For many home buyers, the toughest part is making an offer on a house.
The process often involves contemplation, negotiation and subsequent higher bids. It can be tough knowing where to start. Here’s what you need to know.
Working out how much to offer
So, how do you know how much to offer in the first place?
- See how much similar properties are selling for, what’s the market saying?
- Speak to local estate agents
- Research the local area
- Set a budget for how much you can afford
- Consider how long the property has been on the market
- Bid lower than the asking price (a usual rule is to deduct between 5-10%)
- Are you in a strong position?
1.Do market research
Make sure you play detective here – compare the home you want to buy with similar ones in the same area. Property portals are a good place to start, or the Land Registry.
2. Use local estate agent knowledge
Estate agents will have plenty of local knowledge, including recent sold prices in the area. While they’ll be working to secure a sale for the seller, you can still use them to your advantage before submitting an offer.
Some questions to ask them when viewing a house include:
- How long has the seller lived there?
- How long has the property been on the market?
- Has the seller found somewhere to move to?
- How many others have viewed it?
- Have there been any rejected offers?
3. Research the area
Remember – many things will impact how valuable a property is, and the area has a big role to play in this. For example, how good are the local schools? Good schools can increase the value of an area.
Other things to consider include transport links, and whether there are any major works planned that will impact this.
4. Set a budget
One of the most important things to do when working out how much to offer on a house is to set a budget for what you can afford. You can do this by:
- Using a mortgage calculator
- Speaking to a lender and get a mortgage quote
- Don’t just consider property price – but running costs & living expenses
Don’t exceed your maximum budget or bid too high – you need to work in the perimeters of what you can afford.
5. Consider time on the market
In some cases, the seller will accept a lower offer. While there are no guarantees, if the property has been on the market for a long time, they might be more desperate to sell and therefore more flexible on price.
This is why it’s essential to find out as much as you can from the estate agent.
6. Deduct 10%
A rule many follow if to deduct around 10% from the asking price. This first offer might well be rejected, but it could give you more wiggle room.
7. Strengthen your position
Some buyers are more attractive to sellers (more than those with extra cash), including:
- First-time buyers or those who are chain free
- Cash buyers
- Prepared buyers e.g. those with a mortgage agreement in principle
This means you might be able to get away with bidding lower. Use any leverage you have to your advantage and make sure you state it in your offer.
Always downplay the amount of money you’re willing to part with, to both the estate agent and the seller.
Also, don’t be too overt in claiming you’ve found your ‘dream home’, as the seller will automatically assume you’ll pay more for it. However, on the other hand, don’t pretend to be uninterested; all parties concerned are looking for a sure sale.
How to make an offer on a house
Decided on your bid?
Firstly, inform the estate agent of your offer, regardless of how low; they will pass this information onto the seller. If the vendor is selling their home privately, inform them as soon as possible.
One essential piece of advice is to also put your offer in writing. This will ensure nothing gets lost in translation, reducing the risk of confusion later on down the line.
What should your offer include?
As mentioned, presenting yourself as an attractive buyer can put you in a stronger position. So, your offer should also include information on:
- How organised you are
- Whether you’re chain-free
- Your mortgage agreement in principle
- How big your deposit is (the larger it is, the easier the mortgage process can be)
- How flexible you are with the move-in date
- How much you love the property
Assume a low first offer will be rejected
Assume your first offer will be rejected if it’s low. This rejection could also be subject to the property owner’s specific needs, such as an earlier moving date, for example.
This is all about letting the seller know you’re interested, and you would like to negotiate the house price.
Is your offer legally binding?
In England and Wales, only once contracts have been exchanged does the sale become legally binding. Even if the offer has been accepted, either party can pull out until then.
When can you make an offer on a house?
It’s recommended that you attend multiple property viewings beforehand, don’t just view it once and submit your offer. You should also be ready to get things moving, e.g. getting a property survey done.
When should you increase your offer?
When making an offer on a property, prepare for the fact you may have to increase it.
But, only do this when it’s right, such as:
- If there’s a lot of other interest
- If it’s your dream home
- If you have more in the budget
While it’s essential not to rush the decision, you’ll need to weigh up whether you’d rather put in a higher offer or lose the property.
Did you plan for the possibility of an increase when you put in your initial offer? Or, was it the maximum you could afford?
Making an offer via sealed bidding
What if you’re making an offer on a house via a sealed bid? Here, you’ll have no idea what other potential buyers are offering.
Some tips include:
- Research the area and property thoroughly
- Always bid using an odd number
- Try not to panic
- Don’t overpay
Top tips for putting in an offer
Making an offer on a house can be one of the most difficult parts of buying. But, there are ways to make it easier and boost your chances of success:
Consider other interest
If your initial offer has been rejected, ask your estate agent why. Get as much information as you can.
Don’t just increase your bid if you’re effectively bidding against yourself.
Only ever offer more than the asking price if you know someone else has offered the asking price, or if you are really desperate to get this property.
Don’t submit a second offer immediately
If there isn’t anyone else expressing an interest in the property, don’t be afraid to take your time when responding with a second offer.
Playing hard to get can work in your favour. If the seller is keen to sell quickly (albeit at a higher price), you have time on your side.
Having time on your side could work as an advantage. You can remain interested without actually changing your bid. It’s a way of negotiating without actually negotiating. At this stage, it’s about who sweats first.
Remember, there are more properties out there, so be ready to walk away if the seller isn’t open to negotiation. It’s never a good idea to spend more on a property than it’s worth.
Do your research
Arm yourself with all the facts about a prospective property and the surrounding area to help you decide when and what to offer. A property report can tell you everything you need to know, such as how much similar properties have sold for in the area. Get your full property report below.