We only buy on average 4 or 5 homes in our lifetime, so there is a fair chance you will have forgotten how you negotiated on the last one you bought. Or if you are British the mere thought of haggling will bring you out in hives!
Maybe you are entering the housing market for the first time and are unsure about what to do and say – Not to worry, lets run through it and by the end you will be negotiating like you were born to do it! A little caveat to add first though – If a the home seller or Estate Agents you are buying from is reading this, you will be sussed out !
I will assume that you have gone through my guide to being the best buyer, which means you are fully aware of your situation for buying a property. This process counts if you are a First Time Buyer or Buying after selling your home and is a vital step for you to take. In fact it has been and always will be the buyers ‘Ace in the Pack’.
The Most Important Question:
If you have viewed a property and decided that this is the one, all you need to do is ask one question:
“Are there any offers on the property at the moment?”
If you are asking the vendor, I can almost see their reaction now – if its the truth their eyes will light up at the prospect of an offer and they will just say yes or no. If it is going to be a lie, be prepared for squinty eyes and a 40 second response to your question.
On the other hand if you are dealing with the Estate Agent, they can not lie and make it up (well they shouldn’t), but you may face a barrage of questions once you get a yes or a no – let them know you are talking with ‘whomever’ and will call back later that day or in the morning.
This is a great start, the best you can get, you are in a one person race and the only one who can mess it up is you – No Pressure Then!
On Your Marks – Make sure you have done your homework on property prices in the area, if not you are putting hurdles to big to climb in your way.
Get Set – Because you have followed the guide to being the best buyer you know exactly how much you can afford and how comfortable you are with paying the highest amount you can spend.
Go – Keep your eye on the finish line, if you don’t you may stumble and that could be the end – it’s now time to make that first offer.
Contrary to what you may have been told, do not come in with an offer 20% less than the asking price (remember you have done your homework so you know what it is worth) if you do come in that low be prepared for the owner to hang the ‘sign of shame’ over you – no one likes to have their homes stolen from them!
Dependant on the value of the property I would suggest an offer between 7% – 10% – on a property of £250,000 that would be between £225,000 and £232,500 – I know it sounds low, but it is your first offer and the only way is up. For this offer pick an EVEN number to put forward, like £230,000.
If you remember I told you to tell the Estate Agent you would call them back later that day or in the morning – don’t ! Do it right now, that way they don’t have time to call other people and let them know an offer may be incoming on that property.
The Estate Agent will want to clarify your financial position at this point so they can put forward a fully checked offer, but as you are the ‘best buyer’ tell them to call your Financial Advisor who will let them know you can afford that figure, without giving away how much you can actually afford!
Rejected – Of course it was, but did the Agent tell you what the vendor was looking for? Normally you will get an indication “The vendor is looking for £245,000” – in blunt terms if you know the property is worth £250,000 you have just saved £5,000. Time for your second offer (remember any offer you give has to be put forward to the vendor) and again I would like you to put forward an EVEN number, maybe £238,000.
(Tip – do not get emotional during this period, you want to buy the home and your pride can often get in the way of achieving this – there is no right for the vendor to meet you half way and you risk bringing out the vendors emotional side too creating another hurdle to big to climb over)
Rejected – What do you expect, you are £7,000 adrift from what they are looking for, but maybe the agent has other news for you “The vendors will accept £243,000” – your saving is now £7,000 and you are £5,000 adrift. You have the choice of going for the amount the vendor now wants or one last try at an offer.
The Final Offer – It’s time to bring out the ODD number and some lose change – Your next offer should look like this £241,750. Why? This figure makes it look like you have sat down and calculated to the last penny the amount that you can afford and vendors love that you have put all your energy into their home.
Offer Accepted – Well done, if you were prepared to pay £250,000 for your dream home you just saved £8,250 and still got your dream home!
Offer Rejected – Not to worry, back to the ‘best buyer’ pack, what else can you offer the vendors to help? A fast sale to suit their needs? A slow sale? Even though the vendor might have to accept a lower price they will feel like they negotiated well – still not working? Then try a small increase £500 to show you are trying your best.
Don’t Waste Time – You can’t play a waiting game, if you do you may not be the only person in this race.
You love the property, 2 or 3 other people love the property and the vendor sits waiting rubbing their hands – the negotiation process has just been put in the bin!
Let us cover the ground rules again before we move forward – Have you done you Homework on the Value? – Have you locked away your emotions? – Are you the Best Buyer?
The vendor will wait until all parties have laid out their hands before deciding one of the following:
#1 – To reject all offers and ask for higher bids
#2 – To negotiate with the party or parties that meets their moving needs
Looking at #1 you have the choice now of increasing your offer and will probably be told that your next offer is either accepted or rejected – you can ask what the vendor is looking for and offer that price, but you may not be the only buyer to do that, so you may have to increase again – leave your emotions at the door, don’t over stretch yourself because your heart is telling you to do it!
#2 means that you have slimmed the field down, now the aim is to pull it further towards you. Why have you and the others been singled out? is it a moving timescale situation? is it finances? is it the offer you made? Find out and use it to your advantage, lets say the vendors are worried about their sale falling through, then speak to your solicitor and see if you can offer a 4 week exchange of contracts making the whole process legally binding and then offer a completion date to suit the owners- in other words hand them cake and let them eat it! You may find that you are the only one left at this point or will be given the exact figure you need to pay with those added conditions – Offer it and cross the finish line!
If at anytime you feel unsure about making an increased offer, then do sit down and have a good think about your next step, it is worth remembering that a lot of buyers miss out on their new home by really small amounts – £1,000 – £2,500, but if this puts financial pressure on you it is best to walk away and look elsewhere.