My friend Phil Spencer has written this useful guide for his new MoveIQ business. A bit like my Quick Check service MoveIQ will provide a tailored report on a property that you may be interested in purchasing. There are some great ‘how to’ videos and lots of Phil on camera explaining the in’s and out’s. So, where to start?
Contrary to popular opinion – finding the home you want is often the easiest part of the buying process.
Agreeing on the terms of purchase and carrying that through to completion is where things get difficult.
In a nutshell, the negotiation process is where you try to get the house you want, at the price you want- from a seller who will have a different opinion.
This is where the estate agent aims to broker the deal.
Remember though, the agent works for the seller, not you. The agent is paid to negotiate the best result for their client.
Essentially, the most important part of negotiating the right price is doing your thorough research.
Ensure that you have found out as much as possible about the seller and the property before making any offers.
Knowing their motivation for selling can help you determine your negotiation strategy.
Here are some top tips on how to negotiate a house price.
Understand the property
Firstly, when handling the negotiations, it’s important to look at the marketing history for the house.
- How long has it been on sale for with this agent?
- Was it on the market with another agent before that?
- Have they reduced the price over that marketing period?
- Have there been any offers, if so, what happened?
If it has been hanging around for a while, the price may not reflect current market value or indeed the sellers ‘motivation’.
Reasons for overvaluation:
- Sellers can be determined to get above the market rate. Ask if the seller has received any offers to date, and why they were rejected
- Sellers may not consider detrimental factors like road or plane noise
- The agent may have wanted the business and flattered the seller with an ambitious price
Negotiating your offer
The value of the property
When working out your offer on the property, you can use the rough guideline of deducting 10% from the asking price.
Make sure that you have done your research. Read up on many similar properties that have sold in the area for comparison.
Ensure you find out the property details of the house you’re moving into, and the surrounding area.
Outside of cities it is less common to find lots of identical properties, so it’s unlikely that you will have a direct comparison to make in terms of value. However, you can get a feel by looking at similar houses.
The main things that will have a positive or negative impact on the value of a property are:
- The house itself:
- Size
- Condition
- Garden size
- Position:
- Orientation
- Outlook
- Noise
- Neighbours
- Location:
- Schools
- Shops
- Transport links
- Leisure facilities
Timing of your offer
If the property has just been launched to the market, it is unlikely that you are going to bag yourself a bargain.
Many vendors will take getting a strong level of interest initially as a positive sign. It will mean that they leave the property on the market to see how things pan out.
If you want to buy something early on, then you may have to pay top whack to secure it.
If you find something you want and there are others interested in it, then you will need to react quickly. The early bird catches the worm!
Useful bargaining chips
Whilst money is important when negotiating, there are other factors that will have an impact on how your offer is received.
The key is trying to bring those factors in line with what the seller is looking for (especially if you plan to make a low offer).
- It’s often useful if you can provide flexibility in your proposed purchase timings, to suit the seller
- Try and see things from the seller’s point of view – they might be dragging their heels because they are reluctant to leave
- Try not to become overly principled, or debate petty issues. Sometimes biting your tongue can help ensure a smooth journey
Check exclusivity
In exchange for paying a higher price, ask for exclusivity – a set period within which to complete the offer.
Also, ask that they cease all marketing of the property, when you make your offer, thus reducing your chance of getting gazumped (link to article on gazumping).
Fixtures and fittings
Establish from the outset what is and isn’t included with the sale.
If you feel you are paying full price, or have increased your offer for the property, you can try asking for any items that you would like to be included.
Try to be sympathetic if the seller doesn’t want to include certain things. See if you can find a similar item elsewhere.
How to make an offer on a property
Once you have established the property’s value in your own mind – it’s time to begin negotiations.
Assume the first offer will be rejected and see what the reaction is. Ask for a counter offer. Can you negotiate more, if asked to pay a higher price?
Always submit your offer in writing (even if you make it verbally initially), in the interests of avoiding any misunderstandings.
Important points to include are:
- A paragraph outlining your search history, demonstrating that you know the market
- The offer price in numbers and words to make sure there are no errors or miscommunications
- Other elements to your offer:
- Proposed timing
- Fixtures and fittings
- Exclusivity
- The details of your solicitor (and a letter confirming they are working on your behalf)
- A letter from your mortgage lender
- Proof that you have deposit funds ready
- Your expectations if the offer is accepted: i.e. you want no other viewings to take place and no other offers to be considered
- A confident sign off including a personal message to the agent and vendor. This could be about your feelings for the property or how you hope it will be your next home
Just remember, there is always room for negotiation. So, until the house is taken off the market, the sellers are within their rights to discuss offers with other buyers, just as you are within your rights to go and view other properties.
He makes it sound so simple, doesn’t he? If you want help or guidance through the process then do please get in touch.