10 July 2016
Pitching offers at the right level could secure a bargain or provide insulation against any future declines.
1) Know the Fair Market Value and Do Your Research
Pitching an offer 10 percent under asking price when the house was 20 percent over priced means that you are overpaying.
Don’t be fooled by reductions. If a property was originally overpriced, price cuts could simple bring the price in line.
Therefore, research the fair market value. A price-per-square foot is a solid building block to understanding pricing. By comparing the average price-per-square-foot of similar-sized nearby properties to the price-per-square-foot of the property you want to purchase, you will arrive at an estimated value. If the price is miles away from market value, it may prove to be a waste of time.
Then, research selling prices of recently-sold properties and market activity. Understand the housing market in the local area and gather information about future developments within the area that may influence house prices.
Any, finally, retrieve any old property listings for the property, see View Old Listings for a Property. Many times, old property listings are removed from property portals however they may still be available using a specific Google search. This trick could be used to see if there were price changes and to form an idea as to how long the property has been on the market as sometimes this is not always obvious from the current listing.
Now, form your offer on sound fundamentals.
To get Propcision's estimated ASKING price injected into your Rightmove searches, see Propcision Add-on.
2) Understand how much the vendor originally paid for the property
When Propcision analysed data between asking price and achieved price, the biggest differences were in properties owned for a longer period. Or, more simply put, vendors were more willing to negotiate if they have already seen a rise in their property value. If they have a large margin they may be less precious about pricing.
Research the property in the Land Registry for the last transaction date and price. If the property is not listed in the Land Registry, ask the estate agent how long the vendor has owned the property. Then, extrapolate the original purchase price by comparing similar or nearby properties in the Land Registry for the same period.
This will establish the probability of having a low offer accepted. Some sellers take a pragmatic view of selling rationalising that they’ve made money and wish to move on.
A seller could sacrifice price for the security of a sound buyer and swift transaction.
3) Assess the psychology and position of the seller
The motivation and position of the seller could be key in positioning an offer. Is the property owner-occupied? Has the seller moved overseas? Is the seller part of a chain? Are they buying a property in the same area or moving out of town? Has there been any failed sales or price reductions?
In most cases, estate agents can readily answer these questions. Responses to these question could help to ascertain receptiveness and flexibility in negotiation.
For example, if the seller lives overseas, then they may be more motivated to sell as news from the UK filters through. Without a “man on the ground” assessment of the property market in the UK, the seller may grow increasingly motivated to shift the property.
If the seller is buying a property in the same location, then chances are they need to achieve a certain level on their property in order to move up the ladder. Thus, they may have less flexibility on price.
If a seller is part of a chain, they may be in jeopardy of losing their dream house and are ready to listen to offers. If you can move quickly and express a willingness to put a deposit down, they may accept a low offer in exchange for the security.
4) Avoid Putting Forward a Low Offer Straight After Property Appears on Market
Whatever the side of the transaction, buying and selling is mostly led by emotion. Buyers must recognise there is a person behind the transaction.
Avoid storming in with a low offer straight after the property appears on the market. The seller is unlikely to accept as they may take a view that other buyers may materialise if they wait. After all, if they wanted a quick sale, they would have priced accordingly or attempted to trigger a reverse auction.
If the seller does eventually decide to listen to offers, the seller will remember you and may be less flexible in future negotiations.
5) Move Fast and Demonstrate Responsiveness
Having a low offer accepted exposes the buyer to the risk that another buyer materialises. Therefore, move swiftly during due diligence and be responsive to requests from the vendor.