Buying a home can be complicated, whatever the type of property and whether or not you’re a first-time buyer too. But although complex, it doesn’t have to be stressful. When you make an offer on a property, you need a little help to ensure you negotiate the best price for your dream home.
Moovshack knows negotiating house purchases can become overwhelming sometimes – especially for first-time buyers, so find out what the experts say are the best tips, and make your experience a lot smoother.
This guide covers the following:
- Viewing the House
- Deciding on the Price
- Sending the Offer
- Getting Your Finances in Order
- Investigating the Property
- Utilising Escalation Clauses
- Using the Guide Price
- Where does the Old House go?
- How to Haggle for a House
- How to Negotiate
- Understanding the Seller
- Withdrawing an Offer
- Adding a Personal Touch
What you need to do to make an offer
Before we go into any tips, let’s review the necessary steps to making a bid. You can break down the process into three fundamental steps:
Viewing the house
This is the first as well as the most crucial phase of the home buying experience.
We recommend that you carry out a detailed inspection of the property at this stage. For this, you must know what to check before producing the seller with an offer.
Ask about the plumbing, the structure, and the neighbourhood. Take a long walk through the house and assess all the rooms one at a time.
Deciding on the price
This comes once you have identified your dream home in the house hunt. Communicate your choice to your estate agent and ask them how much to offer.
Estate agents will then tell you what the sellers asking price is and whether it is in your identified range. There may be room to haggle here. In most cases, the seller’s first stated amount is higher than they know they can get.
However, while sellers realistically expect some difference – they will not be ready to accept a very low offer either.
Sending the offer
Once you have decided what to offer, your agent will send this in a letter to the seller. The seller can respond in a variety of ways.
If they have no other buyer, and your offer is too low, they might ask you to increase it. Be ready to start negotiating house prices and leave some margin for it.
If there are more buyers, you may find yourself in a competition of sorts you are bidding against other interested parties. After making an offer, you will have to wait before the seller’s response comes.
Ask the estate agent though if you have any queries on this!
Tips on making an offer on a house
These tips will make your life easier when it comes to being in a position to make your offer! Keep in mind the little things sellers and estate agents look out for. These can help you get your dream house at your dream price.
Getting your finances in order
How you finance your home has an impact on the speed at which you can buy a house. Read more about mortgages here where we talk about the entire process of getting a mortgage in detail, which is also really useful for a first-time buyer.
If you plan to take out a mortgage, your mortgage advisor will get an Agreement in Principle (AIP) OR Mortgage in Principle (MIP) from your lender.
Give a copy of this to your solicitor. The solicitor will then communicate to your estate agent that you have the funds ready to pay. This is a crucial step and demonstrates your serious intention to the seller and their estate agent. The fact that you are mortgage-approved works in your favour.
If you are waiting for your old home to be sold, make sure you have a buyer lined up. You do not want it to fall through at the last moment.
If you are a cash buyer, let the seller know. This may count as a plus point for you if the seller wants a quick sale.
To finalise the sale quickly and be able to make an offer, make sure you have enough money for the deposit ready. This deposit is a percentage of the purchase price and is paid based on contracts and before the sale is completed.
Investigating the Property
Investigating the property has two meanings.
The first is the physical inspection of the building itself. How many rooms it has, what state it is in etc.
This is to see if the property meets your requirements. To make an offer without seeing the property is the biggest mistake you can make!
The second kind of inspection goes into the background. Sometimes, your dream house may have been on the market for a long time. This could have led to a devaluation in its price.
Any reasonable buyer will be tempted to make an offer. However, one of the questions to ask is why the property has been on the market for so long?
This could have something to do with the neighbourhood or the foundations, for example.
Utilise Escalation Clauses
Escalation clauses stipulate that if a higher offer than yours is made, your offer automatically “escalates”. This happens only up to a maximum amount of your choice.
These clauses can save you from going back and forth while buying a house.
It may be likely that other buyers also like the property you are interested in. This could potentially lead to a bidding war. Escalation clauses can easily be added to the offer contract to avoid constant haggling with the seller.
These terms streamline the process of putting an offer on a property and can save you the hassle.
Use the Guide Price
Many buyers ask what does guide price mean when buying a house?
Simply put, it is the estimated cost that the property owner wishes to get for their property.
Sellers and agents often use this phrase when negotiating the sale.
However, a buyer needs to know its importance. The guide price comes in very handy. While making an offer, it gives you an idea of the seller’s range and allows you to understand how low they can go.
During the house sale negotiation, check how many other houses are on sale in the neighbourhood. Then search for the prices their owners are asking for. If your seller’s price is higher than the others, they will most likely negotiate as they know the values of properties nearby.
Where does the old house go?
We do not recommend making an offer on a property before selling yours. Even if you don’t actually complete the sale, at least have a buyer ready. Many buyers rely on the money from the sale of their existing property to fund their new one.
If you make an offer but do not have a buyer for your current home, you can be left in a difficult situation and may not secure the property you want to buy.
To learn how being in a property chain affects conveyancing when buying a house, you can read about it here.
How to haggle for a house
Haggling is a common occurrence in the property market. This is the process where you negotiate with the seller to offer a lower price.
Haggling can have beneficial effects, but we advise that you be careful. The percentage of asking price to offer should not be too great. If it is, you can discourage the seller from accepting your offer.
Use search engines to see how many buyers are looking for similar properties in the area. If there are many on the market, then do not offer too low a price.
The seller may have other buyers lined up. Do not appear too eager to buy the property either. If you do, the seller may not accept your low offer and increase the price while exploiting your wishes to buy the house.
If your haggling does not pay off, do not worry. There is nothing wrong with making a second offer on a house. However, we suggest waiting a while before making a second one.
Firstly, waiting gives you time to reconsider your budget and decide how high you can afford to go. Secondly, if the seller has no other buyers, he may also revert to the original offer.
Should you offer the asking price?
Negotiating house prices can be easy if you know the secrets! It is essential to know what to say when making an offer on a house, and that offer is accepted. You can also check out our guide to buying a new build to gain better insight into the process.
- You mustn’t appear too eager. Always behave as if the current house is one of many options on the market. This is important if you want to succeed in making an offer on a house below asking price. If the seller knows you really want the house, he may drive the price up.
- The state of the house also matters when determining how low you can go. If it requires repairs, then you will have to spend some money after the sale as well. Highlight this point to get a lower price.
- If the seller has work or professional commitments, he may want to move quickly. If the seller is looking for a quick move, he may accept a lower offer.
Understanding the seller
Getting to know the seller’s mind is crucial to get your house offer accepted.
- Is the seller looking to move quickly?
- If yes, then they may readily accept a lower offer.
- Is the seller interested in fast payments?
- If yes, then offer cash if you can.
- Does the seller have many buyers lined up?
If they do, then you may need to accommodate some of their wishes.
While all sellers may have different financial, personal and professional circumstances, they should be respected. Respectfully pose your queries.
Withdrawing an offer
We are often asked, can you pull out having an offer accepted? The answer to this depends on what stage of the transaction you are at.
If you have signed the contract with the seller after having agreed on all the terms, you cannot withdraw. This happens when you have made the offer and had the offer accepted on a house.
This is true even if there is some time before the move happens.
Before the contract has been finalised, you can withdraw the offer, but you may have to suffer a penalty. If there are some contingencies mentioned in your contract, you can withdraw without worry.
Contingencies are conditions that regulate the terms on which you can withdraw from the offer. These conditions may be the house not meeting certain health standards, safety inspections or such like.
However, if you have another reason, you may lose your deposit on the house.
You do not need to be afraid that while the house is undergoing the necessary inspections, it will be sold to another buyer.
This is an important consideration if the buyers market is saturated. An under offer property is one that you have offered to buy. If there is an offer on a house that is accepted, then it means that even before the sale is completed, the property cannot be sold to anyone else.
You can rest assured knowing that the property won’t be sold between the offer’s acceptance and the finalisation of the sale. Just like an offer can’t be withdrawn, an acceptance can’t be either.
Add a personal touch
Showing the seller that you care for the house can really sway them in your favour. This point is often overlooked by buyers and estate agents alike. If a vendor is selling their old home, write a personal letter to them.
This can include a few lines about why you like the house. This will set you apart from other prospective buyers. Let the seller know you value the house.
As a vendor is also parting with a prized possession, this will show the seriousness of your intentions.