What Kind Of Offer Should I Make For A Property? – Understanding Real Value.
Knowing the right price to offer on a property is probably one of the most difficult decisions a buyer will face. It’s the agonising play-off between trying to extract the best deal for yourself, but not antagonising the seller/estate agent and cutting yourself out of the game altogether.
There seem to be numerous unwritten rules that say you should simply go in with an offer somewhere between 5-10% below the asking price. There are numerous reasons why this could be a bad idea…
However, this is not to say that you should just make an offer at the asking price! Many properties on the market are priced at an unrealistic level, particularly as sellers are hearing multiple reports in the media of an inflating property market. The reality is that most regions have not seen a great deal of price appreciation in 2013, it is London’s increases that are dragging the country average upwards (you can check this out by looking at the Land Registry’s regional house price data, it’s the most accurate source).
As a buyer, it is not your responsibility to pay for the seller’s aspirations and desire to move up the ladder. You just have to work out a calculated price through some serious analysis. If this does bring you out at a number that’s below the asking price, then you will have some sound reasoning you can present to the agent and vendor as to why you’re going in at that level. This gives you a better position from which to negotiate further.
So what type of analysis needs to be done? There are a few key steps to follow.
1. What have other comparable properties in the area sold for?
This can be easily checked by entering the property postcode into NeedAProperty’s Sold Prices tool. It’s important to compare properties of a similar size, number of bedrooms and location. The online data often won’t indicate the property size, so if you don’t know the address personally, you can always spy on the property using Google’s streetmaps. Always try to compare sales made in the last 6 months where possible. Sales older than this are not going to be as useful, as market prices are moving on quickly.
2. What has the property sold for historically?
The time and price of the last recorded sale for a property can again be retrieved using the sold prices tool mentioned above. This price can then be entered into the Land Registry of England & Wales online ‘Price Calculator’, which will return a current value for the property by adjusting it for average property price changes in the local area. Bear in mind that this estimate will not take into account any significant renovations or extensions to the home, so this will need to be factored into your valuation analysis.
3. What is the price per square foot, or square metre, is it similar to other properties being sold nearby?
The flooring area of properties for sale can nearly always be found on the floorplans that accompany the property particulars. Simply take the price and divide by the area to arrive at a price per unit and then compare against comparable properties for sale. This method is particularly useful for flats and apartments.
4. Ask the estate agent or seller these key questions…
The final phase is to ask the questions that will give an idea of how pressurised the seller is and how strong demand for the property has been. Ultimately, this will indicate how open to an offer they could be.
◦ How long has the property been on the market?
It could be a stagnant property that has been through multiple agents and price reductions.
◦ Why is the property being sold?
Probate sales are typically slow, whilst sellers who have a new baby on the way and need to upsize, or are moving locations to start a new job by a certain date are going to need to shift by a deadline.
◦ How many viewings have there been?
It’s unlikely you will get a completely genuine answer to this, but it still doesn’t hurt to ask, so you get a view of how popular the property may be with potential buyers
◦ Is the seller in a chain?
There could be pressure to sell so the vendor can get the next property of their dreams. In this situation, they’re unlikely to quibble over a bit of a discount at risk of the chain collapsing.
Weighing all these factors together should provide a good idea of whether the asking price is at the right level and what type of offer may be appropriate. Intelligent bargaining is definitely worth the effort.