Most house hunters have a wish list – it might be all about location, it might have to be immaculate and turnkey, or the standard of local schools might be the key issue.
But the one thing all buyers want to avoid is overpaying. They want the perfect property, and they want to secure it for a good price.
Getting a good deal on a house means doing plenty of research, and it requires delicate negotiation skills, a strong nerve, and plenty of diplomacy.
In this guide Black Brick explains how to decide what to offer for a property, how to negotiate a house price, and how to renegotiate if a survey throws a spanner in the works.
The price is right
According to the latest research (February 2023) by house price analyst LonRes prime London buyers pay, on average, eight per cent less than a property’s asking price. This proves that there is often substantial wiggle room between what a vendor would like for a property and what they will be willing to accept.
Understanding where to pitch an offer is a fine art that needs to be based on very solid knowledge of what similar properties have sold for recently. By recently, we are talking the last six months. And by similar we mean not simply in the same neighbourhood and roughly the same size. London’s property market is highly nuanced, prices vary between floors within the same building and between one side of a street and another. You need to harness this local knowledge to understand how much a property is really worth.
Other factors to consider include how much demand there is in the market, and the circumstances of your vendor. It is always worth finding out how long a property has been on sale for, whether the vendor has a set time frame in which to move, and whether they have found a property they wish to buy.
Don’t burn your bridges
In a slower market some buyers are tempted to make a cheeky lowball offer. This approach can often backfire, particularly in London where forced sales are a rarity. Vendors – and their estate agents – may dismiss you as an unrealistic chancer. A sensible offer backed up by evidence is a far more professional and persuasive approach.
Don’t get carried away
During the pandemic many buyers found themselves engaged in bidding wars to secure the most sought after homes. Many later regretted paying over the odds in a moment of collective madness. Once you have decided what you are prepared to bid on a property then stick to your guns – unless money really is no object – because some vendors have unrealistic expectations and are in absolutely no rush to sell.
Invest in help
Yes, you can go it alone when buying a home but unless you are very confident in your market savvy, and very familiar with the area you intend to move to, it can be a recipe for overpaying.
Estate agents work for vendors, not buyers, and although they should answer straight questions honestly it is in their interests to gloss over issues and encourage high ball offers. A buying agent could stop you making costly mistakes, help negotiate discounts on asking price, and make sure deals go through.
Renegotiating house price after a survey
Your original offer on a property is not legally binding until contracts have been exchanged. Before that you will want to commission a survey to make sure that there are no hidden, and expensive, problems to deal with.
Very few properties are entirely perfect. It is normal for a survey to show up small maintenance matters. But if it reveals serious structural problems – for example subsidence, dry rot, or a roof in need of imminent replacement – it is perfectly normal to go back to your vendor and renegotiate.
The first step is to get contractor quotes to prove how much the work will cost to undertake.
Then you – or your buying agent – will discuss the issues with the estate agent. Sometimes a vendor will agree to make good the works to bring the property up to scratch before you buy. Alternatively, you may be able to come to an agreement to reduce your offer to cover some, or all, of the cost of carrying out the work later.
Renegotiating house price after an offer has been accepted
If you have second thoughts about an offer after it has been accepted you could attempt to renegotiate a lower price – a practice known as gazundering.
Clearly this strategy is not going to please your vendor.
But it does happen, and it is perfectly legal.
A recent survey carried out by quick-sale company House Buying Bureau found that one in three vendors claim to have been gazundered recently.
Sometimes their original offer was reduced because either a survey threw up problems, or because a buyer’s mortgage company valued the property at less than they had offered.
However some vendors suspect their buyer was simply trying to hold them to ransom, in the hopes they would take a lower offer simply because they wouldn’t want to start the sales process from the beginning again.
But attempting to renegotiate without a very compelling reason for doing so is a high risk strategy. Particularly in prime London where vendors tend to be highly discretionary and in no rush to sell if they feel like they could do better elsewhere.
Thinking about your property in the long term
Smart buyers future proof their investment by buying a property they can envisage living in for the medium to long term. That way they can sit out ups and downs in the property market, content in the knowledge that the underlying trajectory of house prices in London is an upward one, while minimising buying costs. This means thinking carefully not only about what you need now, but what might become important to you in the future, like proximity to good schools and outside space, and room for a family which may expand.
Buying costs have certainly reshaped the way we live in the UK. In 1988 people would sell up and move house every 8.6 years. Today they stay in a home for an average of 23 years, according to a recent study by Zoopla and Hometrack.