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Ask an expert: ‘Should I offer the full asking price for a house?’

The key factors to consider when making an offer on a property

Every week, Which?’s money experts answer your financial queries. You can submit your questions to money-letters@which.co.uk, or via our Facebook or Twitter pages.

Q. I’m looking to buy my first home, but I’m not sure how much to offer. Should I go straight in at the asking price, offer more to improve my chances, or offer less to give myself breathing space? There may be other interested buyers  – I’m worried if I offer too little I might miss out.

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A: Making an offer on a property can be a game of cat and mouse – especially if you’re buying in a competitive area where there’s a danger of being gazumped.

There are some tell-tale signs, however, that can indicate whether you should play it cool or go in with a generous figure straight away.

Has the estate agent overpriced the property?

Estate agents fight for commissions and sometimes a high valuation helps win over the client. This means houses often sell for less than the price they are originally listed at.

When Which? analysed 370,000 properties sold in England and Wales in the year to September 2016, we found the average sale price was £256,534 – significantly lower than the average listing price of £262,068.

Our study also found that one in five (19%) of properties were reduced by at least 5% before they were sold – and these homes took an average of 64 days longer to sell than other properties.

You can get a sense of the property’s true value by looking at the sale prices of neighbouring homes. Make sure to compare apples to apples by looking at properties with similar features, positions and upkeep.

When should you offer below the asking price?

It’s worth considering a lower offer if the property has been on the market for a long time, or if it’s in need of significant improvements. Check online to see how long the property has been for sale and whether it has been discounted in the past.

Speed can be a factor too. If the seller wants to move quickly and you’re able to offer a chain-free purchase, it can be in everyone’s interest to get the deal over the line. Chatting to the estate agent – or the owner directly, if possible – can help you get a sense of what their priorities are.

Before going in with a lower offer, weigh up the risks involved. Selling a home can be an emotional process, and sellers may feel insulted if your offer seems cheeky. You also risk losing out to other buyers with more money to spend.

When should you offer more than the asking price?

For desirable properties in sought-after areas, competition between buyers can be fierce.

In these instances, weigh up your options and stay level-headed. Going in with an over-the-top offer could cost you more down the line. If you pay above the odds, you may find your property’s market value flatlines over the years, or even decreases.

Be aware that the bank’s valuer may disagree with the price you paid, in which case they may not lend you the full amount. This may mean the sale falling through after your offer is accepted, a worst case scenario for everyone involved.

Try to find out from the real estate agent whether other buyers are considering an offer, and what their circumstances are. If a seller is choosing between two or more buyers, bidding more money is one way to set yourself apart.

However, also consider what else you can bring to the table. For example, do you have a higher deposit? Or have you already got your mortgage agreement in principle, meaning you can get the purchase through quickly?

If your offer is accepted, it’s worth trying to get the agent to change the online listing and ‘for sale’ board on the property. They don’t legally need to do this, but it can help reduce the chances of being gazumped.

How to make a sealed bid

In exceptionally competitive markets, all interested buyers may be asked to submit a sealed bid to the seller by a set date.

This usually involves providing a sealed offer letter with your highest bid and details of anything that makes you stand out as the best choice.

Alternatively, you might be asked to supply a ‘best and final offer’ by a set date. The main difference between these and sealed bids is that a best and final offer doesn’t need to be formally submitted in an envelope, and can instead be sent by email.

Don’t let the pressure get to you – submit the highest price you’re comfortable paying, taking into account what you know about the property. While losing to another buyer is always a risk, so is paying more than you can afford or than the property is worth.

  • Before you make an offer on your first home, it can be helpful to get a mortgage agreement in principle. For impartial, expert advice on finding the right mortgage, call Which? Mortgage Advisers on 0808 252 7987.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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