In a recent survey, around 30% of homebuyers said they don’t negotiate when buying a property.
The main reason why? A lack of knowledge about how to do it successfully. Others were afraid they’d lose the property if they tried to negotiate the price and some found the whole process scary or intimidating.
The good news is, negotiating on the house price can be easier than you might think – especially if you arm yourself with insight into the local property market and knowledge of the seller’s situation.
To help, here are our top tips for how to negotiate the house price, from the initial prep work to the offer itself, and beyond.
The basics of negotiating on house price
First thing’s first: don’t be afraid to negotiate the price when buying property. It’s one of the biggest purchases most of us will make in our lifetime so it’s fair to try and get the best deal possible.
Plus, most sellers expect you to negotiate anyway. That’s why many of them tend to put their homes up for sale at slightly higher than the market value. It gives them some wiggle room when potential buyers try to haggle for a lower price.
So, while it can be a bit intimidating to push back on the house price at first, knowing that it’s expected of you and there are things you can do to prepare can make it a little easier.
Here are three things you can do to help you enter negotiations like a pro:
1. Research local house prices
Gathering information about the local property market is essential when it comes to negotiating a house price. In fact, it’s something you should be doing before you make your first offer.
If similar properties to the one you want aren’t moving quickly or are selling under the asking price, this is often a good sign that you can offer less when making your opening bid.
Local property listings can be found online using websites like Rightmove and Zoopla. Finding out the last sale price for the property you want and the most recent prices for homes on the same street will put you in a strong position for negotiation.s.
2. Take time to understand the seller
Before you make an offer and enter into negotiations with the seller, it makes sense to find out as much as you can about them and their motivations for selling.
Who are you buying the property from? Why might they be selling at this time? What are they hoping to achieve? You can often get answers to these questions when you’re viewing the property.
For example, their grown-up children may have flown the nest, and they’re looking to downsize from a larger family home. Or perhaps they’ve landed a new job on the other side of the country, and they need a quick sale.
You may wish to consider their financial situation, too. If you know that they bought the house 20 years ago, there’s a good chance they’ll have a decent chunk of equity in the property (that is, the amount they own outright vs the amount they need to pay off from their mortgage). This could mean they may be more flexible when negotiating a price.
On the other hand, if the seller has only recently bought the house, they may need to secure a certain amount in order to pay off their existing home loan.
3. Consider appointing a buyer’s agent
While many homebuyers carry out negotiations themselves, the sellers tend to have an estate agent in their corner, acting as a go-between and offering timely advice.
But did you know, you don’t have to go it alone?
You can work with a buyer’s agent – someone who’ll act in your interests, helping you negotiate the best possible price and terms for the property you want to buy.
A buyer’s agent can bring a wealth of property knowledge and expertise to the table, levelling the playing field between buyer and seller during those crucial negotiations. Plus, it takes some of the intimidation away as you won’t be the one hitting “send” on your bids (although you will get to give the thumbs up).
Buyer’s agents are typically paid in one of three ways:
- A fixed fee
- A percentage of the saving made between the original asking price and the agreed sale price
- A percentage of the final house purchase price (often between 1-3%)
Now it’s time to make an offer
Once you’ve done your research and set a limit in your mind of how much you’re willing to spend, it’s time to make an offer.
First, go in low (but not too low)
Many buyers worry about going in with a low offer, instead choosing to bid close to the maximum of what they can afford.
However, sometimes, it can pay off to go in low if the circumstances are right.
For example, if the house has been on the market for a while, it could be a sign that they’re struggling to sell. A low offer can also work if the seller wants to sell quickly and you’re the only buyer who’s expressed an interest.
Most sellers will expect lower initial offers, and their asking price will usually reflect this. This is where your research can help – you’ll have a good idea of how low you can go.
That said, if you know you’re not the only bidder (and it’s your dream home), going way under the asking price as an opening gambit may not be the best idea. Low bids can sometimes backfire as the seller may lose trust that you’re a credible buyer, refusing to listen to any further offers in the process.
Offer rejected? That’s okay – ask for a counteroffer and make your second bid
If your opening offer is rejected, you may want to ask for a counteroffer.
This is a new offer the seller makes you, stating the amount they’d be willing to accept between your original offer and the asking price. Ideally, it will be under the maximum amount you’re prepared to pay for the property.
For your second offer, you don’t need to meet their counteroffer. Instead, you could pick a figure between your first offer and their counter offer.
Choosing a specific figure rather than a round number – for example, £164,650 rather than £165,000 – is usually best since it gives the impression that this is your mortgage limit. This tactic may persuade the seller to agree to your bid in fear that you’ll walk away otherwise.
Finally, make your final offer
If the seller’s still not biting after your higher offer and you need to make a third one, explain that it will be your final offer.
If you can afford it, your final offer could see you meet their counteroffer price, in which case there’s a good chance you’ll seal the deal (and below the original list price).
Be careful at this stage! It can be tempting to go higher than you’d budgeted if you love the house, but it’s in your best interests to walk away if you’re not sure it’s worth what they’re asking.
You may even find if you play it cool and wait, the seller will come back later and be willing to accept your final offer if they’re unable to sell to anyone else.
How to know when to play hardball – and when to play it cool
If you want to be a tough negotiator, you need to know when you can play hardball and when you need to take a softer approach.
For instance, if you want to buy someone’s much-loved family home that’s packed with happy memories, don’t resort to picking out every flaw you can find with the property in a bid to lower the price. You may run the risk of insulting the seller, missing out on the house altogether.
Instead, focus on the positive reasons why they should deal with you in an attempt to negotiate the price down. Explain how you want to raise your own family in their beautiful home, or show them you can complete faster than your rival bidders, giving them the quick sale they crave. See? Much nicer than criticising their wallpaper.
On the other hand, if you’re trying to buy a new build home, a more aggressive approach could pay dividends. The seller may not have as big an emotional attachment to the property, so highlighting the wonky floors or uneven plastering could work in your favour.
The key to negotiation is knowing your limits. Before you make an offer, you need a solid idea of your budget. A mortgage in principle (MIP) is a certificate showing what you can potentially borrow from a mortgage lender. It also shows estate agents and sellers that you’re serious about buying, and in a position to do it.
You can get one from Habito in minutes. It’s free and there’s no credit check. Get started here.