According to Barclays, three in ten buyers don’t try to negotiate on price when buying a home, meaning that many could well be missing out on huge savings.
Potential buyers’ reasons for not haggling on price when buying a house include the possibility of losing their dream home or awkwardness about asking. They may simply want to get the buying process over and done with, especially if they fall in love with a property.
If you are looking to buy in Baker Street or Fitzrovia, where properties generally don’t come onto the market as often, you might be worried that you’ll miss out on a property if you try to negotiate the price.
If this sounds familiar and you are wondering how to negotiate house prices, remember that haggling on property is expected. In this article, we share tips on exactly how to do that – to ensure you manage to negotiate the best house price for you.
Tips for Negotiating House Price As A Buyer
1 Research The Property To Negotiate Price Effectively
Before you start negotiating prices, try to understand the sellers’ motivation and appetite for price negotiation on their home. We suggest you consider the following questions:
Why is the vendor selling? This will give you a good idea of how motivated the owner is to sell. The more pressure they are under to make a quick sale, the better your chances of negotiating a lower price.
How long has the property been on the market? Owners of properties that have been on the housing market for some time may be more open to offers under their asking price. Knowing whether the asking price has changed, and if it has, when and by how much, helps give you a sense of how open the owner will be to house price negotiation.
Have there been any other offers? If the property has only just come on the market and offers already exist, you know you have stiff competition (and less wiggle room on price). On the other hand, if offers have been rejected in the past but nothing is currently on the table, you are in a stronger position.
How long has the vendor owned the property? Knowing when the owner bought the property and for how much can be helpful information. You can find this out from the Land Registry. If they bought the house over 15 years ago, they will likely be sitting on significant gains and may be more flexible when negotiating prices. However, if they are selling a house they bought recently, they may have to make a minimum price to cover their existing mortgage.
2 Research Other Properties
Research similar properties in your area and how much they sell for through websites like Rightmove, Mouseprice and Zoopla. For example, if you are buying in Marylebone or St. John’s Wood, compare within those areas. If properties aren’t selling quickly or below the list price, you can often negotiate a good deal.
3 View Properties Thoroughly
View the property dispassionately and thoroughly inspect the property inside and out. At the same time, make a list of any work or re-decorating required.
Find out about any major expense that could arise imminently, and consider how to negotiate on house price with this information:
When was the boiler installed?
When was the roof last replaced?
When was the double glazing installed?
4 Don’t Appear Too Keen
When you find your dream house and come to negotiate the house price, resist the temptation to be over-enthusiastic. If there are flaws in the property, such as worn carpets or a dated bathroom, don’t be afraid to point them out during the viewing.
If you are too keen, the estate agent or seller will assume you are prepared to pay more.
Get to know your financial position and add up any costs of buying that will deplete your budget. You can also secure a mortgage in principle at this stage to prove to agents and sellers that you can afford the offer price.
Calculate your deposit amount, accounting for expenditure. The big costs of buying a home are conveyancing (solicitors’ fees), survey costs, mortgage arrangement fees, valuation fees, and stamp duty. Read our article to determine how much stamp duty will affect your budget.
There are also removal costs to consider. If you’re selling at the same time, don’t forget the costs you’ll face on that side too.
Putting in an Offer & Negotiating Price: The Process
Offers are usually accepted by open negotiations, but sealed bids are increasingly common in certain areas. The system your sellers have chosen will help you decide how to negotiate on price, so we’ll look at sealed bids later – first, how to approach open negotiations.
1 Decide On Your Initial Offer
Start low – as a rule of thumb, offer 10% below the asking price. Sellers usually anticipate this when they put their house on the market and price accordingly.
That said, if you’re determined not to lose out on a house that’s just gone on the market, you may offer at or above the asking price.
2 Send Your Offer In Writing
Submit your offer to the estate agent by phone and follow up with an email to create a written record. This written offer is also your chance to back up your bid and promote yourself as a favourable buyer.
Justify your offer price with solid reasons like the age and condition of the property, its aspect and the location. Point to the selling price of comparable properties in the local area.
Be sure to mention if you are a cash buyer, as this is considered very favourably. The same goes for first-time buyers. Sellers like chain-free buyers as they won’t have to wait for you to sell your home to close the deal. Let them know when you want to move (usually, the sooner, the better).
3 Negotiate The Initial House Price
If the offer is rejected, ask the estate agent why before negotiating. Are the sellers concerned about the timeline? Remind them if you’re a first-time buyer or cash buyer with no chain, or can adapt to their schedule.
Then submit a second, higher offer – you may be able to stay under the asking price but take a calculated approach. Offer an uneven number to suggest that you can’t go further. Also, consider negotiating on white goods, which can save you from buying new ones and benefit the seller as they will not have to remove them.
Once your offer is accepted, get a home survey to determine if any significant repairs are needed and confirm the property is worth the price you agreed on. You will have to pay for a survey. Be prepared for your surveyor to under-value the property or identify required work.
If that doesn’t work, resort to a third bid. Tell the vendor it’s your final offer and prepare to accept that they could reject it. But stay cordial in case they have second thoughts.
What Are Sealed Bids When Buying A House?
Sealed bids involve submitting your offer to the seller, who usually chooses the highest bid. They’re more common in a buoyant property market.
One in three properties are now sold via sealed bids, and they are becoming the favoured option for desirable properties in central London. If you are buying a home in Marylebone, Fitzrovia or Mayfair, you may need a sealed bid strategy.
Properties tend to achieve a higher price (a third over the asking price isn’t unusual). Mentally prepare for your bid to be trumped and resist the temptation to pay more than the house is worth.
When Might A Low Bid Prove Successful?
A low bid on a house can often win the day if the property has been on the market for months. If so, it’s likely to be overpriced.
Another reason a seller will accept a low sale price could be because they are motivated to sell quickly. They may be taking up a job offer in another area or are caught up in a property chain and need to sell to buy a property they love. If you are the only potential buyer, this will obviously work in your favour, as will a prompt completion date (or one that works for your sellers).
If a seller has employed several agents to sell their home, the agent you are going through may persuade them to accept a lower offer to secure the commission from the sale.
Will I Be Asked For A Holding Deposit?
As the name suggests, a holding deposit involves putting money down to secure the property – indicating to the seller that you are serious about buying their home.
A holding deposit isn’t typical, but it does arise occasionally. It can be either refundable or non-refundable and is usually held by the seller’s solicitor in escrow.
Negotiating On House Price After The Offer Is Accepted
While you might think that it isn’t possible to negotiate on a house price after making an offer that is accepted, this is actually quite common.
In fact, this is the time when negotiation can be expected due to adverse survey results or if the valuation by the surveyor is lower than the asking price. This is sometimes negatively termed ‘gazundering’, where the buyer chooses to lower their offer – after it has been accepted – to pressure the vendor into accepting a lower price.
However, there are several legitimate situations where you may want to renegotiate the house price after the offer is accepted as a buyer:
Adverse home survey results – if the survey uncovers major issues after the offer has been accepted, it’s very good reason to seek a lower price (or ask for these issues to be fixed in advance of the purchase). This is a very common reason that people choose to renegotiate price after the initial offer.
Down valuation from lender – your lender may (rarely) decide that the property is not worth its asking price, giving the buyer grounds to negotiate a lower price.
Issues with property chain – numerous issues in the property chain can increase costs for buyers, leading them to renegotiate on price. For example, if you are buying and selling a home, the buyer for your property may have lowered their offer meaning that you can only afford to pay a lower amount for the property you are intending to buy.
Market changes – if there is a sudden drop in market prices between the offer and contract exchange, it may make sense to seek a lower price based on the new market rates.
As mentioned above, if the home survey identifies any issues with the property that will require repairs, this provides you with very justified room for negotiation.
For example, the surveyor may indicate that there is damp that requires damp proofing. Or there could be roof damage that was not obvious from the viewing. And of course, certain repairs are more important to negotiate than others – issues with the foundations, roof, dry rot and the boiler (for example), are costly and major repairs which are unlikely to be carried out by the vendor in advance of purchase.
What to say when negotiating a house price after survey
If you’re wondering how to approach the vendor or their estate agent with the news of a price reduction after the survey – it is best to be as objective and dispassionate as possible.
The surveyor will provide details of the repair work required, along with an estimated cost of the repairs. You can then send this to the seller to start negotiating on the price, typically, reducing the asking price by the amount the repairs will cost. In this situation, the seller may choose to have the repairs completed themselves but if they want a fast sale, they are more likely to be flexible with the asking price.
If you are using an estate agent to buy the property, you will usually just need to discuss the survey results with them and ask them to negotiate on your behalf.
If you are speaking to the seller directly, provide them with the report and explain that you would like to negotiate the price to cover the unexpected repair costs that have arisen in the survey.
Beware Of Gazumping
The property is only yours after you have exchanged contracts in England and Wales. The acceptance of your offer alone doesn’t secure your new home. As a result, gazumping is possible, where the seller accepts a higher offer from someone else. This is especially the case when you try to lower the price, especially if done so too aggressively.
To help protect yourself from gazumping, ask the agent to take the property off the market once your offer has been accepted – and make sure your request for a reduction in price is made objectively and rationally.
Are New Build House Prices Negotiable?
Yes, it is often possible to negotiate on house prices for new builds through the developers/builders. Whether the builder accepts a lower price will usually depend on factors such as whether they have a waiting list of prospective buyers.
If there are remaining properties left to be sold and the development is near to completion, they might be more willing to reduce the asking price. Other factors, such as if the local property market has dipped since they set their prices, could also give you an opportunity to negotiate the price.
Kubie Gold Associates are an independent local firm of estate agents specialising in the Rental, Sale and Property Management of Residential Property in the North-West and Central London market
