How to Negotiate the Best Offer for your House (Step by Step Guide)
Let’s face, Haggling sucks! Too high? Too low? Am I being taken for a ride? When it comes to negotiation on house price, most of us have woefully little experience.
That’s where we can help. We share our industry expertise on our top tips for negotiation – applicable for buyers and sellers – to ensure you hold all the cards when it comes to settling on the final house offer.
Let’s get started.
Interesting Facts about House Negotiations
Source: Thisismoney
1) Negotiation via Estate Agents
In this section we’ll look at 3 key areas:
- Pre-planning: The house offer strategy
- How to make a house offer
- Negotiation: The house offer process
Pre-Planning: The House Offer Strategy
According to recent government figures, 83% of homes in the UK are sold via estate agents. Agents traditionally work for the seller – a contract is drawn up between the two parties, and their job is to negotiate the best offer for their client.
For buyers this means the home buying offer strategy begins with that crucial first contact with an agent.
- Meeting an agent: The first question agents understandably want to know is your budget. Downplaying this a little is key, as agents are notorious for their ability to upsell, showing you properties that are a little overbudget. If you’ve hinted that you could go higher than your original quota this effectively lowers your bargaining power.
- Do your research: Online resources such as Zoopla and Right Move make it easy to see what similar properties in any area have sold for, and that of those on the market today. The Land Registry website is also a reliable source to search average house prices in any given area.
- Have you got buyer appeal? Perhaps you’re a chain free or cash buyer. If so, be sure to make this information is known to the agent as some vendors might be more open to accepting a house offer lower than the asking price for a hassle-free transaction.
- Don’t use an agent for financial services: According to the Home Owner’s Alliance, a major source of complaints from both buyers and vendors is that of an agents conflict of interests. This can occur when buyer’s use the seller’s agent as a mortgage broker. When this happens the agent earns commission – and such a situation can lead to both buyers and sellers losing out financially. The Money Advice Service recommends shopping around to get the best mortgage advice, including that of your bank and independent mortgage brokers.
After the groundwork is in place, the next step is to find your dream property. When viewing this should be considered as the first step in your house buying negotiation strategy, so take care to ensure the following:
- Research the property carefully
- View more than once (different times of day, during inclement weather if possible, make notes of work that will need to be carried out, etc.)
- Get sight of the EPC
- Promote your buyer appeal (first time buyer, chain free etc.)
- Even if you love the house try not to appear too keen
How to Make a House Offer
Once you’ve found the right property the next step is to make your offer. This is where those all-important house negotiation tactics begin to come into play. You put in the offer through the estate agent who then communicates this to the vendor.
It’s recommended that you put the offer in writing to the agent (an email following a phone call will suffice, and you can easily set up a house offer letter template prior to the time, filling in the relevant details). Doing this negates the risk of any confusion further down the line.
The seller then has three choices:
- Accept the offer
- Refuse the offer
- Begin the dreaded house sale negotiation process
If your initial offer is in the right ballpark, the latter is the most likely scenario. The haggling process takes place through the agent. For buyers this might represents a disadvantage, because the seller has a professional working on their behalf. It’s possible to appoint a buyer’s agent, if you’re really concerned, but this isn’t necessary (plus it adds further costs to the house buying process).
Negotiation: The House Offer Process
Can you negotiate on a house offer? The short answer is yes and here’s how.
As a buyer, your opening gambit (AKA your first offer) should be considered the start of an exploratory process. The key factor here is to determine how flexible the seller is. To this end, the following tips will help direct you towards understanding what your first house offer should be.
The first offer should be below what you’re willing to pay: This gives you flexibility to increase it, should it be necessary. This is a key psychological aspect of house offer negotiation, as upping your offer will appear attractive to the vendor.
Give the reasons for your offer: Mention any work that needs doing (installing double glazing, roof maintenance, new boiler, etc.) and state estimated costs.
Use other properties as examples: If similar properties in the area have sold for less, this is a valuable bargaining tool.
Imply interest elsewhere: Even if this property is ‘the one’, there’s no harm in implying that there’s another property you’re interested in. Estate agents routinely use the ‘there’s lots of interest in this house’ trick to get you to make or up an offer. Telling them you’ve got options is a cheeky way to stop this tactic in its track.
Even if a seller refuses to budge on their asking price, all is not lost. Asking for extras is another strategic move in how to win a house negotiation. Such requests could include:
- Asking the seller to contribute towards purchasing fees
- Requesting that certain items are included in the sale (curtains, appliances etc.)
2) Low Bids: Cheeky or Worth a Try – What Should you Offer on a House?
- Clues that a low offer might be accepted
- How low can you go on a house offer?
- How to respond to a low offer
Clues that a Lower Offer Might be Accepted
There are many reasons a vendor might accept an offer lower than the guide price, the key is to be aware of what they are. Spotting the signs is vital part of how to get your house offer accepted as well as knowing how much less you should offer to maximise your savings – the following are clues to whether or not the seller might be, to put it bluntly, pretty damn desperate to sell.
- The house has been on the market for a long time: Reasons for this include being overpriced or that there’s an issue with the property, such as needing major structural work).
- The house has been reduced in price multiple times: Apart from probably having too high of an asking price in the first place, constant reductions in price show a desire to sell ASAP.
- The seller is stuck in a long chain: Property chains are a necessary evil when it comes to selling a property. However, they can cause indeterminable delays. If the seller has found their next property and is keen not to lose it, they may well be open to a lower offer for a quick sale.
- The house is advertised with multiple agents: In such a case, the estate agent will be keen to clinch the sale in order to get their commission.
Related: Why your house isn’t selling & how to fix it step by step
How Low can you go on a House Offer?
According to This Is Money houses in the UK sell for an average 3.5% less than the original asking price. The image below shows the percentages for a number of the UK’s largest cities.
This, naturally, varies around the country.
From the above image we can learn that the lowest average properties are sold in Bristol and Manchester (2.2%) and the highest average property is Edinburgh (8.3%).
Houses in London on average are 4.8% lower than the asking price.
A rule of thumb would be to go in at around 10% below the asking price. There’s a fine line between negotiation and insulting a vendor. What is a cheeky offer on a house that’s worth consideration to one person could completely undermine your credibility as a genuine buyer to another. Take into account the reason the house is on the market – the owners of a treasured family home that’s just been offered for sale are not likely to be impressed by a derogatory offer.
How to Respond to a Low Offer?
If you’re the seller, receiving a low offer can bring about many reactions – most of them emotional. Of course, you’re perfectly within your right to refuse. But before you do so, consider the following:
- You've Actually had an Offer!
- Take time to reflect
- Consider the Buyer
- Review the Market Again
- Would you be Better Off Using a House Buying Service?
No matter what, always remember that as a seller you’re the one in control. If you don’t like an offer, you don’t have to accept it.
3) Alternative Buying & Selling Scenarios
In this section we’ll take a look at a couple of alternative buying and selling scenarios and they are:
- Auctions and negotiations
- Open negotiations
- Sealed bids
- New builds
While estate agents remain the more common sales route, other alternatives don’t necessarily mean you can’t negotiate a better deal.
Auctions & Negotiations
Regular house auctions, as in where bidders (either in a room or online) bid until the hammer falls, are only open to negotiation if the property fails to sell. In such cases there might be a case for the vendor accepting a reasonable house offer post-sale.
More common scenarios are that of open and sealed bids.
- Open negotiations: In the same way as negotiating a house offer through an agent, make your opening gambit lower than the price you’re prepared to pay (by around 5-10% is a good guide). You’ll usually be informed if a higher offer is received, giving you the opportunity to increase a second or even third time.
- Sealed bids: Although you might be desperate to clinch a deal, do not be tempted to bid more than you can afford. The vendor will usually accept the highest bid, so a top tip is to not offer a round number. Offering £255,075, as opposed to £255,000 could mean you trump a bid close to yours.
The key approach with both open and sealed bids is to carry out the same due diligence as when buying in a more conventional manner.
New Builds
Many people mistakenly believe that there’s no room for negotiation on the house price of a new build. Nothing could be further from the truth, and buyers often have more wiggle room in such a case.
The following are our top house buying negotiation tips for purchasing not only new builds but also standard properties too.
4) What Happens After a Home Offer is Accepted
- When is an offer legally binding?
- Gazumping
When is an Offer Legally Binding?
Agents are legally obliged to pass on any offers right up until contracts are exchanged, the point at which an offer becomes legally binding in England and Wales (different rules apply in Scotland). Up until that point either party can pull out. However, according to Co-op legal services, doing so may still leave buyers and/or sellers liable to various fees.
When this occurs due to the vendor accepting a higher offer, it’s known as ‘gazumping’. If you’ve managed to negotiate a particularly low sale price the chances of this happening are, naturally, higher.
Gazumping: Is Gazumping Illegal?
No and being gazumped can be extremely costly, with the potential risk of losing large amounts of money in solicitor’s fees, search fees and survey costs. If it happens to you, the only choice you have is to increase your offer over and above that of the gazumper.
One way to lower the risk is to request that the vendor removes the property from the market. If they refuse, consider whether or not it’s worth the risk of losing out should another buyer make a higher offer than yours.
A Final Word
The majority of house buying negotiations take place through an estate agent, removing the need for awkward face-to-face haggling. Research is the most crucial aspect of the negotiation process, providing you with the necessary knowledge as to how to make the best house offer.
Despite your best efforts, a vendor might not accept your final offer on a house. If this is the case, and it’s the maximum you can afford, then it’s time to look elsewhere. However, by following our key tips for house negotiation, we’re confident you’ll be well-placed for securing your chosen property at a truly realistic price.
