How to offer & negotiate on a property
After searching for a property that you finally like and want to make an offer on, there’s always a dilemma: do you offer high, and risk overpaying or offer low and risk losing the property? There’s a lot to consider, and there isn’t necessarily a right or wrong way to approach it because each situation and property is different. However, this guide will help you be as well-prepared as possible when making an offer on a property.
The property market in 2023
While this is not a strategy that guarantees the best outcome when making an offer on a property, there are certain guidelines and principles that will increase your chances of success. Market conditions also play a major part in your offering strategy.
In 2022, it was very much a seller’s market, although with the impact of sharp interest rate rises and financial uncertainty. However, in 2023, it appears to be a buyer’s market, as price indexes show that house prices have dipped. While the market conditions may be on your side, doing your research and due diligence is still important.
Have your finances pre agreed but keep your cards close to your chest
Having your finances ready to go certainly puts you in a better negotiating position than not. However, when registering with estate agents or booking viewings, you may not want to give away too much about your purchasing power, as it may come back to bite you later on. If you like the property, keep your emotions in check and don’t let on to the agent, as they will likely think you will increase your offer and may urge the seller to hold out for more.
Do your due diligence and research
Before viewing properties, it’s always worth doing your due diligence on house price research for properties in the local area. Property portals like Rightmove and Zoopla allow you to look at properties currently listed on the market and those that are sold subject to contract. While you can’t see what they have sold for until they’ve completed at the land registry, it will give you some idea of the level of asking prices for similar properties. You can also check sold prices and estimated sale prices online.
Consider using a buying agent
Buying a property can be a complex and time-consuming process, especially if you’re unfamiliar with the local property market. That’s where a buying agent can come in handy. They can assist you with your property search, provide you with valuable local knowledge and contacts, and help negotiate the best deal for you.
They can also help you navigate the buying process, from arranging property viewings to dealing with legal and financial matters. While there are costs associated with using a buying agent, their expertise can often save you time and money in the long run.
Book a second viewing
It’s always worth having a second or third viewing before you make an offer, preferably at a different time of day so you can see the property in different lights and get a feel for the neighbourhood and neighbours. It’s also worth taking a friend or family member, ideally someone who has bought and sold before, for a second opinion.
The offering process
Here’s an overview of what to do once you’ve done your research and you’re ready to make an offer.
- Make an offer on the property: both over the phone and in writing. This is done to avoid any confusion or misunderstandings.
- Sell yourself: It’s important to “sell” your position by highlighting any advantages you may have over other buyers. For example, being a cash buyer, having a mortgage approved, or having no chain.
- Negotiate: After making an initial offer, negotiations usually take place. It’s common for the first offer to not be accepted, so be prepared to go back and forth with the seller or their agent until a mutually agreed upon price is reached.
Keep in mind that the offer process can take time, and it’s essential to be patient and not rush into making a decision. Take the time to carefully consider the offer and the terms before moving forward.
Before accepting your offer, the agent or seller may request to see a copy of your agreement in principle and proof of deposit. Once they have accepted your offer, they will require your solicitor’s details, proof of ID, and address.
Reasons a seller may accept a lower offer
There are several reasons a seller may take a lower offer and it can often come down to luck and timing.
- Vendor suited: The seller has found a property and needs a buyer on theirs to proceed with the purchase. In this case, they may be willing to accept a lower offer to secure a quick sale and ensure that they don’t lose out on their next property.
- The property has been on the market for some time: and the seller may be motivated to accept a lower offer to finally sell the property and move on.
- Quick sale: The seller may want a quick sale for personal reasons, such as a job relocation, financial pressures, or other life events.
- Cash buyer: If you’re a cash buyer, the seller may be willing to accept a lower offer because it means they won’t have to wait for a mortgage application to go through, which can be a time-consuming process.
- You can move quickly: If you’re able to proceed quickly with the purchase, the seller may be motivated to accept a lower offer because it means the sale can be completed sooner, without any delays or complications. Having no chain and/or your finances & solicitors lined up can help.
- Lack of interest: a seller may take a lower offer if there is a lack of interest in the property. This could be due to various reasons, such as the property being in a less desirable location or having features that are not popular with buyers.
Speak To an Expert
Whether you’ve just had an offer accepted on a property and you’re ready to go, or you’re simply wondering how much you need to save for a deposit, it’s never too soon to reach out.
Open offers or sealed bids
Estate agents and sellers can decide how they market the property and how offers are made, either through open offers or sealed bids. Open offers mean that potential buyers make offers on the property, which the seller or agent can then accept, reject, or negotiate.
Sealed bids, on the other hand, mean that all interested parties submit their offers in a sealed envelope by a specific deadline, and the seller then chooses the best offer. In this scenario, buyers are usually asked to make their highest and best offer to increase their chances of success.
Tips when offering on a property with open offers
- Be polite and respectful: when communicating with the estate agent or seller. Being rude or aggressive will not help your chances of getting the property.
- Offer below the asking price to start with. Most sellers will expect some negotiation, so don’t be afraid to make an offer lower than the asking price. You can always increase your offer later if necessary.
- If the property has been on the market for a long time or has had a lack of interest, you can be more bold with your offer. Consider offering 5-10% below the asking price to see if the seller is willing to negotiate.
- If there is a lot of interest in the property or it has only just come on the market, you may have less luck with a lower offer. Use your judgment to decide if a higher offer may be necessary to stand out from other potential buyers.
- Remember that most properties have been priced with offers in mind and are purposely put on the market for a higher price than the seller expects to receive. Don’t be surprised if the seller rejects your initial offer.
- Don’t start above the asking price unless you have been told that there are already offers above the asking price. Starting high may make the seller think you are desperate to buy and could result in them holding out for an even higher offer.
- Play hard to get. Show interest in the property but also let the seller know that you are considering other properties and are not desperate to buy. This may encourage them to take your offer more seriously.
Tips on offering on a property with sealed bids
- Do your research: Before making an offer, research the local property market and the property itself. Look at the asking price, local sold prices and any similar properties on the market. This will give you an idea of what the property is worth and how much you should offer.
- Put your best foot forward: This is your only chance to make an offer, so make it your best offer. Consider offering the asking price or slightly higher if you really want the property.
- Know your limits: Set yourself a maximum budget and stick to it. Don’t get carried away in the heat of the moment and offer more than you can afford.
- Be prepared: Have all your finances in order before making an offer. This includes having a mortgage agreement in principle and proof of deposit ready to show the seller.
- Write a personal letter: Consider writing a personal letter to the seller explaining why you love the property and why you would be a good buyer. This can sometimes make all the difference in a competitive bidding situation.
- Consider adding contingencies: If you want to make your offer more attractive, consider adding contingencies such as a quick completion date, waiving certain inspections or agreeing to cover any legal fees.
- Don’t give up: If your offer isn’t accepted, don’t give up hope. Keep an eye on the property and if it comes back on the market, consider making another offer.
Pros and cons of sealed bids verses open offers
Sealed bids and open offers are two different methods used by sellers and estate agents to receive offers from potential buyers. Here are some of the pros and cons of each method:
Pros of sealed bids:
- Encourages buyers to submit their highest offer
- Offers are confidential and cannot be influenced by other bidders
- Seller can choose the most favourable offer without negotiating
- Can create a sense of competition among buyers
Cons of sealed bids:
- Can be stressful for buyers as they only get one chance to make an offer
- Offers may exceed the true value of the property
- Buyers may feel that their offer was not considered fairly
- The winning bidder may withdraw or fail to complete the sale
Pros of open offers:
- Buyers can negotiate and potentially secure the property for less than the asking price
- Less stressful as buyers have multiple opportunities to make offers
- Buyers can see the level of interest in the property
- Can be more transparent than sealed bids
Cons of open offers:
- Can result in buyers bidding against each other, driving the price up
- The seller may not take lower offers seriously
- The seller may receive multiple offers at the same price, resulting in a difficult decision
Ultimately, the decision of which method to use depends on the seller’s preferences and the property market conditions. Some sellers may prefer the transparency of open offers, while others may prefer the confidentiality of sealed bids.
Frequently asked questions on how to put in an offer on a property and negotiations
Yes, estate agents have a legal obligation to pass on all offers to the seller, even if they are significantly below the asking price or considered unrealistic. This obligation is included in the Estate Agents Act 1979 and is part of the agent’s duty of care to their client, the seller. However, the seller ultimately has the right to accept or reject any offer, regardless of whether it was presented to them by the estate agent.
No, in the UK, when offering on a property, other potential buyers do not know how much other people have offered. The seller or estate agent may choose to disclose the number of offers received, but they are not required to disclose the specific details of each offer. This is to protect the privacy of each buyer and to prevent collusion or unfair practices among potential buyers.
Generally, putting a holding deposit down is not required when making an offer on a house in the UK. However, some new build properties may require a reservation fee or deposit to secure the property. It’s always best to check with the estate agent or developer to confirm their specific requirements.
While it is not essential to have a solicitor when making an offer on a property, it can be helpful to have one. A solicitor can provide legal advice, review the terms of the contract, conduct searches on the property, and ensure that the transaction goes smoothly. Additionally, some sellers may require the buyer to have a solicitor in order to make an offer.
Having an Agreement in Principle (AIP) from a mortgage lender is not a legal requirement when making an offer on a property, but it can help your position as a buyer.
An AIP shows that you have spoken to a lender and they have indicated a willingness to lend to you, based on an initial assessment of your financial circumstances. It can provide reassurance to the seller that you are a serious buyer with a realistic chance of obtaining a mortgage.
If someone offers on a property after you have had an offer accepted, it is known as being “gazumped.” Gazumping can happen if the seller receives a higher offer from another party, or if they simply change their mind and decide to accept a different offer. Unfortunately, in England and Wales, gazumping is legal, which means that even if you have had an offer accepted, it does not guarantee that the sale will go ahead.