How To Negotiate A House Price

A lot can hang on your house price negotiation strategy, especially if your heart is set on buying a certain property.

In over 70% of house purchases, the purchase price is negotiated at the outset.

Here are 3 simple steps to take into consideration when negotiating on house purchases.

STEP ONE - KNOWING THE CURRENT MARKET PLACE 

You need to work out how much to offer below asking price without putting off the seller and also factoring in the other offers on the table. To do this you need to do some research first. 

1. Completed / Sold properties

This is where you can get the most accurate data about what properties in the area have sold for. You need to look for properties on your street, with the same amount of floor space, bedrooms and bathrooms. Where properties differ in size this can become more difficult because more bedrooms and bathrooms will mean a higher purchase price. 

You should also be careful not to compare property prices for properties not on your street as a street in itself could add £10,000s to the purchase price.

Where there is a comparable house but it was sold over 12 months ago, then you need to check on the Land Registry to see how much house prices have gone up in your area over the last year (or however old the last property sold is). The Land Registry has a great tool for this and you can such comparable years and months going back to 1996. Click here to go to the Land Registry House Price Index.

2. Under offer

You can check under offer properties however don't rely on this data. These properties haven't completed and the online property portals don't update their current offer prices so the advertised price could be £700,000, but the accepted house price could be £600,000.

3. For sale 

Looking at other properties for sale is not an indication of what your property is currently worth. Asking prices are not always met and the fact that the seller is asking for this amount of money, doesn't mean this is what the property will finally sell for.

STEP TWO – UNDERSTAND WHAT A WIN LOOKS LIKE FOR THE SELLER

In any successful negotiation, both sides need to feel they have won.

For you the win is buying your dream home at a price that is reflective of the property's market value in its current condition - the cheaper the better.

For the seller, their win is different and might be:

• Moving home - can they afford to buy their new home? They budgeted their onward purchase based on the estate agent's valuation so to buy their new home they may not want, or be able to negotiate below the asking price without some concessions on their onward purchase
• Probate sale - are the executors happy with the sale price? Could they find a new buyer to pay more and as such give a better return to the beneficiaries?
• Landlord sale - similar to the above, does the landlord make as much money as they wanted to achieve? Every penny off effects the landlord's return on their investment. 

Find out what the win is for your seller and work out how much to offer below asking price that still allows them their win otherwise you may end up losing your offer to another buyer who is prepared to pay what the seller is asking for.

STEP THREE – UNDERSTAND HOW LOW SHOULD YOU GO

Here are things to consider when working out how much under the asking price you should offer:

• Too low - going too much below asking price can mean that you alienate the seller. Whilst there are other considerations such as the length of time the seller has been on the market and how desperate they are to sell, often going in too low doesn't get your negotiations off to the best start.
• Reduction not based on anything - it helps to explain to the seller why you have offered a bid lower than their asking price - it makes your reason more tangible.
• Go In at Asking Price - offering what the seller is asking gives you an opportunity to defer negotiating until further into the transaction such as after your survey or mortgage valuation. With so many buyers offering under asking price, it can start your relationship off with the seller on the right foot by offering the asking price.

Unless there is some good reason to do so, you should only ever make an offer that you can afford and that you feel is what it is worth based on your own research.

Thinking of sellikng your home?

HS Homes of Solihull is a small independent estate agent based in Shirley, Solihull. If you are interested to know what your home is worth, call us on 0121 430 4448. Alternatively, click here to book a free market appraisal.