By Alexa Phillips
House hunters now hold more power – here are the tactics to use
Savvy property hunters may now be able to secure steep discounts on their purchases as chains break down and rising mortgage rates hit prices.
Demand from buyers has dropped by a fifth in the last two weeks, according to the property website Zoopla, creating a buyer’s market in many areas.
House prices could already be falling due to spiralling mortgage rates, but lags in collecting the data mean the impact cannot be seen yet. A slump of 10pc is expected over the next two years, according to estate agent Knight Frank.
Jonathan Hopper, of buying agents Garrington Property Finders, said Britain is moving from a seller’s market to a buyer’s market.
“A couple of months ago, asking for a double-digit discount wouldn’t have happened anywhere in the UK; you’d get laughed at,” he said. “Now we’re in a market where sellers are open to those sorts of discussions because there is far more flexibility and a pragmatic approach starting to emerge in the market.”
How to grab a bargain
Mr Hopper said prospective homeowners can improve their chances of snagging a better deal by showing sellers they are a reliable choice.
“There’s a lot of uncertainty about people who’ve had mortgage deals pulled or haven’t re-checked their finances and don’t know if they can still afford what they thought they can afford,” he said.
“If you can demonstrate that you’re organised and a strong purchaser, preferably who’s willing to offer a degree of flexibility – because there’s a lot of sellers whose plans have been shaken – that’s very valuable and very attractive to sellers at the moment.”
He recommended that buyers have up-to-date information from their lenders and are not relying on a months-old “agreement in principle”, a precursor in the application process which gives a buyer an idea of how much they can borrow.
Banks have been withdrawing some agreements over concerns that borrowers can no longer afford the same mortgage size due to rising rates.
Mr Hopper advised against being overly aggressive on price at the outset of negotiations, which can alienate sellers. He said buyers should first take time to listen to what a seller’s motivations are. “For some it may be price, but for others it may well be timescales or flexibility,” he said.
He said buyers can then make a structured offer, preferably in writing, which outlines why they are the best solution for that seller, with supporting evidence.
One of his clients secured 9pc off the asking price of a property on Friday by offering them certainty that the deal would go through. “We were deemed the strongest bidder rather than the highest bidder,” he said. The buyer had a large deposit, evidence of proof of funds and an agreement in principle that was only three days old.
He said the seller was then able to negotiate a discount on their own purchase by showing that the chain was unlikely to collapse.
“A couple of months ago, greed would have trumped insecurity, but we’re now in a market where certainty of one’s position is more important than trying to squeeze the last pound out of something,” he said.
‘Wait and see’
Henry Pryor, another buying agent, agreed that aspiring homeowners could gain an advantage by pitching themselves as a reliable option. “But don’t rush, wait for the other side to come to you,” he said. “The balance of power is swinging very much in favour of buyers away from sellers.”
He advised against making a property purchase right now, calling it a “huge financial gamble”. He said: “You can buy a house today, but it will be cheaper tomorrow and even cheaper next year.”
He also advised against being fooled by price reductions on listings websites, which have increased in recent weeks. “The asking price is not a statement of value,” he said. “It’s like the handkerchief that a magician uses in a conjuring trick. Just because someone was asking for a pound doesn’t mean it was worth a pound.”
The difficulty for buyers is in knowing what properties are worth due to the changing nature of the market, he added.
Casper Harvard-Walls, of buying agency Black Brick, said some estate agents are deliberately choosing high asking prices knowing they will be negotiated down. Others are opting for lower asking prices to attract more offers, but may expect higher bids.
He recommended that buyers keep a close eye on sale prices in the area they want to buy in. “They can then compare what sold previously to what they’re being offered by the agent to build a picture and tailor their offer,” he said. He said this is a much smarter strategy than just making offers that are 10pc below the asking price.