The home buying process is notorious for being complicated. Despite this, contrary to popular opinion, finding a home is often the easiest part of the buying process. Agreeing on the terms of purchase and carrying that through to completion can be where things become difficult.
Here, we explain how to negotiate a house price, how you can get the best deal and potential ways you can ‘haggle’ a lower price.
What is the Negotiation Process?
Negotiating a house price is where you try to get the property you want, at a lower cost than is being requested. This often comes when the seller has a different opinion about the amount their home is sold for. Naturally, the buyer will put an offer at the lowest price possible, which can lead to a conflict of interest.
This is where the estate agent will try to broker the deal. It’s worth remembering though, the agent works for the seller – not you. The agent is paid to negotiate the best deal for the client. This can mean that when buying a home, you’re faced with an uphill battle to secure your favoured price, though there are ways to impact this.
It’s crucial to do thorough research before embarking on any negotiations. Ensure you’ve found out as much as you possibly can about the seller and property before making any offers. Knowing a seller’s motivation for moving can also help in determining your strategy for how to negotiate a house price.
How to Negotiate New Build House Price
New build properties are a popular choice among many home buyers. If you're looking to buy a new build, you may feel the need to pay the asking price. This isn't the case. Here are some vital new build negotiation tips to help you.
Do Your Research As Normal
Many new build house buyers assume that there's no room for negotiation. Don't presume that you're getting a good deal. Do your research as you normally would and ask yourself a number of questions:
- How many other homes in the complex have been sold?
- How much were they sold for?
- What are other properties in the area selling for?
- What other projects have the developer completed? What did these sell for?
- Does the developer have a history of raising their asking price?
New builds tend to be more expensive than other similar properties. It's important to understand how much extra you're paying as a premium. Put your property investors hat on and take into consideration the price per square foot in comparison to similar properties.
Understand the Market
It's vital to take stock of the current state of the market. If there's a lot of interest in the development, you'll have less of a chance to negotiate a lower price for your new build. If however, there are other developments nearby or a lot of properties on the market, you may find that the developer is open to sweetening the deal.
If you're looking at one of the last properties on the development, you may find that the builder is keen to get it filled so they can move on to the next site. This is an ideal opportunity to haggle the price down as much as possible.
Approach at the Right Time
Is the developer approaching the end of their financial year? This is an ideal time to push for a lower price as they may be keen to hit their pre-set targets.
Moreover, making an offer during slower times of the year (such as Christmas) can help to secure a more favourable price than you may necessarily achieve during peak times.
Can You Secure Any Incentives or Added Extras?
If some of the houses in the development have already been sold, it may be difficult to negotiate the price down. Developers ideally want a consistent sale price.
This means that you may do better by asking for certain incentives or added extras to be included in the price. Be smart about any added bonuses which aren't included in the show home. These will only save you money if you were already planning to buy them. Additionally, the inclusion of furnishings sounds like an attractive option, but you may not have the level of personalisation as you would if you furnished the property yourself.
Any additional extras you get may have already been included in the sale price by the developer. This means that the little bonus given to sweeten the deal isn't actually much of a bonus at all. When considering the added extras, weigh up whether these are actually useful and convenient to you.
If you're unable to get the deal you want, ask for some added extras - if you don't ask, you don't get. There are no prizes for being polite. Buying off plan is often an unpopular option, so try to secure as many incentives as you can.
Understand the Property
When handling house price negotiations, it’s important to understand the marketing history of the property, as this will have a big impact on whether you have room to manoeuvre concerning the asking price.
- How long has the property been on sale for with the current agent?
- Was the house on sale with another agent prior to this?
- Has the price been reduced while on the market?
- Have there been any offers? If so, what happened?
If the property has been on the market for some time, the sale price may not reflect the current market value.
Therefore, ensure that when buying a property, you do your research around it before you put in an offer. You don't want to end up paying more than you should!
There are a number of reasons why a house could be overvalued. Here are some of the most common:
- Some sellers become determined to sell for higher than the market value – if you suspect this is the case, ask the seller if they have received any other offers and why these were rejected
- Sellers may not always consider all detrimental factors which could put potential buyers off – more about these later
How Much to Offer on a House?
Wondering how much to offer on a house?
There’s no hard and fast rule for this, as all circumstances vary. However, there are some factors that are good indications for how much to offer on a house. Don't pay more than is necessary out of desperation to close the deal, even if it's your dream home!
As there’s a lot to consider when it comes to negotiating house prices, we’ve broken this down into manageable chunks so you can get the best possible outcome.
Here are the factors to help you decide what to bid on a house:
The Value of the Property
There’s often a difference between the value of a property and its sale price.
A rough guideline that many follow for initial offers is to deduct 10% from the asking price. This is always an approach worth consideration but it’s not as black and white as it seems. Property investments are a big deal, so there’s a lot to think about here.
Make sure you’ve done your research, read up on similar properties in the local area and find out how much they’ve sold for. This will give you an accurate comparison and realistic benchmark figure. Remember though, every property is different – use this only as a guide. The housing market is an ever-changing place!
It’s easier to find similar properties in large cities, in more rural areas it may be difficult to find a direct comparison. If this is the case, it may be a little harder to find a sale price benchmark. Don’t panic, you can still look at similar houses in the area to get a feel for what the local market is like.
Ensure you find out all you can about the house you’re planning to move into, as well as info on the surrounding area. You may be able to use this to your advantage.
Factors Which Affect a Property’s Value
There are a number of key aspects which could affect the value of a property. This could concern the house itself, its location or even position. These are worth considering when negotiating house prices.
- Garden size
- Transport links
- Leisure facilities
The Timing of Your Offer
If the property has just been put on the market, it’s unlikely you’ll bag yourself a bargain. Many vendors will take strong initial interest as a positive sign, this means they’re likely to leave the property on the market for longer to see how things pan out.
If you want to buy a house which has just been put on the market, it’s likely you’ll pay over the odds to secure it. If you want a house which others are interested in, it’s important to react quickly and get the process moving as soon as possible. The early bird catches the worm!
Useful Bargaining Chips
While money is key when negotiating a house price, there are a number of external factors which can have an impact on how your offer is received.
The important thing here, is to bring these factors in line with what the seller is looking for. This is especially prevalent when you’re making an offer below the asking price.
Here are some crucial bargaining chips which could give you an advantage:
- Provide flexibility in your purchase timings, convenience can sweeten the deal
- Try and consider the seller’s position – maybe they’re dragging their heels because they’re reluctant to leave
- Try not to become principled, this is no place to debate petty issues – biting your tongue can help smooth the process
- Show you’re keen for a quick sale, but don’t rush. This will weaken your position
Ask for Exclusivity
If you’re facing the possibility of paying a higher price, it may be worthwhile asking for exclusivity. You may benefit from an agreed period to complete the offer.
This could also include pausing any marketing or promotion of the property while making your offer. This can reduce the possibility of getting gazumped.
How to Make an Offer on a House
Once you’ve established the perceived value of the property you’re looking to buy, it’s time to begin negotiations.
Always assume the first offer you make will be rejected. This is an important stage in determining the reaction of the seller. Ask the seller to make a counter offer. If you’re asked to pay a higher amount, will you be able to negotiate this?
Always submit your offer in writing, even if this is initially made verbally. This is important as it will help to avoid any potential misunderstandings.
When submitting an offer, here are some points to include:
- A paragraph outlining your search history, demonstrating that you know the market
- The offer price in numbers and words to ensure there are no errors or miscommunications
- The details of your solicitor, and a letter confirming they’re working on your behalf
- Proof that you have the necessary deposit funds ready (consider stamp duty)
- Your expectations if the offer is accepted, i.e. you want no other viewings to take place and no other offers to be considered
- Proposed timings, i.e. when you would like the sale to take place
- A letter from your mortgage lender
- The final word on what fittings you expect to be included for the price
- Finish this letter with a confident sign off. Include a personal message to the seller or agent, for example detailing your hopes on how you hope this will be your new 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.
When Will a Low Bid Be Successful?
Certain circumstances can make the sale go in your favour. These include:
Time on the Market
If the property has been on the market for a long-time, it’s likely the vendor will be keen for a sale.
So, while time on the market can be useful for the guide price on what to offer, it can also help your low bid to be accepted.
Lack of Other Interest
If you’re the only buyer interested in the property, this can help the sale go in your favour.
Working to the Seller’s Timings
Making the process as convenient as you can for the seller is a good way to make the sale go your way.
Particularly if the seller is in a rush, working to their timings can help you secure the deal you’re looking for.
If the seller is using multiple agents, it’s likely one will encourage them to take a low price to secure the sale.
Being an Easy Buyer
Make life as easy as possible for the seller!
Demonstrate that you can act quickly, show interest, don’t waste their time. If you’re chain-free, this can also make you a more attractive buyer, as the seller won’t have to wait for you to sell your property to buy theirs.
So, ensure you have all the necessary funds available and show you’re keen to get things moving as quickly as possible.
How to Negotiate a House Price Down
While there are some reasons why a lower bid will be accepted, it’s likely your first offer will be rejected.
Having to haggle a house price down can be difficult, as buyer and seller have widely conflicting interests. But, here’s how to negotiate a house price:
Present Yourself Well
Stick to your guns.
Presenting yourself as a confident, reliable buyer can help you haggle the house price down. The better you look as a buyer, the more likely you are to secure the sale.
Imply Interest Elsewhere
Telling the vendor you’re looking at other properties in the area can encourage them to accept your offer.
This may not be true, however it can cause the seller to accept your offer through fear of losing the sale completely. Particularly if you're a first-time buyer with no chain, the seller will be keen to close the deal.
Mortgage in Principle
As mentioned previously, the more attractive you are as a buyer, the more likely it is that the seller will accept your offer.
A mortgage in principle proves you can afford a property!
Therefore, getting a mortgage in principle is a useful bargaining tool, as you stand a better chance of securing a deal than a buyer without one.
Always compare mortgage options to ensure you’re getting the best deal.
Review the Property’s EPC
All properties are now required to issue an Energy Performance Certificate. This tells you how energy efficient your potential new home is.
If the property isn’t as energy efficient as it could be, you could haggle a lower sale price as a result. Explain you want the costs of making the house more energy efficient to be factored into the price.
Fixtures and Fittings
It’s vital that you establish from the outset what is and what isn’t included in the sale.
If you’re paying a higher price than you’d like, or have increased your offer, it may be worth asking for items included in the sale.
Negotiate some incentives!
Try to be tactful with this, many people have connections to their furnishings. Look for items which aren’t necessarily considered as fixtures and fittings. For example, a cooker or white goods, etc.
Asking the seller for freebies can help you save money in the long term.
Don’t Reveal Your Real Budget
When it comes to home negotiation, don’t admit your real budget.
The seller or agent will always try and push it to the limits!
Buy in Cash
Cash-buyers are much more attractive than others.
Therefore, if your first offer was rejected and you’re wondering how to get a lower price on a house, offer to buy it in cash.
While this isn’t an option for all buyers, if you’re able to, it can help you secure a lower price.
Get a Survey
Always run a survey on the property you’re looking to buy. If your potential new home needs some repairs or maintenance work done, a survey report can help you haggle the price down.
Alternatively, if the seller won’t budge on the price, ask them to split the costs of repairs 50/50.
After Your Offer Is Accepted
Even once your offer has been accepted, there’s nothing to stop you being gazumped, unless you’ve asked for exclusivity. Completion dates can be moved, perhaps due to the seller dragging their feet.
However, if you’ve agreed a price, presented yourself as a confident, reliable buyer and have all the necessary funds in place, you stand a good chance of negotiating the house price down.
You can negotiate more confidently armed with all the facts about a prospective property and the surrounding area with Phil Spencer's Property Report.
Reports are proving invaluable for home buyers as they can be used to see local valuations and rental estimate to make sure you don't over value or pay too much for a property. It also includes historic details on the property such as the last time it was sold, the last sale price and how the current price relates to other properties in the area, and how that price compares nationally.