When you are looking for a new home and find one you are interested in buying then you should make sure you are paying a competitive price for that property. Negotiating house prices is a tricky process and, as with all negotiations, needs a bit of give and take to reach a final agreement. In this article, we provide some guidance on negotiating house prices to get the best price.
How to negotiate a house price
When you first start looking for a new home you should look closely at the house prices in the local area in which you are looking to buy then compare and assess why one property is marketed at a different price to another. Once you start viewing properties online you will quickly get a feel for how the prices vary and how the features of each property and the location can drive the marketing prices.
If the area in which you are searching is new to you then you will need to do more research on pricing to understand the various price bands in different locations. It may be worth using a map of the area and marking up the roads and housing estates and compare prices for the type of property you are looking for in different areas. Once you have a good feel for property prices in your search area you can then start to understand how much a property is worth in more detail.
What affects the value of a house?
The location of a property is one of the main criteria when valuing a property. You may be able to improve or renovate a property but one thing you cannot do to a property is move it to a better location. Buying a property in a poor location may result in the house not increasing in value as much as when compared with better locations and can leave you struggling to sell in the future.
Location is not simply the area where the property is located but also other less obvious factors such as:
- connection to main roads and motorways
- availability of high standard of schooling
- availability of health services
- access to a supermarket or other essential shops
- availability of parking
- environmental issues such as flooding, noise pollution or neighbour issues
Accommodation and amenities
The accommodation available is a key element that affects the value of a house such as:
- number of bedrooms
- size and configuration of living areas
- space to create a home office
- high-speed broadband
- energy rating
- incentives or added extras (new build properties only)
Condition of property
The condition of a property will affect the value of a house, a property in poor condition will not only be difficult to sell but would be expected to fetch a lower price than a similar property in a better condition.
When looking at the condition of a property you should look beyond just the decor as this can be improved fairly cheaply and quickly but more serious issue can be more expensive, such as:
- Roof - is the roof of the property and any outbuildings in good condition? Whilst this may not be easy to ascertain from ground level there may be watermarks on walls or internal ceilings that could indicate an issue
- Brickwork - is the external brickwork well maintained or does it need pointing or repainting?
- Carpets - are the carpets in reasonable condition or do they look as if they need replacing?
- Kitchen/bathroom - do these need upgrading or fully refitting?
- Driveway - is this in good condition or are there potholes or other defects that need attention
Once you understand what affects the value of a house you will be in a better position to compare various properties in different locations and will have the basis to start negotiating the best price when you find a house you want to buy.
Things to consider before making an offer on a property
Preparation before viewing a house
By working through the section above you should now have a fair idea of the value of any property you would like to view.
Prior to arranging any viewings I strongly suggest reading our article 'Get the best deal when viewing a house: 41 things to check' - in this article we provide a comprehensive guide to the things to look for and questions to ask when viewing a property.
Ask the estate agent how the present owner has lived at the property; if they have lived there for a number of years then they will have built up sizeable equity in the property and may be more open to negotiating on the price.
At the viewing
The viewing is the time to find out at much as you can about the owner of the property and their situation, this may help you when negotiating to get the best price. Try and ascertain their reason for moving and if they are on a tight timescale due to schooling or the arrival of a new baby.
Inform the seller of your situation if you are in a position to move quickly, maybe you are a first-time buyer or have sold your property and are chain free, which will speed up the sales process. Give positive feedback to the owner about their property and how it might fit your requirements, people are often sentimental about their homes and would be keen to sell to someone who will appreciate their home.
At the end of the viewing you should have built up a good relationship with the owner that will benefit you later if you should decide to make an offer.
How to make an offer on a house
Once you have viewed a property and are interested in making an offer you should assess the property with regard to location, accommodation and condition as described in the above section. Any areas where you feel the property falls short are the areas you can focus on when negotiating the house price.
Make a list of these negative elements of the property so you can use this as evidence to support your initial offer.
If you have done your research, created a list of the negative elements of the property and understand the owner's motivation to move you are now ready to make your initial offer. There is no set rule as to how much below the asking price your initial offer should be as whilst you want to pay the lowest price possible you may risk losing the house of your dreams by offering too low an offer at the outset.
You should bear in mind that you will generally be putting in your offer through an estate agent and they are obliged to inform the seller of your offer and so always ask for feedback regarding your offer as soon as possible to ensure they have passed it on.
When you make your initial offer you should back it up with a reason why you are offering this price. For instance, you feel that there is work required on the property and you have taken the estimated cost of these repair into account when reaching your offer price Just making a low offer with no supporting reason will appear as if you have plucked a figure out of the air and your offer is likely to be rejected.
When making your initial offer remind the estate agent of your current position in regard to how quickly you can complete the sale as this will back up your offer and make it more likely to be accepted.
What to do if your offer is rejected?
If your initial offer is rejected then you need to decide if you want to make another offer or move on to another property. Before you make any further offers you should ask the estate agent if the seller is prepared to put in a counter offer that will be accepted. Once you know this figure then your next offer should be somewhere between your initial offer and the counter offer provided by the seller.
If your second offer is rejected then your next move depends on how much you want the property. If you have fallen in love with the property then the only way to secure a deal is to now offer a price the seller will accept.
It is worth doing your homework when negotiating the best price for a house you are looking to buy and this article should provides some useful tips. Also, don't give up on your negotiations too early as even a small saving on the purchase price can pay for other costs involved with moving or reduce your monthly mortgage payments.