Finding a property you love is exciting. Then comes the slightly nerve-racking part: how much should you offer?
Bid too low and you could lose the property. Bid too high and you may wonder whether you’ve paid more than you needed to.
There isn’t a magic number, but there are some sensible steps you can take before making an offer.
Get your mortgage position sorted first
Before you start negotiating, it helps to understand what you can realistically afford.
A Mortgage adviser can give you an indication of how much you may be able to borrow, subject to the lender’s full assessment.
Remember, though, that your maximum borrowing amount doesn’t necessarily need to become your maximum house price.
Think about the deposit, monthly mortgage payments and the other costs of buying and owning the property.
Don’t automatically offer the asking price
An asking price is exactly that: what the seller is asking for.
It doesn’t necessarily tell you what the property is worth or what the seller will ultimately accept.
Before making your offer, look at similar properties that have actually sold in the surrounding area. Pay particular attention to properties of a similar size, condition and location.
This can give you a much better starting point for deciding what you’re comfortable paying.
Ask the estate agent useful questions
The estate agent works for the seller, but you can still gather useful information.
For example:
- How long has the property been on the market?
- Has the asking price already been reduced?
- Have any previous sales fallen through?
- Are there currently other offers?
- Is the seller in a chain?
- How quickly would the seller like to move?
- Is there anything particularly important to the seller besides price?
The answers can help you understand your negotiating position.
Your circumstances can strengthen your offer
The highest offer isn’t necessarily the most attractive offer.
Imagine one buyer offers £305,000 but still needs to sell their existing home. Another offers £300,000, is chain-free, has their deposit available and already has a mortgage Agreement in Principle.
Depending on the seller’s priorities, the second buyer could potentially be more attractive because their purchase may look easier to proceed with.
So when making your offer, make sure the estate agent understands your whole position, not just your number.
Should you make a low first offer?
There’s nothing inherently wrong with offering below the asking price.
But there’s a difference between negotiating and making an offer so unrealistic that the seller doesn’t take it seriously.
Consider the local market, how long the property has been available, its condition, comparable sold prices and how much competition there appears to be.
Most importantly, decide what the property is worth to you.
What if there are several bidders?
This is where emotions can start taking over.
You may be told there are multiple offers, or the agent might ask interested buyers for their “best and final” offer.
Before increasing your bid, decide on a maximum figure you’re genuinely comfortable with.
Ask yourself:
If someone else buys this house for £1,000 more than my maximum, will I regret losing it?
Then ask the equally important question:
If my offer is accepted at this price, will I regret paying it?
Your maximum should ideally be the point where you’re comfortable with either outcome.
Don’t forget the mortgage valuation
Getting an offer accepted doesn’t automatically mean a mortgage lender will agree that the property is worth that amount.
The lender will normally carry out a valuation as part of the mortgage application.
For example, suppose you agree to buy a property for £325,000, but the lender values it at £310,000. The lender may calculate its lending based on its own valuation rather than the price you’ve agreed to pay.
That can potentially leave you needing a larger deposit or reconsidering the purchase.
It’s another reason not to let a bidding war push you beyond a figure you’re comfortable with.
Your offer has been accepted – what happens next?
Congratulations—but there’s still work to do.
This is usually the point where you’ll instruct your solicitor or conveyancer and progress your full mortgage application.
And that’s where having your mortgage preparation done beforehand can make life considerably easier.
Before you start bidding, talk to a mortgage adviser
Knowing your numbers before falling in love with a property can make the whole process less stressful.
A mortgage adviser can help you understand how much you may be able to borrow, what the monthly repayments could look like and what mortgage options may be available based on your circumstances.
That means when you find the right house, you can concentrate on negotiating a price you’re comfortable with rather than trying to work out your finances at the same time.
Thinking about buying a home? Get in touch and we can look at your mortgage options and help you understand your budget before you start making offers.
Your home may be repossessed if you do not keep up repayments on your mortgage.