It can take weeks or even months of viewing properties before you find your ideal home, so once you’ve found it, it’s important that you know what the next steps are. One of the steps is negotiating on the purchase price.
So here are my key tips to help you negotiate the best deal.
Understand The Local Market
It’s important to understand what’s happening in the local market. There are some really good resource tools that will help you to do that, property portals such as Zoopla and Rightmove. These websites will tell you how long the property’s been on the market for whether there’s been any price reductions, what other houses have sold for nearby. This will help you in negotiating the property purchase price. For example, if a property’s been on the market for over six months and had multiple price reductions, the chances are the vendor is going to be quite keen and almost quite desperate to sell which may well work in your favour.
If you are a first time buyer, you’ve got a cash deposit in the in the bank account, a mortgage in principle, you’ve obviously got no house to sell, so you’re chain free, then you are the golden ticket for any vendor! It’s important that you really play on that and make the vendor aware of the benefits. If the vendor has a few offers on the table, selling to someone that’s motivated to move with no chain is going to be far more attractive to them than someone that’s got to sell their own house and is part of a chain.
The chances are the vendor has built up quite an emotional attachment to their house. Don’t be afraid to talk about how much you love the house and would treat it with love and care. They’ve probably made lots of cherished memories in the property, so it will mean a lot to them to know that you’re going to go in there and look after the property in the same way as they did. If you know it’s going to be your family home for the next 5-10 years, you’re going to raise children etc, you’d be surprised how much that means to a vendor and may sway their decision when considering an offer.
Consider The Vendors Financial Position
Understanding the vendors financial circumstances doesn’t mean finding out what they earn or how much money they’ve got sat in the bank but more about how much they’ve spent on the property. Because if you’ve got a vendor that’s been in the house for maybe two years, they’ve upgraded the kitchen and they’ve upgraded the bathrooms, the chances are they’ve got a sale price in mind to recoup some of the costs they’ve spent on it.
On the flip side of that, if you’ve got a vendor that’s been in the property for 15 or 20 years, the chances are that sat on quite a lot of equity. And there might be a bit more of a room for negotiation, as they don’t need every last pound to help them with their onward purchase.
Meet The Vendor
This is a tricky one as some agents conduct the viewings rather than the vendor but if you get the opportunity I would encourage you to speak with the vendor during the viewing. Try and find out why they’re moving, what’s motivating them. If it’s a married couple that are divorcing, they may be quite keen to get the property sold. Likewise, if you’ve got a family that wants to move to a school catchment area before their kids new school term starts, again, they’re probably going to be quite keen to move quickly. The more motivated the vendor is the more chance you have of negotiating the best price.
This one isn’t rocket science, when it comes to offers, start low. But importantly, don’t start too low. Because you are at risk of offending the vendor. If their property is on the market for £275,000 and your opening offer is £225,000, chances are that’s going to rub the vendor up the wrong way. And they might just dismiss any further offers from you. It’s important to start low, but not too low. And you’re starting low with a view of entering in to the negotiation process!
As an example, lets say you’ve found your ideal property on the market for £275,000 you like it, but you want to get the best deal. You could start your opening offer at a cheeky £260,000.
Be prepared for the vendor to reject your initial cheeky bid but you should encourage the vendor to give you a counter offer. The vendor might come back and say they’re not willing to sell it for £260,000 but would consider £270,000.
Then it’s your turn to hold your nerve, I’d suggest saying something along the lines of I’m not willing to go up to £270,000 right now so my offer is £265,000.
Best & Final Offer
Now, there is a chance they may not want to test your resolve any further and just accept at £265,000, which would be great but likewise they might reject that too. At this stage, I would encourage you to lodge your best and final offer of what you’re willing to go up to. In this scenario, that might be something like £267,500. Now, most vendors in this market would be a bit silly to reject an offer from someone that’s keen, no chain, mortgage ready. Let’s face it an offer of £7,500 below asking price is reasonable in this climate. Likewise, you’ve saved yourself £7,500 on the asking price.
Negotiating on A New-Build
When it comes to new builds, it’s a little bit different in terms of negotiations. It’s certainly not to say you cannot get some money off the listed asking price but it’s more likely you will have better success negotiating on the incentives. There are some builders out there that will accept offers below the advertised price, but most of the big national providers tend not to do that, unless their house sale has recently fallen through or they’re near their financial year end and they’re trying to get rid of their stock quickly.
Some examples of incentives are things like flooring so carpet and ceramic tiles, it could be upgrading the bathrooms, it could be lawn in the garden (yep, that’s right sometimes you don’t even get grass as standard!) or a larger patio area for those summer nights in the garden, an outside tap or outside lights. If you are not a first-time buyer and you are buying a new-build the first incentive you should request is payment of the stamp-duty tax as this is likely to be one of your biggest costs.
As a general rule of thumb, I expect you to be able to negotiate somewhere between 3% – 5% of the property value in regards to incentives.
So that concludes my key tips for negotiating the best purchase price. Happy house hunting and good luck!