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Offering under asking price, whats realistic?

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  • Offering under asking price, whats realistic?

    Hi

    Ok, two things; we're first-time buyers (anywhere) and I'm not originally from the UK. Both points mean I've got lots of questions about buying our first home

    This ones regarding asking prices and realistic offers. I know the whole matter is pretty subjective and down to the people involved but;

    The asking price is always going to be as high as the vendor (and estate agent) can make it without scaring people away. Correct?

    So what kind of offer under the asking price should we realistically be looking to make, assuming there's nothing wrong with the property and its a straight up offer (ie no works need doing before sale).

    Is there any good rule-of-thumb? 10% less, 5% less, 1% less?
    Or is it generally completely subjective?

    On the flip side, would there be any kind of offer that could be TOO low and have the vendor rule us out completely? One would hope they're just say "no, too low" and we could work up from there?

  • #2
    Re: Offering under asking price, whats realistic?

    Just to add a little more, after a quick google around I see people suggesting offering 10% less than asking is a good idea to begin with and infact some stats suggesting most homes seem to sell for around 8% less than their asking price.

    Just to fill you in, we're looking at properties around £550,000 (First-time buyer? London, big gifted deposit). 10% off 550k is £55,000 ... that seems like a HUGE amount to ask the vendor to give up on?!

    Does that 10% suggestion decrease at higher price points?

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    • #3
      Re: Offering under asking price, whats realistic?

      It's difficult to give a definitive answer, Loki, because there's no hard and fast rule. You are right in saying that the asking price is usually pitched as high as the vendor and estate agent believe to be reasonable. The difficulty, as you know, is that while the housing market is more stagnant in the UK than it has been for years, there are still hot spots out there (where property is snapped up very quickly) and cold spots (where there is barely any movement at all).

      You could try looking at websites like mouseprice, zoopla (bit variable, that one) and rightmove to give you an idea of house prices and turnover in your preferred area. There are other sites, of course. After that, it's down to how long the property has been on the market and how keen the vendors are to move.

      Depending on what your research turns up, you could try making your initial offer lower than the asking price and see what response you get.

      The only certainty is that you can always increase a lower offer but you can never decrease a higher one!

      Good luck.

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      • #4
        Re: Offering under asking price, whats realistic?

        Hi Loki

        As has been posted previously there is no hard & fast rule that an offer should be any specific percentage below asking price. The property market is like any other market and the price of a property is how much someone is willing to pay, of course the seller wants as much as possible for the property but the market will finally determine what the seller will achieve. The estate agents price is a guide on what there particular market can achieve at that time, having said that some sellers place properties on the market higher than what the estate agent may have said.

        Now regarding your situation, you are looking at a property marketed at £550,000.00, this is siginificant because the Stamp Duty rate above £500,000.00 is 4%, many sellers at this price band strategically price there property at a level that buyers will offer below the 4% stamp duty threshhold i.e. £499,999.00 which has a stamp duty level of only 3%. So if I were you I would offer aggresively, first at say £495.000.00 with a view to increase to a maximum of £499,999.00 if need be. The seller may just say no & if you really want the property then you will have to pay more & trigger the higher stamp duty threshold, if you don't ask you don't get.

        Let me know how you get on.

        Geldard23.................

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        • #5
          Re: Offering under asking price, whats realistic?

          Property is always available at the right price if you look carefully enough. Work out what the property is really worth before making an offer. Use comparable prices on Right Move, Mouseprice, etc. Property Snake is good for seeing if a house is already discounted from the original asking price. Use the Firefox browser and download Property Bee which will then show lots of extra info on your Right Move searches which is helpful.

          I know it's difficult when buying a home to live in yourself but try to remain objective. There has rarely been a better time to buy property but you have to do your research and stick to your guns. Don't be talked up in price just because the vendor wants more. Know your limit! Your limit should not be what you can afford but what the house is really worth to you financially!

          I have just bought a property to refurbish for £75,000 (it was on the market for £95,000) but I know that done up it will be worth £115,000 and I only need to spend £15,000 on it and it'll take 6 weeks. I am going to offer a vendor funded deposit to attract buyers and offer it for sale at £107,500. Profit will be around £15,000 for a couple of months work.

          Try to apply the same sort of logic to your own home purchase and you won't go far wrong.

          REMEMBER: The equity is locked in in the purchase price not in some speculative future value! Buy at the right price and you can't go wrong.

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          • #6
            Re: Offering under asking price, whats realistic?

            The first thing to know about property prices is that there's one rule for London and the "leafier" parts of the South-East, and another rule for everywhere else . So disregard everything you hear about prices, on a country-wide scale.
            For making an offer, you can always increase it but you can't take it back down (well, you can back out but the buyer wouldn't take you seriously if you then re-offered, they'd assume you were a time waster).
            The general rule in negotiations is that one party will ask for the highest amount they can reasonably expect and the other will offer the lowest amount they can justify - unless they're just playing the odds and expect that if they make enough silly-low offers, one of them will get accepted by someone who's desperate.

            So, assuming you're a serious buyer - do your homework. Find out what other comparable properties are actually selling for (there are websites that can help, and the Land Registry website, too). Find out how long the property has been unsold - the longer, the lower the acceptable offer can be. Look for anything about the place that you could use as a bargaining point: state of repair, lack of parking, untidy street, noisy school/factory/trains/roads etc.
            After you've got you list and have put a subjective £££'s value on each factor and subtracted that from what other places go for - that's your offer. When you make it, don't just say "I can offer you X-amount", then fold your arms and be sullen. Explain why you think it's worth what you say - but I wouldn't suggest giving them a shopping list "well, I knocked off 5-grand for this, and 10 thousand for that ..." as you'll only start an argument. After that, the buyer will start the proper negotiations and you'll end up somewhere in between.
            Last edited by pete_l; 28-07-2012, 08:39 AM.

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