Home Buying Part 2: Making an offer
Read our Home Buying Part 1 blog for information on knowing what to expect before negotiating an offer.If you’re worried that the asking price is a little too much and will exceed your budget, don’t hesitate to make a lower offer. As long as you make a reasonable offer, the seller is likely to accept, especially if they’re after a quick sale or the property has been on the market a long time.
On the other hand, if the property has only just been introduced to the market, the seller may want to wait until a higher offer comes along, in which case you may need to negotiate a little further.
Not sure about what price to offer?
Your budget (maximum offer price) is going to be determined by the level of deposit that you have available and the maximum mortgage that is available to you. You should also bear in mind that the deposit must be at least 10% of your maximum offer price, but as the required credit score is so high with 90% mortgages, the majority of first time buyers should really budget for 15% deposit or if there is any historic bad credit then a minimum deposit of 20%.
If your offer is declined then don’t feel disheartened – consider compromising a little, (but don’t let it affect your budget significantly). Remember that the vendor will want a price that’s closest to the asking price; don’t encourage a price that’s well below what the property deserves, as you may lose the seller’s interest altogether.
In any negotiation both the buyer and vendor have a figure in mind that they are happy to work towards.
Let’s say, for example, that a house is on the market for £150k. A first time buyer bids £135k (90% of asking price) but the vendor says they are looking for something along the lines of £145k. The first time buyer explains the benefits of selling to them; let’s say they are chain free, have a mortgage agreed and can move within 4-6 weeks so at a push, they could stretch to a maximum of £140k (still £10k under asking price).
Overall, it really comes down to how quickly the vendor wants a sale and in this example there is a further £2,500 to play with before the vendor has achieved 95% of initial asking price.
If the vendor accepts £140k then the first time buyer has a bargain and has saved himself or herself a bit more money!
A successful offer
If your offer is accepted, you’ll receive written confirmation before long. The contract will remind you that although your offer was successful, you can still pull out at any time and so can the seller, if they wish. You can also give yourself a firm pat on the back, as the price you offered obviously attracted the seller successfully!