Putting an offer on a house is the first step towards securing your ideal home and it can be quite daunting, particularly for first time buyers who are new to the housing market.
When so much money is at stake, you want to be sure that you get the best possible deal. However, this must be balanced with other factors such as what the seller is willing to accept and the wider housing market. Your family, friends and colleagues may be full of advice like, ‘sellers always overprice’ and ‘always offer below the asking price’. But while it is tempting to automatically go in under the asking price, misjudge the situation and you could quickly lose your dream home to another buyer.
The truth is that every house and every seller is different so choosing the right offer will always require some level of personal judgment. Despite this, even if there was a simple calculation for working out the optimal amount to offer on a house, the ‘right’ offer is ultimately going to be the price you are happy to pay.
If this all sounds very confusing, you are not alone. Even the most experienced of buyers feel anxious about making an offer on a house. So, in this post we’ve provided our top 5 tips for making an offer on a house to help you plan your bidding strategy and improve your chances of getting an offer accepted.
Our top tips for making an offer on a house
1.Research your local market
Before making an offer, make sure you understand the local market and what similar properties in the area are selling for. You can check recently sold house prices for houses on the same street or the same neighbourhood easily on many websites online, such as Zoopla or Rightmove. Depending on the site, clicking on individual historical listings can also show you whether the asking price was reduced over time as well as what the final sale price was.
Find local houses that have similar features to the one you are interested in and use the prices they sold for to judge whether your offer is reasonable and likely to be accepted. Features that could affect the price of a house include:
- Number of bedrooms and bathrooms
- Whether it has central heating
- Whether it has parking, a garage and/or a garden
- Whether it has been recently renovated or modernised
Other local factors that can affect the price of a house include:
- Proximity to amenities, such as shops and doctors surgeries
- Proximity to good schools
- Flooding risk
- Infrastructure links (this can have both positives and negative effects, e.g. if the house backs onto a railway line it is likely to be noisy and potentially unsafe for children and pets)
2.Form a bidding strategy
Your approach to bidding will depend on various factors such as:
- How much you can afford to borrow for your mortgage
- What you are prepared to pay
- What the properties in your chosen area are worth (using your own research to judge)
- The benefits and drawbacks of each individual property
- Your own personal preferences, such as:
- Whether you want a quick, stress free purchase
- Whether you’re prepared to lose a few houses during negotiations so long as you get the best deal in the end
There are two main bidding strategies you can take:
- Make your best offer – this could be under, over or at asking price depending on the circumstances
- Make a lower offer under the asking price
Make your best offer
If you are targeting a local area which is at the top of your price range or the area is particularly competitive (e.g. where a property gets a number of offers, the seller may invite all best offers by a certain deadline – a ‘sealed bid’) this may be the right strategy for you.
It will also show the seller that you are serious, making it more likely that you offer will be accepted and less likely that you will be gazumped. Therefore, if the property is your dream home and you want to do everything you can to secure it, making your best offer straight away may be the ideal strategy.
Make a lower offer
In certain circumstances, it may be worth making a lower offer initially. There will usually be room for negotiation even if your first offer is not accepted. For example:
- If the area is less competitive
- The house has been on the market for a long time
- It needs work doing
- You are simply looking for a bargain and would prefer to negotiate
You may also get away with making an offer below asking price if the seller wants to make a quick sale and you are chain-free or a cash buyer.
However, there is always a risk going in under offer; the seller may receive a higher offer or they may be insulted if the offer is too low. So long as you are prepared to take the risk, there is no harm in going in under offer, even if you would eventually be prepared to pay more.
Should you ever offer more than asking price?
In very competitive areas, such as city centres, homes may regularly go for over the asking price. It can be very frustrating for buyers to be continuously outbid in their local area, particularly if they are offering at asking price. However, the main thing to remember is to keep a cool head as over-bidding may just end up hurting you (for example, if your mortgage lender does not agree that the house is worth what you offered).
Where homes in a local area do receive significant interest, you are likely to encounter:
- Sealed bids – this is where the estate agent will invite the interested buyers’ best offers. The buyers will not know what the other potential buyers have offered until they are either accepted or rejected by the seller
- Open houses – rather than conducting viewings over a few weeks or months, this is where the estate agent will schedule all interested viewings on the same day. Once the buyers have viewed the property, the estate agent will invite sealed bids
The benefit of sealed bids for sellers is it creates competition between potential buyers and encourages them to try to outbid each other. It can pressure buyers into making offers higher than they are comfortable with. There is also a risk that the buyer’s mortgage lender will not agree with their offer; for this reason, sealed bid purchases have high drop-out rates.
If you are faced with this type of situation, remember your research and keep track of what properties are actually selling for. Wherever possible, build relationships with estate agents and find out what other potential buyers are offering on your desired properties. Even if you are outbid and lose a property, there is always a chance that the winning bidder has overstretched themselves and cannot fulfil their offer.
Finally, while outbidding all the competition may be one way to make you an attractive buyer, you may have other qualities you can bring to the table that will convince a seller to choose you…
3.Emphasise why you would make a great buyer
Generally, buyers who can move quickly and/or are not in a chain are the perfect type of buyer, for example:
- First time buyers
- Cash buyers
- Home owners who have already paid off their mortgage
Sometimes, these types of buyer may even be able to negotiate a better deal because it is more likely to be a straightforward purchase with fewer delays.
However, this isn’t always the case. For example, if the seller is not bothered about an efficient sale, only about getting the best price. Therefore, the best thing to do is to talk to the estate agent to work out exactly what the seller’s feelings and intentions are. Then, you can market yourself accordingly.
4.Protect your position
Once your offer has been accepted, contact the estate agent and ask them to take the property off the market, particularly if the seller accepted an offer under the asking price, as this will reduce your chances of getting gazumped.
Although the estate agent may be reluctant to ‘officially’ remove the property from the market, they should at least mark it as ‘subject to contract’ on their website and any other site, such as Rightmove.
5.Don’t be afraid to change or withdraw your offer if you need to
Ultimately, so long as your mortgage lender agrees with the value of the property, the ‘right’ offer on a house will be what you are willing and happy to pay. Even after you have made an offer and it has been accepted, you can withdraw or change your offer right up until the exchange of contracts.
So, if your searches and surveys come back and reveal that the property has issues, such as structural issues that need work in the future, you may be able to negotiate a lower price to account for these costs. This is sometimes referred to as ‘gazundering’ and some sellers will not take kindly to it. Be aware that if you try to lower your offer after a higher one has been accepted the seller may pull out. Alternately, you could ask the seller to do the work themselves and if they refuse, you are within your rights to withdraw your offer.
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