The average is around 5 per cent less than the original asking prices – particularly for properties priced above £500,000. Sellers generally presume buyers will haggle and rarely expect to receive the asking price, although some people ask an unrealistic price and won’t budge a penny. If you’re in doubt about a property’s value, it may be worthwhile obtaining an independent valuation (appraisal) – if it’s less than a vendor is asking it may encourage him to lower his price.
Buying property is one of the few times when you’re expected to haggle over the price (like buying a used car!), although if a property has been realistically priced you shouldn’t expect to get more than a 5 to 10 per cent reduction. However, in a buyer’s market, such as London in late 2004, you should haggle like mad over the price. This applies equally to new and old properties.
In London, many developers offer inducements to buyers of new apartments such as paying stamp duty and legal fees, although you may be able to negotiate a 10 to 15 per cent discount if a development is selling slowly (some developers will throw in a free garage – valued at up to £75,000 – with luxury penthouses). Cash buyers may be able to negotiate a considerable reduction for a quick sale, depending on the state of the property market and how urgent the sale. Your bargaining position may also be strengthened if you aren’t part of a chain.
When making an offer, don’t be panicked into over-bidding. If you make an offer that’s too low you can always raise it, but it’s impossible to lower an offer once it has been accepted. If your first offer is accepted without haggling, you will never know how low you could have gone, although it’s rare to have a first offer accepted if it’s well below the guide price.
Calculate what is a reasonable price based on other properties in the same area (location is the prime factor in determining value), the state of the property market (whether properties are selling fast or slowly) and the amount of work that needs to be done. Don’t show your hand by indicating that you will go higher, but try to give the impression that your offer is a high as you can stretch to.
You may need to pitch your offer close to the asking price in a booming market when a property is particularly desirable. If an offer is rejected it may be worth waiting a week or two before making a higher offer, depending on the market and how keen you are to buy it. Agents sometimes invent rival buyers and bids – if an agent says he has a higher bid it may be worthwhile confronting him face to face and asking for written evidence (you could also ask the vendor).
However, if you fall in love with a property, don’t procrastinate but make an offer immediately and increase it until it’s accepted. If it’s fairly priced and you really want it, you should make an offer at the asking price if there has been a lot of interest.
Bear in mind, however, that you can still be gazumped after an offer has been accepted (except in Scotland).
If you make a low offer, it’s advisable to indicate to the owner a few negative points (without being too critical) which merit a reduction in price. You may be able to negotiate a substantial reduction if there’s a lot of work to be done – in any case you will have to renegotiate if major problems are discovered during a survey (presuming you still want to buy it). Bear in mind, however, that if you make a very low offer an owner may feel insulted and refuse to sell to you!
An offer should be made in writing (supported with information about funding and legal arrangements), which is likely to be taken more seriously than a verbal offer. Before agreeing a price, make sure that both the vendor and agent are aware of the terms of your offer, which should include the following:
- A list of fixtures and fittings (and anything else you’ve agreed with the seller) that are included in the sale.
- Any work that’s to be done on the property before completion.
- The offer being subject to a survey and contract – if the survey brings to light any work that needs doing you may need to renegotiate the price.
- The vendor taking the property off the market in order to reduce the risk of being gazumped.
Getting the Best Deal
If you simply want to buy a property at the best possible price as an investment, shopping around and buying a ‘distress sale’ from an owner who simply must sell is likely to result in the best deal. Obviously you will be in a better position if you’re a cash buyer and able to complete quickly. However, if you’re seeking an investment property it’s advisable to buy in an area that’s in high demand, preferably with both buyers and renters.
Tip: Always be prepared to walk away from a deal rather than pay too high a price.
You should find out as much as possible about a property before making an offer, such as the following:
- When it was built;
- How long the owners have lived there;
- Whether it’s a principal or second home;
- Why the owner is selling (although getting a straight answer can be difficult);
- How urgent a sale is;
- How long it has been on the market (and why it hasn’t sold);
- Whether the asking price has been reduced;
- The state of the property market;
- The condition of the property;
- The neighbours and neighbourhood;
- Whether the asking price is realistic.
Timing is of the essence in the bargaining process and it’s essential to find out how long a property has been on the market (generally the longer it has been for sale, the more likely a lower offer will be accepted) and how desperate the vendor is to sell. A good clue is when a property has been reduced in price, which may be indicated in an advertisement or an agent’s data sheet.
Some people will tell you outright that they must sell by a certain date and that they will accept any reasonable offer. You may be able to find out from neighbours why someone is selling, which may help you decide whether an offer would be accepted. If a property has been on the market for a long time, e.g. longer than six months in a popular area, it may be overpriced (unless it has obvious faults). If there are many apparently desirable properties for sale in a particular area or development that have been on the market a long time, you should find out why. Buying when the market is flat or during the winter when there are few buyers around may also net you a bargain.
Tip: For your part, you must ensure that you keep any sensitive information from a seller and give the impression that you have all the time in the world (even if you’re desperate to buy immediately).
All this ‘cloak and dagger’ stuff may seem unethical, but you can rest assured that if you were selling and a prospective buyer knew you were desperate and would accept a low/lower offer, he certainly wouldn’t be in a hurry to pay you any more!
In an overheated property market there are few real bargains around, and if you think you’ve found one it will probably need lots of work – once you’ve renovated it, it won’t seem like such a bargain! Most bargains are snapped up by developers and buyers who have ready cash and are able to complete fast (buying at auction can also net you a bargain).
Tip: If a property is offered for a seemingly bargain price, try to find out why before viewing it, as there’s usually a good reason.
Taking a Property off the Market
An offer should be conditional on the vendor taking the property off the market, even if only for a number of weeks – say three or four – while you obtain a mortgage, have a survey and your conveyancer conducts searches. You may be able to get the vendor to agree to sign a lock-out agreement, whereby he takes the property off the market for a period during which contracts are exchanged.
A vendor in England or Wales may invite sealed bids (as is standard practice in Scotland), although this is rare. There are two kinds of bids; a formal or an informal tender. With a formal tender, once the bids are opened and a bid is accepted, the sale is complete and binding on both parties. With an informal tender, a sealed bid is subject to a survey and contract, and until contracts are exchanged either party can withdraw.
This article is an extract from Buying, selling & letting property (UK). Click here to get a copy now.