Published: 26/03/2019 By Peter BarryMaking an offer is tricky. You don’t want to go in too low and potentially lose the property but you’re also wary of over paying. The ideal position to adopt is one of detachment. If you can look at the property in purely financial terms you have a massive advantage although in reality emotions are bound to become involved. The best advice is to try and act rationally and keep emotion at bay until everything is agreed.
Often, the asking price does not bear much resemblance to what the property is actually worth. Most agents build in a certain amount for negotiation and many go further and inflate the asking price in order to flatter the seller and get the property on their books but as a guide the sales to asking price ratio normally hovers around 95%.
You need to start by doing your own research so that you have a good idea of the value of the type and size of property that you are looking for. The easiest way to do this is to look at a good selection of properties. This should be done in a fairly short period of time so that if it turns out that the first property that you viewed is the one for you, it is still available. At the very least you should check on sold prices so that you can see what similar properties close by have sold for. Use these figures for guidance only as they don’t indicate if the property has been extended, its condition and in a rising market they can quickly become dated.
There is nothing to lose by opening with a low offer. An offer can always be increased but the agent and seller will lose trust in you if you reduce your offer later in the process. Estate agents are unlikely to advise you on what the vendor will accept, and it would be unethical for them to do so. By making an opening offer, even one you know is unlikely to be accepted, may get you some valuable guidance from the agent on what the seller’s aspirations are.
If you’ve done your research, you should have a maximum figure in mind so do your best to stick to this. Not overpaying is particularly important if the property is for investment as this should be a straightforward comparison of the yield that you can achieve on one property as opposed to another.
If you are buying a family home and intend to live in it for several years you may decide that it is worth paying slightly more than you know the property is realistically worth. This has to be a judgment call but if the property is perfect for you an extra few thousand becomes less significant the longer that you intend remain at the property.