Updated 07 May 2020
Once you find the right property for you, you naturally want to secure it as soon as possible. But first comes the bidding process, which is your opportunity to negotiate on the asking price. You want to make an offer that secures the house, but you don’t want to pay over the odds for it. If you’re a first-time buyer or if you’re not familiar with property negotiations, you can follow these steps to put you in a good position when you make an offer.
Before making any offers on a property, work out your budget. The simplest and most accurate way to do this is to apply for your mortgage first. The maximum mortgage you can comfortably afford, plus your saved deposit, is your budget. If you do happen to find a cheaper property, you should be able to find a better mortgage deal; if you go for one that’s slightly over budget, you may be able to stretch yourself to afford more, such as by extending your mortgage term. But generally you should aim to stay within your budget.
The asking price on a property is generally a starting point. Often you can secure a lower price, though the final price can also be higher if the sellers receive lots of realistic offers.
If you see the phrases ‘Guide price’ or ‘offers in the region of’ used by the estate agent, this simply means that the seller may be more open to negotiation, and that the initial price is probably over-optimistic. Apply the above tips and you should be able to bring the price lower.
Making offers on a home is easy enough, but winning the bidding war can be quite a challenge. Here are a few pointers for putting yourself in a stronger position.
First and foremost, do your sums. Work out how much mortgage you can afford, add your deposit, and set money aside for legal and moving costs too.
It’s also wise to get a mortgage in principle. This is an offer from a mortgage provider stating the amount they are willing to lend you based on the information you initially submit to them, and it shows sellers that you are in a position to buy now. A mortgage broker can help you find the best rates.
First-time buyers occasionally stumble on this simple step. Don’t make your offer direct to the seller – the correct procedure is to go through the estate agent. It’s worth submitting your offer over the phone and sending them an email to confirm it, in case anything gets missed during the phone call.
Your email should include:
When estate agents invite offers on a property, there are two types of bid. They will specify whether they want open bids or sealed bids.
Open bids are when the estate agent can tell you what other people have offered and whether the seller knows the price they would be willing to accept.
Sealed bids, by contrast, are when you’re invited to submit an offer in an envelope, and you won’t know the amount other parties have offered. The buyer will collect all the sealed bids and open them at the end of the process, and choose the one they want to accept. This means there is no opportunity for any buyer to raise their bid. It can be a way to lure people into making higher offers, or simply a means of speeding up the process.
Once you’ve made your offer, if you haven’t heard anything from the estate agent within about three days, it is worth getting in touch for an update. You can then decide whether to increase your offer or walk away.
If your offer is accepted, the estate agent should usually let you know very quickly. You can then start the legal process of conveyancing.
Estate agents have to pass on all offers to the buyer, but that is pretty much where their responsibility towards you ends. Ultimately, they are on the seller’s side – they want to help them get the best price for the property and thereby maximise the amount of commission they receive.
Be wary of estate agents putting pressure on you or exaggerating the interest in the property. They may be trying to get you to enter into a bidding war with another party. You can find out more about working with estate agents here.
When an offer has been accepted and the seller then decides to accept a different offer, this is known as gazumping. It is legal, but it can make life very difficult for the other party.
Sometimes, sellers simply invite other offers because a glitch in the current process is making it particularly slow. In other cases, sellers reposition properties to try to fetch a higher price. They may put the house back on the market with better advertising or added details to make it more attractive.
An offer isn’t legally binding until you exchange contracts, so you should ask the seller to take the house off the market to make sure it isn’t advertised anymore. You should also receive a formal letter of acceptance from the estate agent, and you may want to request that as soon as possible. Once you have this, you can enlist a solicitor to handle your purchase and speak to your lender to finalise the mortgage agreement.
It usually takes between four and 12 weeks to be in a position to exchange contracts, but can sometimes take a lot longer. During that time, you or the seller can still back out.
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