Buying a home is a big and exciting step, but it’s easy to let the pressure get to you a little. Thankfully, knowing what to do and what to expect should help put you at ease as you move through the process. So, here’s how to make an offer on your perfect property in four easy steps.
Stage 1: Be sure the property is right for you
Buying property is expensive, so before you even think about putting in an offer, make sure you do the groundwork. Think seriously about:
Your budget –Don’t forget there are costs to consider beyond the property price you had in mind. As well as the deposit and mortgage repayments, you’ll need to think about the cost of surveys and searches, stamp duty as well as solicitor or conveyancer fees.
Contingency funds – although not essential, it’s a good idea to factor in a contingency fund, especially if you’re buying an older property which might need ongoing maintenance. Having a little bit of leeway just means budgets won’t be quite as tight when you move in.
Location – it’s easy to get carried away if you’ve found a property you love, but remember, it’s not just the property you’re buying into, it’s the area as well. If you commute, make sure you’re happy with the time it’ll take to get to work. If you’ve got a young family, consider schools and the accessibility of leisure activities, shops, banks and other local amenities.
Stage 2: Your starting offer
You may be willing to put in the asking price straight away, but it can be well worth your while taking a moment to consider the following before you commit.
What is a guide price?
The guide price is as an indication of what a house might sell for rather than for what it definitely will sell for. You should use this as a rough guide when working out your opening offer.
What is ORIO and OIEO?
Some properties come with the tagline OIRO (offers in region of) which can be confusing. Essentially, this is a rough guide price and while sellers would rather accept an offer at or above the OIRO price, they are willing to consider a slightly lower offer.
Another label you might see is OIEO which stands for ‘offers in excess of’. This means buyers want you to offer a price greater than the one being advertised.
When to make an offer lower
At the end of the day, any property is only worth what someone is willing to pay for it, and you might find yourself in a strong enough position to make a lower initial offer if, for instance:
- You’re chain free.
- You’re a cash buyer and aren’t waiting for a mortgage to be agreed.
- It’s a buyers’ market and properties are struggling to sell in that area.
- The seller wants a quick sale, for example if they’re moving abroad.
- The property has been on the market for a long time or is on with more than one agent – both are signs that the seller is keen to move on.
When to make a higher offer
The housing market can vary by region, so you may find yourself in a situation where a higher offer might be prudent, for example if:
- Houses sell quickly in a particular area.
- You know that there are other buyers interested in the same property.
- You’re buying in a desirable area within commuting distance to a city or busy town or near excellent schools.
- You feel strongly about a particular property and it ticks all the boxes when it comes to your ideal home.
Stage 3: Negotiation
You’re likely to encounter a situation where either you realise you can push the seller lower, or the seller tries to push you a bit higher. This is completely normal, just remember to keep that budget in mind as you head into your negotiation.
How much less can you offer on a house?
Most properties are sold under ‘open negotiations’. This means negotiation is a two-way conversation between you and the seller.
In these situations, you can start your negotiation by offering between 5% to 10% less than the actual asking price. For example, if a property is on the market for £250,000, your opening bid could be £225,000.
What are sealed bids?
Sealed bids are an alternative to open negotiations, which usually happen when you’re competing with several other buyers.
Each buyer will write down their best offer, place it in a sealed envelope which will then be sent to the property owner via the agent. It’s then up to the seller to choose the winning bid – typically the highest.
If you do find yourself facing a sealed bid or situation where you feel you need to offer more than the asking price, then it’s important to keep to the limit you’ve set yourself and not get carried away.
What is a holding deposit?
In some cases, you might be asked to pay a ‘holding deposit’. This can mean different things so make sure you’re clear about how this will be applied to your offer.
Traditionally, a holding deposit is an amount paid by the buyer to show the seller that they’re serious about buying the property. If the buyer pulls out, the seller keeps the deposit.
Holding deposits can also work in other ways – for instance, a non-refundable deposit means that buyers lose out even if the seller chooses to sell to someone else. Other times, deposits can be completely refundable, so the buyer gets back their money no matter who pulls out.
What is a holding deposit?
Negotiating for a property can be the tensest part of the house-buying process, especially if it’s property you’ve set your heart on – here are our tips on getting the best price for your next home:
Check local house prices – is the asking or guide price realistic in comparison? If it’s higher than the local average, ask why – is it worth it? It could be a good place to start bargaining.
Critically view the house – this can be hard if you’re keen on a property but looking for areas that need work could lead to a reduction in price. Check the windows are well maintained, ask when the boiler was last serviced and have a quick look up at the roof for slipped or missing tiles.
Sell yourself – if the seller thinks you’re in a good position they’ll be more likely to choose your bid over someone else’s. Some sellers may even be willing to sacrifice some of the asking price for a quick sale. So, if you’re a first-time buyer, chain-free, or paying in cash – make sure the seller knows this.
Stage 4: Having your offer accepted and beyond
Just because your offer’s been accepted, doesn’t mean the house is guaranteed to be yours. In England and Wales, an offer isn’t binding so you or the seller can pull out.
What is gazumping?
Gazumping is when the seller decides to take another (higher) offer after they’ve already accepted yours. While it’s disappointing, it’s perfectly legal. In Scotland, gazumping is less likely to happen as the legally binding contract between buyer and seller is usually drawn up much earlier in the process.
There’s little you can do to stop gazumping from happening, but you can limit the chances of it occurring by asking the seller to take the property off the market. Most sellers will be happy to do this but if they aren’t, then you should ask why. If you’re not satisfied with the answer, just be wary and think carefully before spending money on a survey.
Your mortgage advisor can also give you guidance on how to minimise the risk of gazumping and what to do if it does happen. For other talking points you might want to think about, read our guide to the most important questions to ask your mortgage advisor.
What happens after my offer is accepted?
You’ll need to choose either a solicitor or conveyancer to manage the sale. Both will carry out the same processes (for example, organising searches and a survey) but they aren’t quite the same.
A conveyancer is a property specialist and best for straightforward property sales. On the other hand, a solicitor has more in-depth knowledge of other areas of law which can help you if a sale is trickier – for instance if the property comes with conditions or if there are any ongoing disputes with neighbours.
Solicitors are generally more expensive than conveyancers because of their wider knowledge but can be worth the extra cost if a sale proves to be complicated.
When you get to the point of agreeing an exchange and completion date, it’s a good idea to think about calling broadband, utilities and home insurance providers. It’s also worth getting your mail redirected so you don’t miss out.
To give yourself the best chance of having your offer accepted, you should arrange to have a mortgage agreed in principle. This will also give you a good idea of how much you’ll realistically be able to afford.
To help you find the right type of mortgage, we’ve teamed up with Bank of Ireland UK to offer a new mortgage range that could work for you. Use our mortgage calculator to get an estimate of how much you could borrow or find out more on mortgages at Post Office Money.