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Making an offer on a house

Making an offer on a house is rarely as simple as offering the asking price. Sellers and estate agents expect prospective buyers to offer less than the asking price - so do not be afraid to go below it.

How to make an offer on a house

The most common way to put an offer on a house is via the seller's estate agent. By law, they must relay all offers to the seller.

It's in the estate agent's best interests to get the highest offer possible, because of the commission they make on the sale. Do not let them bully you into offering more than you are comfortable with, even for your dream house.

Not all online estate agents will act as the middleman during negotiations. You may have to speak to the seller directly. There are even some online agents that let you make an offer with just their app!

For private property listings, you will most likely make the offer directly to the seller.

It's a good idea to follow up a verbal offer with written confirmation - usually an email. This significantly reduces the chance of disputes over what offer was made and agreed upon.

To make an offer on an auction property, you need to place a bid. The bidding should start at the 'guide price'. The 'reserve price' is the minimum amount the seller will accept. You can place a bid:

  • In person at the auction house

  • By proxy (where someone goes in your place)

  • Over the phone

  • Online

Property auction processes can vary, so be sure to check first.

In any case, the faster the sale goes through, the better for everyone. Time is money!

Questions to ask the estate agent

To help make your offer a good one and speed things along, arm yourself with as much information about the property as possible.

Some questions to ask the estate agent may include:

  1. How long has the owner lived in the property?

  2. Why are they selling?

  3. How long has the property been on the market?

  4. What fixtures and fittings are included in the sale?

  5. Regarding flats: how much are the service charges and ground rent?

  6. Is the seller part of a chain? What stage are they at in their search?

  7. How many other people have seen the property so far?

  8. Have any of them made an offer? How much for?

  9. What is the lowest price the seller will accept?

  10. Did the seller do any major work on the property? Could I have a copy of the planning permission and building completion certificate?

  11. How old is the boiler? When was it last serviced?

  12. Could I see the electrical and gas installation checks/reports?

  13. Have there been any subsidence/flooding issues?

  14. Is the property listed? What grade is it? Is it in a green belt area?

  15. Have there been any neighbour disputes? Parking issues?

  16. How much is Council Tax?

  17. What is the broadband speed in the area?

  18. What is the Energy Performance Certificate (EPC) rating? What are the average monthly utility costs?

The agent does not have to answer every question, but there is no harm in asking. You can also search for some of these answers online – as well as check for planning permission applications that may impact your property.

The decision to buy a property is huge, so you want to be sure you are doing the right thing.

How much to offer on a house

Things to look out for when deciding how much to offer on a property:

  • Asking prices of similar properties in the area

  • Recent sold house prices

  • How long it's been on the market

  • If the seller has already lowered the asking price, and by how much

  • Clues that it may need major work

It is common to offer 5% to 10% below the asking price. Sellers expect buyers to offer less than the asking price and value it accordingly.

Start negotiations with an offer below your maximum budget and always do your homework first. Check prices for similar local properties currently on the market - are your sellers being realistic with their asking price?

For an even clearer idea, research sold prices too. You can do this via online property portals like Zoopla. Recent research found the gap between the asking and achieved prices in expensive areas like London, was around 5 or 6%.

Take all these figures into consideration along with the actual asking price.

For example: you've seen a property for £300,000. 

You want to try your luck and offer 10% below this (so, £270,000). But your research into recently sold house prices shows that some bigger houses have gone for £260,000. 

You could therefore feasibly offer less than £260,000, using the sold property prices as back up. But you should avoid going too low because you do not want to annoy or alienate the seller.

Never offer more than you can comfortably afford. 

You may end up needing a bigger mortgage, withdrawing your offer, or having the offer accepted and becoming 'house poor'. This is where almost all your income goes towards your mortgage repayments with very little left over.

If you're uncomfortable negotiating, and fear you could miss out on the property as a result, you could always hire a buying agent. Remember that these too come at a cost.

The longer a property has been on the market, the stronger your negotiating position. The seller might be more willing to sell it at a reduced price so that they can put an offer on their next property.

Expect some back and forth between you and the seller's estate agent. If the seller accepts your first offer, you went too high!

Home survey

Once your offer has been accepted, it’s time to carry out a home survey.

A surveyor will look for any major issues with the property and estimate the cost of sorting them out. You're well within your rights to go back to the seller to ask that amount be knocked off the agreed price if work is required.

Buying a property without getting a survey is a huge risk and could cost you huge amounts in repairs in the future.

What is gazumping?

To ‘gazump’ is to offer a higher amount than an already accepted offer on a property. It is perfectly legal in England and Wales, because an accepted offer is not legally binding – it becomes legally binding only when contracts have been exchanged. 

Gazumping was notably common in 2017, with around a third of prospective buyers being gazumped. The government has since proposed the introduction of 'voluntary reservation agreements'.

A reservation agreement is a written agreement between the buyer and seller saying that neither party will back out. Its purpose is to discourage gazumping or sales from falling through.

As part of the agreement, the buyer and seller each would need to put down a reservation fee. Whoever backs out loses their fee, which would then be awarded to the remaining person.

To limit the chance of being gazumped, always ask the seller to take the property off the market in writing when they've accepted your offer. They should also take down any boards or signs outside the property and remove its online listing.

Buyers can also consider taking out Home Buyers Protection Insurance, which will cover your upfront expenses (survey and legal costs etc) should the sale fall through.

It can also be worth getting to know the sellers – if they trust that you are serious buyers who love the property it might make them less likely to accept alternative offers.

COVID-19 update for mortgage borrowers

The Financial Conduct Authority (FCA) confirmed that homeowners whose finances have been affected by COVID-19 can apply for a 3-month mortgage payment holiday, which can be ‘topped up’ to a total of 6 months. 

Homeowners unable to make their mortgage payments who have yet to apply for a payment holiday have until 31 March 2021 to do so. Mortgage payment holidays ease the burden of having to make monthly payments at times when you may be struggling to make ends meet. The holiday will not appear on your credit file and won’t affect your credit score, however lenders will still be able to find out about it. 

You should only take a mortgage payment holiday if you really need to. This is not free money – it is simply extending the term of your mortgage by 3-6 months. Your home loan will continue to build up interest during this time, meaning the total amount you will pay back over the term of your mortgage will be higher.

8 February 2021