Reaching the stage in the home-buying process where you are preparing to make an offer can be both exhilarating and nerve-wracking.
Making offers and navigating property negotiations can be challenging, but by taking the right steps, you can ensure that you not only secure your ideal property but also pay a fair price for it.
Deciding What to Offer
How Do I Calculate a Property's Market Value?
To determine the market value of a property, begin by researching recent sold prices of comparable properties in the area.
Remember, not every sold price is a reliable indicator of market value. There can be various factors influencing the selling price, such as an overly enthusiastic buyer paying a premium, or perhaps structural issues that could have deflated the price. However, by analysing a range of similar properties that have recently sold, you can build up an idea of what people would be willing to pay for a property.
You can also estimate market value by adjusting the price the current owner paid to reflect average house price growth since they bought it. This method of estimating market value assumes there haven't been any major renovations since they bought the property, and that the purchase price was fair.
Sold house prices and automated valuations
Online resources provide valuable property data, allowing you to estimate the market value of properties.
For up-to-date sold prices and valuations, try our house price pages. Search by street or postcode to view individual properties.
You can filter the properties in a postcode or street to find properties comparable to the one you are trying to value.
View the trend graph to see a plot of sold prices, showing you what people are paying for comparable properties. Each property valuation will also display a valuation trend based on the property's sold prices and average price growth in the area for that type of property.
Ask how long the property has been on the market and the level of interest it has received. The longer the property has been available, the more likely the sellers will accept a lower offer.
You should also enquire about the current owners' reasons for selling – if they need to sell urgently, due to factors like a new job, divorce, or inheritance tax, they may be more willing to negotiate a discount to expedite the sale.
Take note of the property's listing price history and note any subsequent reductions, as this can offer insight into the seller's willingness to negotiate. If they have recently reduced the price, it is likely that they haven't received many viewings or offers so far and will wait to evaluate the level of interest at the lower price point.
How Do I Research Local Planned Developments?
Bear in mind that even if you are captivated by a particular area, it may change over time. For instance, a that property boasts fantastic views of open fields might find its landscape transformed if the land is developed in the future.
While it's impossible to predict the future with absolute certainty, researching local planning applications can help you gain a better understanding of an area's potential development.
The findings may either reduce a property's appeal, for example, if there are plans for extensive industrial development, or enhance it, for example, if there are plans for improved transport links.
As a general rule, an initial offer of between 5% to 10% below the price you want to pay is a good starting point that gives you room for negotiation.
However, you'll want to take into consideration the information you have about the seller, including the price they paid for the property and their motivation for selling, as well as the level of interest from other potential buyers, and your eagerness to secure the property.
Sellers usually expect initial offers to range from 5% to 10% below the asking price. So, if your estimated market value is significantly below the asking price, the negotiating process might prove challenging. Conversely, if you believe the asking price is undervalued, making an offer closer to it could help you secure the property swiftly.
How To Make an Offer
Communicating with Estate Agents and Sellers
Typically, you will make an offer through the seller's estate agent. By law, an estate agent must relay all offers they receive to the seller, ensuring your offer is passed along.
If a property is privately listed or the seller has used an online estate agent, you may need to speak to the seller directly to present your offer.
It is always a good idea to put your offer in writing to reduce the risk of any misunderstanding further down the line. You can outline any conditions of the offer, such as agreeing on any fixtures or fittings being included or removed as part of the sale.
Ensure to state that, if your offer is accepted, it will be under the condition that the property is taken off the market immediately. This ensures that you're not exposed to the risk of another potential buyer entering the process and outbidding you.
Understanding Estate Agents
When dealing with estate agents, it's important to remember that they are working for and being paid by the seller. When interacting with them, your general mindset should be to gather as much information as possible while only sharing details about your position if it is advantageous to you.
Disclosing information such as your maximum budget might result in the agent pushing you towards the upper limits of what you are willing to spend.
Emphasise your Position
To increase the likelihood of your offer being accepted, it's important to emphasise any factors that make you more appealing as a buyer. These could include:
Cash buyer - Inform them if you are a cash buyer and don't require a mortgage. This reduces the risk of the transaction falling through due to financing issues.
No-chain status - If you don't require the sale of a property let them know. This reduces the risk of the transaction being delayed or falling through due to an inability to sell your current property.
Decision in Principle - If you have already spoken to a mortgage lender and have a Decision in Principle that indicates you can afford the property, this can help reassure the seller there is a lower risk of the transaction falling through due to financing issues.
Negotiations and Bidding Tactics
After you make an offer, the seller or their estate agent will generally respond within a day. They should inform you whether your offer has been accepted or rejected, as well as if any other bids surpass yours.
Estate agents are required to inform potential buyers of other offers. They will often use a guide price instead of disclosing the actual offer amount submitted.
For example, if you initially put in an offer of £260,000 and your competitor put an offer in at £265,000 then an agent may tell you a guide figure of £260,000-£270,000 for the competing offer.
Deciding on the Next Steps
If your offer is rejected, you have several options. You can choose to retract your offer and move on to searching for other properties if you don't think it is worth increasing; you can increase your offer; or you can indicate that the offer remains open with the hope that the seller may reconsider at a later date if there is little other interest.
Remember to keep your budget in mind and refer back to the research you have done to avoid getting carried away. Even if a home may seem to tick a lot of boxes, there are always new properties coming onto the market.
Sellers are likely to reject an initial offer, expecting that it will be increased. It's wise to factor in a bit of negotiating room for compromise, so that both the buyer and seller can feel a fair price has been reached.
Throughout the negotiation process, resist the temptation to appear overly enthusiastic, and be sure to highlight the property's shortcomings as well as the strengths, so the seller knows you are taking these into account. If you appear too eager, with instant responses and consistent praise for the property, it could give the impression that you will continue increasing your offer because you are so enamoured with the property.
The negotiation process can allow both parties to feel a sense of compromise from the other party, ultimately leading to satisfaction with the final deal on both ends. Research from Zoopla in 2019 reported an average discount from the asking price to the price paid of 3.9% across all property types.
When Should I Offer Above the Asking Price?
Offering above the asking price should only be considered if there is considerable interest in the property and you are confident in your assessment of its market value. This may be the case in a highly competitive market, where multiple buyers are vying for the same property.
Gazumping and Gazundering
What is Gazumping and Gazundering?
Gazumping occurs when a seller accepts a higher offer from another prospective buyer after having already accepted an initial offer. This can be detrimental for the original buyer, as they may have already spent money on unrecoverable costs such as surveys or solicitor fees.
Gazundering is when a buyer lowers their offer shortly before the exchange of contracts, putting pressure on the seller to accept a lower price to avoid the deal falling through.
Both Gazumping and Gazundering cause stress and uncertainty during the home-buying process. If either causes a deal to fall through, there are financial and emotional strains placed on both parties.
How Do I Protect Myself from Gazumping?
As a buyer, there are steps you can take to protect yourself from gazumping.
Make an offer conditional on the fact that the property is taken off the market immediately, including removal from any online portals. This reduces the likelihood of other buyers coming in and outbidding you.
Demonstrate you are a serious and committed buyer by being quick to respond during the transaction process. The seller is less likely to look for other options if they have confidence that you are proactive and capable of ensuring a fast-moving and smooth transaction.
Consider taking out home buyer's insurance, which may cover some of the expenses if you are gazumped.
Get an ‘exclusivity agreement'; this agreement prevents the seller from accepting higher offers and usually requires a non-refundable deposit.
How Do I Protect Myself From Gazundering?
As a seller, to protect yourself from gazundering.
Stay informed about the local property market trends to ensure you have a realistic understanding of the property's value if it comes to justifying a rebuttal for a requested price reduction.
Be upfront and honest about known issues with the property so they cannot be used as justification for a price reduction further down the line.
Maintain good communication with the buyer and work only with a reputable estate agent who should be able to provide reliable buyers.