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Finding the right house can take weeks or months, but as soon as you find ‘the one’, you need to know the exact steps to follow to make sure you secure your dream house. One of these steps is knowing how to negotiate on price.
Know the market
Keeping an eye on the local market is always key. If similar properties in the area aren’t selling quickly, or if they’re selling below the guide price, you know you can sensibly offer less than is being asked.
Local property listings are always in the local press as well as online, such as Rightmove and Zoopla. These sites will also give you the last sale price for the home you’re interested in, as well as the most recent prices paid for properties on the same street. It means if next door sold for £25,000 less last year than your vendor is asking for today, you can use this information to aid negotiations in your favour.
Consider the vendor’s financial position
Knowing what your vendor spent on the property can be incredibly useful information. If they bought the house over 15 years ago, it’s likely they’re sitting on huge gains with a much smaller mortgage. As a result, they’re likely to have a more flexible mindset as to what they’d accept. If your vendor has only recently bought the house, it may well be that they need to accept a certain offer to simply cover their existing borrowings.
Use any face time with your vendors to find out about their situation. Why are they moving and where to? What you want to uncover is how urgently the vendor needs to sell. For example, if they’re trying to move to a better school catchment area, they’re likely to be keen for a quick sale compared to a older couple who are simply downsizing. It’s also great news for you if they’ve already agreed a sale on their next home - they won’t want to lose out on their next home for the sake of negotiating too hard.
It won’t always work and you may not always get a truthful answer, but simply asking the vendor or the estate agent what the minimum price they would take can shift the goalposts, hopefully in your favour. You may feel uncomfortable asking such a direct question but you may just be surprised on the answer you get - if you don’t ask, you’ll never know!
Use your own situation to your advantage as this might be enough to avoid going into negotiations. Tell the vendor the position you’re in i.e. if you’re a mortgage approved first time buyer, or if you’re a cash buyer who doesn’t need a mortgage.
Also, don’t be afraid to tell the vendor about the emotional attachment you have to the property (if you do, that is). Vendors can often be sentimental about what was their family home and it doesn’t hurt to help them picture how you too would love it - explain for example, that you see what a good family home it is and how much you’re looking forward to raising your own family there etc. Go ahead, tug on those heart strings rather than loosening the purse strings.
Putting in an offer
Once you’ve done your research, worked out your own value of the house, prepared your vendor’s mindset and set your own limits - now it’s time to make the offer. Remember, your vendor has already set their own minimum price in their head so even the most expert negotiator will have their limits of success.
Most vendors will expect slightly lower initial offers and their asking price will often reflect that, but after having done your homework, you’ll have a good idea how much you can push it with your opening offer. Of course, if you know there are rival bids for your dream home, you must be prepared to lose out if you’re adamant on offering a lower than asking price bid.
Make your second bid specific
If you get turned down, ask for a counter offer and hopefully this will be under your maximum price. Now pick a figure somewhere in between your initial offer and their counter offer. Don’t choose a round number - opt for something specific (i.e £154,650 rather than £155,000) It implies that this is your mortgage maximum limit (i.e your maximum loan amount) and can sway some vendors minds into agreeing, fearing that you will be forced to walk away if they don’t agree.
Ask for giveaways
At this point, it is not unreasonable to ask for things like white goods to be included with the sale. Particularly if you’re a first time buyer, this can save you a lot of money when starting out and often it can help the vendor out as they don’t have the headache of having to move more items on moving day.
Make your third offer final
If your vendor is not shifting their asking price and you don’t feel the property is worth what they’re asking, adapt your offer as you see fit, but explain that this is a final offer. If it has gotten to this stage, it’s likely you’re the only person currently bidding.
At this point, you must be prepared to walk away. If the vendor comes back to you in a few days, they’re selling to you, rather than you buying from them and you can afford to be confident in any further bids.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.