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Negotiating house prices can be nerve-wracking. When is it appropriate, and how should you go about it? Don’t let any potential awkwardness put you off: haggling for the best house price is normal. The day-to-day reality of house buying and selling is that there is a lot of negotiating involved, and many properties sell for below the asking price.
This doesn’t mean that there are no rules, or that you can begin thinking about bagging the home of your dreams for an unrealistically low price. But, with a bit of know-how and pizzazz, you may well secure the home you want at a price that is more reasonable than the one initially listed.
Resorting to generalisations about the current state of the property market won’t get you very far in individual house sale negotiations, so always do a comprehensive research of the house prices in the area you’re considering, paying particular attention to recently sold properties that are similar to the one you want.
Unsurprisingly, desirable areas come at a premium, but if your heart is set on a competitive area, you may still be able to negotiate a better price. How? This is especially likely if the property has been on the market for a while, or the seller is keen to move soon. Suss out why they’re selling: if it’s so that they can move up the property ladder, you’re unlikely to have much room for negotiating. If, on the other hand they’re downsizing or moving out of town, this is the time to put your bargaining skills to good use.
So, you really love the house. Resist the temptation to jump for joy as soon as you’ve crossed the threshold. Play hard to get, or the seller (and their estate agent) will assume that you’re prepared to pay more. While it will never do to be dismissive or rude about a property, try to hold yourself back from being over-enthusiastic. If there is an obvious drawback to the property (which is not a deal breaker for you), such as a small kitchen, or a very dated bathroom, don’t be afraid to point this out, tactfully, and suggest that your offer will have to reflect it.
Speaking of estate agents, there are a couple of important points to remember about them at the negotiation stage. One is that the estate agent is working on behalf of the seller not you, the buyer – so do not confide in them about the upper limits of your budget, or let your desperate desire for the house show.
The other point, however, is that it is in the estate agent’s interest to close the deal reasonably quickly and move on. So, if you convince the estate agent that you are ready to buy, with the deposit easily accessible, the mortgage hypothetically agreed with the bank, and your lawyer ready for a phone call, they will be more likely to suggest you as a good option to the seller, even if your offer isn’t as high as they’d been hoping.
Avoid making unrealistically low offers, though – this will not only annoy the seller, but put off the estate agent who may start questioning your seriousness about making a purchase.
Sounds risky – and it is. If you sell your home before you buy, be as prepared as you can be to buy quickly by doing all your research in advance and having your mortgage pre-approved, at least in principle. You can start doing your mortgage research with a free online calculator. You’ll need a back-up plan (ie, somewhere to stay for a bit) if things go awry, too.
Despite the risk, selling before you buy has a big advantage – it makes you ‘chain-free’, which sellers will always prefer to having to wait for you to sell your home for the deal to be completed.
If you are a first-time buyer, you are at an advantage in this respect. Being chain-free also makes you less vulnerable to being gazumped, which is when someone comes in with a higher offer after you have closed negotiations. While a higher offer is tempting, most sellers would rather go with someone with cash in the bank and avoid entering a chain.
If you are negotiating the price of a cherished family home, tread very carefully. As a rule of thumb, expect to negotiate down about 10 per cent of the asking price, but be careful not to insult the seller by pointing out the flaws in their property as the reason why they should come down in price.
If, on the other hand, you are considering buying a new build, you can afford to be more aggressive in your negotiations, since you’ll not be criticising someone’s home of many years. Having a good eye for structural elements and materials will come in handy when buying in a new development. If you think it will cost you to replace the cheaply-laid flooring, say so.
One commonly reported situation recently is of buyers trying to negotiate down simply on the basis of ‘isn’t everyone lowering prices because of Covid’? This isn’t true, and some sellers might actually find this line of negotiation off-putting, so steer clear. Instead, find good, solid reasons why you think it’s reasonable to ask for a discount (e.g. you can complete sooner than other buyers).
If you’ve never done it before, you may be wondering how to make an offer on a house correctly. The answer is: in writing, with as much detail and as little room for misinterpretation as possible. It’s much easier to open negotiations this way, as there’s won’t be a ‘he said, she said’ situation if you or the seller have trouble coming to an agreement.
Sellers like offers in writing, and so do their agents/solicitors, especially if the letter is accompanied by proof of your mortgage offer, an indication that you can be flexible on exchange and completion (within reason) to suit their schedule and any other details you can give them.
The first time you’re refused is just the start of the conversation – it’s more than likely that the sellers are seeing whether they can push you higher, so be sure to communicate with the estate agent, even if just to confirm that the offer you’ve made is the highest you can/will go and that you’re a good bet in other aspects. In a quiet market, it’s more than likely that they estate agent will come back to you. And if not, keep your eye on what’s happening with the house and continue to signal your interest if it stays on the market.
There are some cases when you will want that particular house so much that it will seem worthwhile putting in an offer above the asking price. Gorgeous period properties in good repair don’t come along that often, and if your heart is really set on it, then you shouldn’t pass up the opportunity of a lifetime if your finances offer some upward flexibility.
Even so, be careful: any counter-offers should be made in descending order, so that the seller knows that there is a limit to how much you’re prepared to spend (and how long you’re willing to negotiate).
In case you are submitting an offer via a sealed bid, again keep cool-headed. Avoid panicking about what others will offer and only put in what you can afford. If you offer a lot more than you budgeted for, your mortgage offer may become void, which will delay everything.
Getting the best mortgage rate on your new home should be seen as part of negotiating the best price. As we’ve explained above, getting a mortgage agreed with your lender in principle will also give you more leeway when haggling with the seller: if you are seen as more reliable and coming with fewer potential complications than other buyers, you are more valuable.
We will not only help you get the best mortgage deal, but will also assist you with document preparation.
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