Do homes usually sell for asking price?

Making an offer on a house & negotiating effectivelyOnce you have found a house you want to buy, you then need to decide how much to offer. Do you put in a high offer to clinch

Do homes usually sell for asking price?

Making an offer on a house & negotiating effectively

Once you have found a house you want to buy, you then need to decide how much to offer. Do you put in a high offer to clinch it, and risk wasting money? Or a low offer and risk losing your dream home? What's the best way to make an offer and negotiate the price to ensure you get the perfect property at the best possible price?

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Making an offer on a house in 2022

Making an offer on your dream home is hard enough at the best of times. But in 2022 a prevailing sellers market has made things trickier for home buyers to navigate: there are more buyers than homes for sale resulting in rising house prices.

Following the pandemic, people have been reviewing what they want from their homes and are on the hunt for more space and gardens. Competition for these properties is high.

But this may be set to change. Sellers are increasingly having to lower their asking prices, with reductions at the highest levels since before the pandemic, property website Zoopla has said (29 September).

Six per cent of homes currently listed for sale have had their asking price reduced by 5 per cent or more, its research found.

Although the recent cuts to stamp duty will make it easier to get on the housing ladder for some first-time buyers, Zoopla also said rising mortgage rates will impact demand for homes next year.

On stamp duty savings though, be warned. Weve heard of instances where buyers who have had their price agreed have been asked by the seller for more money following the stamp duty cuts announced on 23 September. Its cheeky, but if you find yourself in this position wed recommend you split the difference.

Here are our top tips to making a successful offer on a house, how much to offer and everything you need to consider when negotiating a house purchase.

Research local house prices

Before making an offer on a house you want to buy, it is a good idea to research local house prices and sold prices so you understand how much houses like the one you are looking at are selling for. This will help to re-assure you that you arent paying too much.

In particular, be aware of how much similar properties in the area are selling for, and how quickly they are selling. If they are moving very slowly, and going below the asking price, then you are in a stronger position to put in a lower offer.

Know your financial position, but dont shout about it

Before you start house hunting you should have checked how much you could borrow and have an idea of what you can afford to spend. If you are not a cash buyer, having a mortgage agreement in principle and deposit will put you in good light with estate agents when it comes to making an offer on a house you want to buy.

When first contacting local estate agents, downplay the amount you are willing to spend. Estate agents tend to show you homes that are slightly more expensive than your limit, and it will put you in a stronger position when it comes to negotiation.

If you fall in love with a property when viewing it, do not prance around declaring that you have had your heart stolen. If youre too obviously keen, the agent and seller will know you will be willing to pay more. Play it cool, and ask questions that will set you in good stead for the negotiation process. See Top Tips  clever questions to ask the estate agent, and Top Tips -things not to forget when viewing a property

Consider using a Buying Agent

A buying agents job is to find their client the property that best fits what they are looking for. They will then negotiate the best price and terms. In a highly competitive market a buying agent might just give you an edge as they will be able to find properties that havent come on the market yet, and can give you an informed view of the propertys value. They can then negotiate the price for you. Read more about how buying agents work, cost and how to find one in our guide Buying Agents Explained.

How to put in an offer on a house

When you have an idea of how much you would like to offer, this is how to formally put in your offer:

  • Tell the estate agent. By law estate agents have to pass on every offer they receive to the seller.
  • Put the offer in writing (a telephone call followed up by an email will be fine) in order to reduce scope for confusion or argument later.
  • Emphasise your position. First-time buyers are attractive to sellers who want to avoid long chains and possible delays. Being a cash buyer can also mean you can move quickly. If you sound like youre on the ball and keen to move soon, that will also help your case.
  • Get ready for negotiations. If the seller is interested in your offer, then negotiations are conducted via the estate agent. Note that this puts buyers at a distinct disadvantage  the seller has a professional negotiator (the agent) working on their behalf, while the buyer is left to their own devices. If are you worried about this, you can appoint a buyers agent. Keep reading for the different approaches to negotiation.
  • Protect your purchase. If your offer is accepted, ask for the property to be taken off the market. Agree with the agent a written list of which fixtures and fittings will be included. Having it in writing at the start of the process reduces the chances of disagreements and delays later in the process. Consider Home Buyers Protection Insurance. Until you exchange contracts, either party can pull out.

When is a low bid more likely to be successful?

While negotiating for a house can seem daunting, keep in mind that the seller is also probably pretty worried about getting the price they want. Circumstances can be in your favour, making it more likely the sellerwill accept a bid lower than the asking price  sometimes much below.

A low bid on a house is more likely to be successful if:

  • The house has been on the market for a long time, which suggests they are having problems selling and other people think it is overpriced. Has the asking price dropped since it was put on the market?
  • The seller wants to sell quickly. For example, this would be the case if they are looking to buy a specific new house but are caught in a chain, or if they are having to move to follow a job
  • You are the only buyers who have expressed interest in the property  the seller will realise you are probably their only hope
  • You suggest a completion date that works for the seller
  • You can show you can act quickly, and are a more certain buyer. The seller will be less interested in someone who will take a long time, may not be able to raise the funds, and could pull out later. If you have your finances in place with a large deposit, a conveyancing firm lined up and a surveyor ready to go, then you will be much more attractive to the seller. See How and when should I get a mortgage?
  • Similarly, if you are not in a chain, either because you are a first time buyer or have already sold your home. The seller will then not have to wait for you to sell your house before you can buy theirs, with the accompanying risk it might all fall through. See Should I sell my house before I buy a new one?
  • The estate agent is keen to get a quick sale. While the agent works for the seller and is looking to sell for as much as possible, they are often looking for a quick sale without too much effort, in order to collect the commission.
  • The seller is using multiple agents. The estate agent will then be more likely to want to persuade them to accept a lower price, to guarantee they get the commission rather than another agent

Work out how much you can afford to bid

Before entering into either negotiations or a sealed bidding process, decide on how much you want to spend on the house you are buying and think hard before exceeding that amount. Do not forget the extra costs of buying a property (see The costs of buying and owning a property)

Bidding tactics  open negotiations & sealed bids

The best bidding tactics will depend on the bidding process  whether they are open negotiations (more common), or sealed bids.

Making an offer  open negotiations

  • As with all negotiations, when you are making an offer on a house, start low. A good rule of thumb though is to offer 5% to 10% lower than the asking price.
  • Dont forget that sellers often take this into account and deliberately put their house on the market for more than they expect or would accept.
  • The agent will normally tell you of any bids that trump yours, and give you a chance to offer a second or even third bid.
  • You should only offer more than the asking price if you know the seller has already been offered that, or if you are really worried about not getting your once-in-a-lifetime dream home and you think there are lots of other buyers.
  • Stay polite and calm at all times. Youll only alienate everybody if you get irritated.
  • Play hard to get, but stay realistic. If you think the seller is desperate, it is not in your interest to appear too keen.
  • Perhaps contact the seller directly and negotiate in person. But remember they could be harder to negotiate with than the estate agent who wants to close the deal as soon as possible.
  • Dont be overly influenced by other things thrown in with the deal. For example, unless very new, second hand white goods are usually worth very little and its often less hassle to sell them with the house than move them.

Making an offer  sealed bids

If bidding for the house you want to buy is via sealed bids, you will have to write down your offer and seal it in an envelope. The estate agent will give all the bids to the seller who will usually choose the highest.

  • Sealed bids are designed to get a high price as buyers, worried they will be outbid, put in their highest offer.
  • Sealed bids often result in the home seller getting more than the asking price.
  • In some areas where demand is particularly high sealed bids are more common.

Bidding via sealed bids can be stressful, keep the following in mind when you decide how much to offer:

  • While it is very tempting to offer an amount over what you would otherwise have paid to ensure you win the bid, it is important to stick to your budget.
  • Always offer a few more pounds and pence than a round number. For example, offer £375,050 rather than £375,000 just in case another bidder offers that round number.
  • Be aware that if you do end up bidding more than the asking price your mortgage company may not cover you, so make sure you have adequate finances in place before bidding.

But, sealed bids can also be beneficial to the buyer:

  • There is no pressure from estate agents or seller and, as long as you overcome the temptation to overpay, you only pay what you think the property is worth to you.
  • If you can find out from the estate agent or seller how many other people are bidding you may be able to make a more educated guess at how much to bid.
  • While its not common, you can still negotiate if you lose the bid: accepting a bid does not wrap up the sale.

See our guide on Sealed Bids for tactics to help ensure you dont overpay and increase your chances of a successful bid

Video  making an offer and negotiating

Holding deposits

Some sellers insist that the buyer makes a deposit to accompany their offer  this is a holding deposit.

A holding deposit shows that the buyer is serious enough about the offer that they are willing to put money down up-front.

Not all sellers insist on holding deposits. Those that do, tend to be in more volatile markets, or markets where there are a lot of investor buyers and foreign buyers.

There are different types of holding deposits:

  • Sometimes the deposit is refundable regardless of which party pulls out.
  • Sometimes the deposit is non-refundable if you  the buyer  pulls out, but will be refunded if the seller pulls out. This gets rid of the completely frivolous buyers who have no intention of making a purchase.
  • Sometimes the deposit is completely non-refundable. Avoid these because it means that the seller can sell to somebody else and the only way to get your money back would be to sue them.
  • Many estate agents do not encourage holding deposits; some actually discourage them believing that they unnecessarily prolong the transaction.
  • Never give a holding deposit directly to the seller. Usually the sellers solicitor would hold the deposit in an escrow account.

After your offer has been accepted

Even after an offer has been made and accepted by the seller, it is not legally binding on either side (in England and Wales; there are different rules in Scotland). Until the exchange of contracts either party can still pull out (although the buyer might lose their holding deposit if they were required to put one down).

1 in 3 homeowners who bought within the last 10 years have experienced the seller pulling out of the deal after accepting their offer because they have received a higher offer from elsewhere (according to research by MFS). This is called gazumping, which is more likely if your offer is on the low side

  • If you are gazumped you can potentially lose hundreds or even thousands of pounds in pointless survey fees, land search fees and solicitors fees.
  • There is not much you can do about it apart from counter-gazump (putting in a higher bid than the gazumper).

Once a seller has accepted your offer, ask them to take the property off the market, which they should do if they are serious about accepting your offer. They do not have to, but if they do this will prevent other potential buyers butting into your purchase. If they dont, then ask why they are still marketing their property, and be careful about spending thousands of pounds on surveys, solicitors and arranging mortgages.

Related Guides

  • The HOA Step-by-Step Guide to Buying a Home
  • How do I know Im not paying too much?
  • Top Tips  Getting to the front of the buyers queue
  • How can I get estate agents on my side?
  • Do estate agents need to see proof of funds?
  • Estate agents legal obligations to buyers
  • The Costs of Buying and Owning a Property
  • Survey types & survey costs
  • The legal side of buying a home explained
  • How long does it take to buy a home?

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