Top ten tips on how to negotiate when buying a renovation property, and save thousands of pounds
It’s stating the obvious, but when you walk into a newsagents and want a Mars Bar you pay the price on the sticker. 50p last time I looked. It would look a bit odd if you said, “Sorry mate, my best price is 45p, take it or leave it”. Such is the belief here in England that you should pay the registered price of an item that it sometimes feeds through into house purchases, even though buying a house is the single biggest purchase any of us makes in our lifetimes. What follows is negotiating your house purchase in a nutshell, to help you pay the best possible price. If you’re lucky, it could leave you with thousands more pounds for the renovations to follow.
NB – please note different rules apply in Scotland.
Research your market. Do as much research as possible on the surrounding locality. There are several websites which will give you sold prices, eg http://www.houseprices.co.uk/. This will give you what estate agents call “comparables”, i.e. what similar houses have sold for recently. They will have used exactly this technique to value the house in the first place. Another useful resource is Hometrack, which gives a pretty good picture of the overall state of the market. Also, has the price dropped recently? PropertySnake should give you the answer.
Research your seller. Why are they selling? Are they in a hurry? How long have they been trying to sell the property? All this information is useful to know when building up your picture of how strong your negotiating position is.
Research the estate agent. Revelation of the year: some of them overvalue the properties they sell in order to get more commission. Estate agents often value a property at a realistic rate, then add in what they call “hope value” before it goes on the market in case they find a gullible buyer.
REMEMBER – a house is only worth as much as someone is prepared to pay for it. Are you in competition with another buyer?
Establish the top level of your budget, including any work to be done. If you are planning major renovations, ask a builder to come and cost out your planned improvements for you. They are usually friendly if they think they might earn thousands of pounds out of the job. Don’t tell the estate agent your real budget, but about 10% lower. They will often show you houses slightly above your budget. Click here for our guide to buying costs.
Viewing the property. A tricky one this. Pay particular attention to its state when viewing, without giving away that you’ve fallen in love with the damned place and would sell your own grandmother into slavery to get it. Remember – there are plenty more fish in the sea, you can always walk away. Be prepared to play a long game.
Making an offer. In today’s market, which is broadly a static one, you should be looking at offering at least 10% under the asking price, depending on the circumstances of the sale (i.e. not if someone else has already put in a full-price offer!). Hometrack reckon the average price being achieved is currently 92% of the asking price. That means for every house being sold at its asking price, another one is being sold for 16% less. Food for thought. However – don’t put in an offer so low that the seller is insulted and refuses to even contemplate it. You are looking for a win-win situation.
Cash is king. If you are a cash buyer, this will be more appealing to a seller, even if someone has put in a previous higher mortgage-backed offer.
Haggle. If the agent comes back with a new price, then they are at least interested. Whether you stick to your guns will probably depend on the strength of your bargaining position. Deploy some cost-free arguments for sticking to your previous price, such as “my surveyor has told me the roof needs to be replaced” (as long as it’s true!).
Closing the deal. Be patient. If you’re not in competition and the house has been on the market for a while, don’t hurry back with a counter-offer. Ultimately, whether or not you increase the price you are prepared to pay will depend on how badly you want the house and whether you still think it will be a good deal. If it’s not, you can always walk away.