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Deciding how much to offer

Making an offer on a property is the highest-value negotiation most people will have in their lives – so it’s no wonder that it’s also one of the most nerve-racking. But if you understand how to value the property, and how to negotiate on price, the process is much less daunting.

Before making a bid for a property, it’s important to do your own research to avoid overpaying.

If you offer too much, the bank may not give you a mortgage for the full value of the property. You may also struggle to achieve the same price if you go on to sell in a few years' time.

As a starting point, it can be helpful to compare your potential house with similar properties in the same neighbourhood with the same characteristics - including number of bedrooms, age, and garden size and position. 

  • A mortgage broker can tell you how much mortgage you're likely to be offered so you can work out a realistic budget - speak to an expert at Which? Mortgage Advisers by calling 0808 252 7987.

Local market factors affecting property value

Aside from the property’s characteristics, consider whether there are any other factors that may enhance or detract from its value. Things to consider may include:

  • Is the property in a desirable school catchment area?
  • Are there nearby transport links? Does the local authority have plans to expand these links or to decrease services?
  • Is new infrastructure planned that might offer better services – or create traffic, pollution or noise?
  • Is the house in a flood zone, or otherwise likely to be impacted by natural disaster?
  • Are there any development applications on nearby properties that might detract from the property’s appeal, like a new power plant or service station? Could any nearby developments boost its appeal, like a new supermarket?
  • What are crime rates like in the area? Is the area becoming safer over the years?

If the property has been bought and sold since 1995, you may also find Land Registry records of previous sales prices available online. While prices can change dramatically from year-to-year – and not always for the better – it can be helpful to have an indication of past prices.

A Google search of your property may also turn up previous advertisements, which could show you whether the property has been reduced in price in the past.

It can also be helpful to find out whether previous offers have been made, and whether the owner has ever accepted an offer that subsequently fell through. The estate agent can't legally tell you how much these past offers were for, but they may indicate whether they were close to the asking price.

Once you’ve gathered this information, you should have an idea of how much you’d be comfortable paying. It may be worth offering the asking price if you need to move quickly, the property meets all your needs and you're confident that it's fairly priced.

Making an offer in a competitive market

In some markets, properties are snapped up quickly and buyers are regularly gazumped - meaning that they're outbid by other buyers after their offer has been accepted. 

If a lot of other buyers are interested in the property, it can be worth offering the asking price or even higher to avoid missing out.

But even in this situation, make sure you're not paying above the odds - do your market comparison and stick to the range you've identified. Also, keep in mind that high competition means you may be buying at the 'top of the market' - so even if the property has grown in value in recent years, growth may taper off when the market quiets down.

You may find yourself vying with multiple other buyers at the same time - our guide explains how to handle a 'sealed bid' or 'best and final offer' scenario. 

When you make your offer, emphasise factors that stand in your favour - for example if you're a chain-free first-time buyer, or a cash buyer not reliant on a mortgage.

When to make an offer below the asking price

The asking price does not always reflect a property's value. Agents sometimes over-value properties, and vendors sometimes choose to start with a high asking price if they're not in a hurry to move on the offchance someone will pay it.

It can be worth offering below the asking price if you know:

  • A similar property recently sold at a lower price and the market hasn’t changed.
  • There are some repairs or improvements that would need to be carried out for you to be happy in the property.
  • The seller has a motive to complete the deal as soon as possible – for example, if they need to move quickly due to pregnancy or a job change.
  • The property has been on the market for a while and no one else has made an offer recently.
  • You’re not in a chain or you’re a cash buyer – this could make you an attractive candidate to the owner.

Find out more: house prices map – our guide for sellers includes an interactive map that shows what's happening with house prices in your postcode area.

How to make an offer on a property

When it’s time to make your offer, information is power – you should factor in the value of the property, the seller’s circumstances and your own position (especially if you're chain-free or are a cash buyer).

Before submitting your offer, it’s helpful to set yourself an upper limit that you’d be comfortable paying, and that you think the property is worth. Then, if you're not in a competitive situation, consider going in slightly lower – say 5%.

You can make your offer to the agent either over the phone or in person at their offices. Either way, it's worth also putting your offer in writing and, if accepted, agreeing a provisional timescale to work towards for completing the purchase.

Unless there are other buyers in the mix, ask for your offer to be subject to a survey and getting a mortgage. You could also state that it's subject to the property being taken off the market, as this will decrease the likelihood of you being gazumped.

If the owner doesn’t accept your offer – or receives a higher one – you may get the opportunity to make a second, or even third offer. Don’t panic - weigh up your options carefully when increasing your offer, and make sure you stay within your range.

Find out more: buying through estate agents – learn about your rights.

Negotiating on the price after you've made your offer

When you enter into a negotiation, the following advice can help you get the best price:

  • Be coy about your finances. Revealing how much you’re willing to spend may prompt the agent to show you properties at the top end of your price range.
  • Play it cool, even if you fall in love with a property. Showing too much enthusiasm may make the agent think you’d be willing to pay any amount to move in.
  • Show you’re a serious contender. Have all your paperwork in place, including a mortgage in principle from the lender, so the seller knows you’d be able to follow through on your offer.
  • Don’t be overly influenced by ‘sweeteners’. Sometimes owners offer to throw in white goods, or other perks, to push up your offer. But usually these goods aren't worth the extra you'd pay on your mortgage.
  • Think about what else you have to offer. Are you a chain-free buyer? Are you buying in cash or with a large deposit? Are you happy with a long – or short – settlement time? These sorts of things can be appealing to sellers, and are worth emphasising in your offer.
  • Take your time to consider your options. While the agent may push you to seal the deal, think it over carefully before you make a higher bid.

Video: how the experts decide how much to offer when buying a property

In this video, Which? mortgage adviser David Blake and property surveyor James Rangeley explain how they used their industry knowledge to decide how much to offer when buying their own homes.

 

Correct as of date of publication.


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