Making an offer

You’ve found a property you would like to buy. Fabulous. Now it’s time to think about making an offer.

Check whether the house is more or less worth the price by comparing it to similar properties in the same area, especially those that have recently sold. Obviously, different properties have different features (extensions, kitchens, loft conversions, location etc) that will affect the value, but this will give you a rough guide.

Check what fixtures and fittings are included. Make sure you know whether the property is leasehold or freehold. And think about what work you will need to do on the property for you to live in it comfortably and take that cost into account.

How much to offer? The art of negotiating

Most sellers build a bit of leeway into their price, so it’s quite normal to offer as much as 10% less than the asking price. If you are the only buyer interested in the property, you will be in a strong bargaining position. Likewise if the house has been on the market a while, or the seller is in a rush to sell. You will also be in a stronger position if you are not part of a chain waiting for your own property to sell, and if you have a written ‘Mortgage agreement in principle’ that shows you are genuinely in a position to buy.

On the other hand, if there are several people interested in a property, the seller has more power. You might even wish to offer the full price straight away to avoid getting into a ‘bidding war.’ It’s all a bit of a balancing act – you have to weigh up the strength of your position against how much you want the house - and you have to act cool without coming across as though you’re not interested! Estate agents are professional negotiators but don’t be intimidated. Act as though you have all the confidence in the world!

Once your offer has been accepted it should be put into writing – make sure that it is ‘subject to contract and survey’ so that you are not legally obligated until a survey has been completed and you have exchanged contracts with the seller.

Finally, make sure that the seller takes their property off the market as soon as they have accepted your offer, so that you minimise the risk of being gazumped.

What is gazumping?

It may sound like something you’d say when someone sneezes, but gazumping is no joke. You have been gazumped if a seller accepts your offer - and then later decides to accept an even higher offer from someone else. Gazumping isn’t illegal (except in Scotland) and it can cost you a lot of money (surveys, searches and solicitor’s fees) as well as time and heartbreak.

You can reduce the chances of this happening by:

*Interesting Fact: A consumer survey showed that 73% of homeowners think gazumping should be illegal – but one in five said they would be willing to gazump someone else!

 

*Motley Fool survey cited in What Mortgage website September 2007