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Guide to negotiating a property purchase Rule number one - know your location Rule number two - inspect with care Rule number three - be ready to move Rule number four - keep your distance Rule number five - go low, stay low Rule number six - be ready to haggle Rule number seven - bid smart Final thoughtsGuide to negotiating a property purchase
It can feel daunting. Even terrifying. When you’re trying to buy something that costs maybe 50 to 100 times more than you’ve paid before, a small mistake can cost many thousands of pounds. So it’s worth checking out how the experts do it, with the benefit of years of experience, during which they’ve probably messed up frequently.
They stick to 10 golden rules:
Rule number one – know your location
Find out what similar properties are selling for and how long they’re taking to sell. Are they sitting on the market for months, or do they disappear within a couple of weeks? This gives you a sense of how much competition is out there. If you're interested, here's a guide to the 6 best property sales websites in the UK.
Consider the pros and cons of the area: is there noise from traffic or neighbours? How close are you to shops, transport, parks, leisure facilities? How safe is the neighbourhood?
Try to find a local property report, covering the latest developments, statistics etc.
Rule number two – inspect with care
Commission a report by a professional surveyor, looking at everything from potential damp in the basement to the state of the roof. They will tell you whether the property is worth the asking price. Discuss this with the surveyor. How much would it cost to bring the place up to scratch? They can tell you how much to knock off the asking price.
Do your own inspection of the property, looking for issues. Can you smell anything odd, which could be damp or damaged drains? Is there any mould on the walls or ceilings? How much of the current fixtures and fittings, flooring and decoration, would you keep and how much replace?
Compare the property’s size, condition, age and layout to what’s on offer nearby.
Check out the Energy Performance Certificate (EPC). If it’s low, work out how much it would cost to bring it up to a good standard, through double glazing or insulation for example.
Add up the likely cost of all these things and consider deducting them from the asking price.
Rule number three – be ready to move
What sellers and their agents love is a chain-free, financially ready buyer who can move quickly, saving them months of potential hassle and time-wasting. When buyers are in property chains it not only takes longer to transact, it’s also less secure – they could drop out if the chain fails.
Even if you’re in a chain, you can still prepare by having a ‘mortgage in principle’ agreed with a lender, meaning that you’re ready to transact as soon as your own sale goes through (if you need a mortgage, that is). Even if the sale on your property falls through but you still want to proceed with your next purchase you could use bridging finance to bridge that gap and avoid losing your next property. This is reassuring to the seller, since it shows you’re a serious buyer and can afford the property.
Don’t reveal what your actual budget is, just give them a sense that all’s fine.
Rule number four – keep your distance
As a property investor, you’re interested in the financial advantages of a deal, rather than finding your dream home. Stay calm and business-like in negotiations rather than enthusing about how amazing a property is. Agents will interpret emotional as an excuse to push up the price.
Equally, you want to impress the seller with your credibility and the fact that you can move quickly to complete the deal. You need to be seen as an attractive buyer, someone who is good for the money and competent dealing with legal contracts, rather than an amateur who’s out of their depth.
Consider mentioning that you’re interested in other nearby properties. This may trigger the agents to accept a lower offer, for fear of losing you.
Rule number five – go low, stay low
Unless there’s fierce competition for the property, start your negotiation with a bid at least 5-10 per cent beneath the asking price. Most sellers and agents pitch their valuations high, so you’re simply bringing them closer to a realistic level.
While discussing a price, make your position clear: stress how you’re ready to move, you have your finances in order, you’re chain-free… whatever attributes you have, put them on the table. If the property has been on the market for some time, ask why.
Set a maximum budget and be prepared to walk away. In fact, hinting that you’ll walk away can be a strong bargaining position. The seller has to weigh up whether to risk losing you and starting the process again with someone else, or compromising on price and keeping you on board.
Put your offer in writing, so that there’s no scope for confusion or debate later on.
Rule number six – be ready to haggle
Property prices are subjective. A place is only worth what someone is prepared to pay for it. So remember – you are that ‘someone’. If the property market is falling or interest rates are rising, you may decide that you’re not prepared to pay as much as you initially discussed. Or you may have discovered issues with the property that will cost money to put right.
Be prepared to knock money off the asking price for anything that will cost you later. Both the seller and their agent are usually motivated to achieve a quick sale, so they’ll be open to bargaining, to accelerate the process.
If there are items in the property that you would use, such as fridges and cookers, see if they can be included in the sale at no extra cost.
Rule number seven – bid smart
If it comes to a competitive tender, with sealed bids, remember to stay within your budget – and the budget your financing will cover. Always offer a few pounds more than a round number – say £450,050 – so you’d trump someone offering £450,000. Discuss your bids with the estate agent: they may give you a clue about what would be a winning amount.
Final thoughts
If you follow these rules, you’ll stand a great chance of getting an investment property for a bargain price, or getting a better property for your budget.
One other thing to bear in mind. Because property values are subjective and because people become emotionally attached to their homes, they like to sell to buyers where there’s a personal connection. Maybe you have something in common, like a shared background or interest. Maybe they think you’ll treat the property well.
Small things, but they could tip the balance in your favour.
Read Next: The guide to conveyancing
Read the full guide: The guide to property investment
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