If you're buying a property for the first time, the whole process can seem pretty overwhelming.
Should you be offering the asking price, or can you suggest a lower price? Can you just tell the seller you want to buy their house or do you have to talk to their lawyer?
In this article we take a look at the process of making an offer on a property, and share some advice on how to get the best deal for your house purchase.
With a bit of preparation the process of making an offer doesn't have to be difficult. There are a few basic steps to follow:
Before you make your offer, there are a few things you need to ensure you've done first. Most importantly, you'll need to figure out your finances.
Most estate agents will ask for 'proof of funds' on receipt of your offer. This proves you are a serious buyer, and prevents people making an offer on a house they can't actually afford.
You can provide proof of funds in the form of a 'mortgage in principle' letter from your bank, or a bank statement. A mortgage agreement in principle isn't an official mortgage approval (which depends upon a lender's valuation of a property), but does provide proof that the mortgage provider is willing to lend to you. If you know that you'll need to get a mortgage, make sure you apply for a mortgage in principle soon after you start your property search. This will help avoid delays once you find a property you want to buy.
It can also be pretty handy to know which conveyancer you want to work with before making an offer. This will allow you to move quickly if your offer is accepted, and can be appealing to sellers.
Once you have your proof of funds in place, and have found your dream home, it's time to make your offer.
First, you'll need to phone or meet with the estate agent representing the seller. You can then submit an offer to them verbally.
It's likely that the estate agent will ask for some further information, such as your 'position' (how soon you can move, how you are financing the sale, whether you need to sell a property before you can buy). They'll also ask for some personal information such as copies of your ID, and the contact information for your conveyancer.
After you've made your offer verbally, make sure you follow up by submitting your offer in writing or over email. This creates a written record of your offer, and everything you've discussed with the estate agent. This will ensure that there are no crossed wires when the estate agent relays your offer to the home seller.
At this stage it's a good idea to make sure the agent is clear that the offer is 'subject to survey'. This means you'll be able to renegotiate or withdraw your offer should any major issues come up in the survey. It can also be useful to ask the estate agent to draw up a list of all the fixtures and fittings that will be included in the purchase price, so that you have a written record of exactly what's on the table.
Once you've submitted your offer formally, the estate agent will pass your proposal to the property owner. They'll discuss whether the amount you want to pay meets the seller's expectations, and about your position as a buyer. If there are other interested buyers, they'll also compare your offer to the others they've received.
The seller will probably take some time to think everything through, but should respond within a couple of days. They will either: accept your offer, reject your offer, or propose a counter offer. If your offer is accepted you will progress to the conveyancing stage. If your offer is rejected or countered, you can either walkaway, or attempt to negotiate.
Tip: If your first offer isn't accepted, ask the estate agent for feedback. They should be able to tell you why the seller rejected your proposed amount, if they've received a higher offer, or are worried about your chain situation. They might even let you know how much you would need to increase your offer by.
If you decide you want to make a counter offer you will negotiate the details with the seller's estate agent until you find an amount that you both agree upon, or you can walk away. If you're uncomfortable negotiating with an agent, it is possible to hire a buyer's agent to represent you - but they will charge a fee.
If negotiations go well your offer will be accepted. At this point your legal representatives will get to work drawing up a contract.
Tip: Once your offer has been accepted, request that the property is taken off the market straight away. Your offer is not legally binding until a contract has been signed. Removing the property from the market will reduce the chance of another buyer offering a higher price and gazumping you.
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When you're thinking about putting in an offer on a property, it can be difficult to weigh up offering too much to avoid being rejected, versus offering too little money and risking losing the property to another buyer.
The best way to approach the problem is to thoroughly research: the local market, the value of the property you're hoping to buy, and the seller's personal situation.
Take these questions as a starting point:
If there's a lot of competition for the property, it's likely that the seller won't accept a lower offer on their home. However, if you're the only buyer that has expressed interest, you might find that the buyer will be willing to accept less money.
If there are lots of similar properties on the market the competition for this particular house will be less intense than if it's a one of a kind dream home. When there's lots of competition, buyers tend to offer more.
The recent sold prices of other local properties can be a good indicator of the amount you should offer. If these houses have sold for significantly less than the seller is asking for, it's likely you can propose a lower amount too. On the other hand, if they consistently sell for more, the property is probably undervalued. In this case you might consider offering slightly more to beat any other interested buyers.
If you've fallen in love with a particular property, or haven't found any others that satisfy all the things you need from your new home, you might decide to offer slightly more so that you don't risk losing the property.
Buying a house costs more than just the price of the property. You will also need to factor in legal costs, stamp duty land tax, survey costs, removal costs, and any maintenance or furnishing you want to do once you move in. If you're moving to a bigger property you may also find your recurring costs - such as utilities, council tax, and service charges - increase too. Take this into account when figuring out how much you can afford to spend on the purchase, and running of your new home.
It's incredibly important that you do not spend more than your allocated budget - regardless of how much you love a house. The continuing financial implications of buying a home for more than you can afford can last for several years in the form of: unaffordable monthly mortgage repayments, maintenance costs, or lack of savings for emergencies.
If the seller needs to move quickly they will usually be more likely to accept a lower offer.
You might also find that a seller will favour chain free, or cash buyers over others, even if their offer is lower. Chain free and cash buyers are able to move more quickly, and pose less risk of falling through than those in long chains. So, if you're a first time buyer, for example, you're in a particularly strong position.
As a general rule of thumb, in England and Wales it is acceptable to offer around 5-10% less than a property's asking price. In Scotland the etiquette is slightly different, and many estate agents will request 'OIEO' (or 'offers in excess of') a certain price.
You're more likely to have a low offer accepted if:
The property has been on the market for a long time
The seller has already had to reduce the price to attract interest
The seller is keen to move quickly (for example, they're part of a chain, or they need to move for work.)
There's no competition from other buyers
You're a first time, chain free, or cash buyer
Yes. It is possible to make an offer on a house that's already marked as 'under offer'. Offers can be received right up until the moment the seller has signed a contract, and the buyer has paid their deposit.
In fact, estate agents are legally obligated to put forward all offers they receive, at any point in the sales process, however ridiculous, cheeky, or last minute. This means even if the buyer has informally accepted an offer you still have a chance.
However if you plan to put in an offer at the last minute, it's likely that you'll have to make it very attractive for the seller. You'll have to be willing to pay more than the accepted offer, or be in a substantially better position than the current buyer (eg. a completely chain free, cash buyer).
No, it doesn't cost anything to put in an offer on a property.
You may be asked to pay a holding deposit, but it's not compulsory to do so. Usually you'll only be asked to do this in a particularly volatile or competitive market, to prove that you're a serious buyer.
There are a few different types of holding deposit so make sure to check the terms before you agree. For example: you should never give a holding deposit directly to a seller. All money should be handled by their conveyancer or solicitor.
Although you won't have to pay a fee to submit an offer on a property, you must be prepared to pay all of the additional costs that come with buying a house if your offer is accepted.
Put aside some money for: legal fees, mortgage arrangement fees, survey costs, stamp duty land tax, removals costs, along with any maintenance or furnishing you hope to do once you move. If you are selling your home too, you'll also need to budget for the associated costs - such as estate agent fees.
Once you have signed a contract, or 'exchanged', you will be legally obligated to go through with the home purchase. It can be incredibly expensive and stressful trying to withdraw from a sale after this point.
It can be pretty nerve-wracking making an offer on a house you love. Luckily, there are a few things you can do to increase the chance the seller will accept it:
It goes without saying that an offer will be more appealing if it ticks as many boxes as possible for the seller. Doing a bit of research into what they're looking for can go a long way. How soon are they looking to sell? Can you be flexible with the completion date to fit their schedule? How long have they been on the market? If the property has been online for a long time, a seller might be more inclined to consider less than the asking price.
Remember, your offer isn't all about the money. It's worth advocating for yourself in both financial and logistical terms. For example, demonstrating that you're ready to move quickly by having a mortgage in principle in place, and a conveyancing firm ready to go, will show you're a serious buyer that won't cause delays. If you're a first time buyer make sure to flaunt it.
Researching the property and the local area will also improve your chances of having your offer accepted. You can use the information you find about house prices nearby, and potential new developments that could impact the property (such as a new motorway, or skyscraper) to justify why you are offering the amount you are. This demonstrates that you've fully considered the true value of the property - rather than arbitrarily offering a percentage below the asking price.
Although it's tempting to discuss your plans with the agent working on the property, remember that they're ultimately working to get the best price for the seller. For example, telling an agent that your first offer isn't the highest you can pay, will simply lead to the agent advising the buyer to hold out for a higher offer from you.
Negotiating on a property is a delicate piece of diplomacy - and an offer is just the start of the process. Being prepared with all the information upfront, remaining calm if your first offer isn't accepted, and discussing in detail how you could reach an agreement will make you stand out. If the seller sees that you're a dependable and organised buyer, they'll be reassured that the conveyancing process will also go smoothly.
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