that the property is overpriced.If you have a full structural survey carried out you may identify faults you can use in your house price negotiation as the date of exchange approaches.
House Price Negotiation – Buyer Tip
To get the best possible deal in your property price negotiation analyse the local market. Asking prices are sometimes exceeded in the best areas. In some areas, buyers could still find trouble selling. Find out the areas where prices are still low. Perhaps there are too many flats for sale. If so consider a flat instead of a house.
Build relationships. In a sellers’ market a buyer has to stand out. Not just in terms of being able to meet an asking price, but to appear more favourable to the seller.
Watch out for estate agents trying a number of tricks to make sure their clients gain the maximum benefit from a strong housing market. These include joint viewings to heighten the atmosphere of competition. The worst case scenario is a sealed envelope process, where a number of buyers make an offer that they think will seal the deal. Avoid sealed envelopes and bidding wars at all costs.
Don’t be tempted to borrow more than you can afford. Set yourself a maximum figure you can go to and stick to it. During a house price boom many people can take on too much debt.
Consider buying at an auction, where prices can be cheaper. However be prepared to carry out a good deal of work on a home bought at an auction, as homes that come up are often in need of renovation.