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How low can you go? – guest post by Phil Spencer

In a buyer’s market potential buyers are looking for a bargain, lowball offers that were once seen as cheeky and unwelcomed are becoming the chosen tactic of many house hunters. In the past, agents advised buyers not to make ‘disrespectful’ offers that would insult sellers, who were told not to entertain these insulting offers, but it seems times are changing and lowball offers are starting conversations.

White modern kitchen extension

A lowball offer is usually described as 25% less than the asking price, for example an offer of £220,000 for a property advertised at £300,000 would fall into this category. Most of the time sellers won’t be very happy and won’t accept the offer.

Making an offer can be tricky, you don’t want to go in too low and risk losing the property but at the same time you don’t want to over pay. If you do want to make a low offer you need to understand the seller’s position, are they motivated to sell quickly or are they happy to wait around to get the best price? Most importantly, have they had any other offers? Legally the estate agent isn’t able to tell you how much the offers are, but they can indicate if they are in the same region as yours or closer to the asking price.

White-tiled-and-green-bathroom

Asking prices are just a guide and there’s often some room for negotiation baked in, typically the sale price is around 95% of the asking price.

The best way to gauge an appropriate price for a property is to look at recent sale prices (rather than asking prices) of comparable properties in the area. There is a time lag between when a property goes under offer (reflecting the market price at that time), the time the deal completes (several months later) and the time that price figure is reflected in statistics, such as those of the Land Registry. Try to ensure you know as much as possible about the comparable price figures you’re using. These prices should be taken with a pinch of salt. They don’t show the condition of the properties and in a changing market, prices can change rapidly but they will at least give you an indication.

If you do decide to go in with a low offer have a reason(s) for it – do your homework. Whether it’s an out-dated bathroom suite, damp in the basement or the local sale prices being lower than the asking price, justify your offer. As a buyer it’s important to remember that an estate agent is working for the seller, so don’t tell them your absolute maximum price (keep a bit of mystique).

blue statament staircase

Making a low opening offer can be a good way to open up a conversation and understand from the agent’s reaction what the seller’s price aspirations are. If a property has been on the market for a while, a low offer that gets a dialogue started can result in a good deal for all parties.

The worst buyer behaviour is gazundering. This is when the buyer waits until the last moment to reduce their offer, usually when everyone in the chain is ready to exchange, knowing that if the buyer refuses they could lose the property they’re about to buy. As a buyer, the problem with going in with a lowball offer is that the vendor may suspect you’ll decrease the offer last minute and gazunder them. If the vendor’s agent thinks there’s a likelihood of this happening they may advise the seller not to accept the offer in the first place and hold out for a better buyer. Read also: What to do when it all goes wrong.

modern living room

Images sourced from Pinterest

The amount you’re prepared to pay will vary depending on how you intend to use the property. If it’s an investment you should do your homework. Have a maximum figure and stick to it, based on the profit you can make from the property. Whereas if you’re buying a family home that you plan to live in for a number of years you might be prepared to pay more than the property’s market value for your ideal home.

By all means make a lower offer, but not simply because you believe it’s now the done thing and have reasons for the price you’re offering. If you’re not prepared to risk losing the property to another buyer or by offending the seller, make a realistic offer based on what you can afford (avoid taking out a mortgage that’s more than 75% of the purchase price), the condition of the property and the recent sold prices of similar properties.

Remember every sale is unique, from the condition of the property to the seller’s situation, make sure you’re clued up and make an offer that’s appropriate based on all the factors.

Best,

PHIL

 

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Phil Spencer

Phil Spencer doesn’t need much of an introduction, he’s TV’s most well-known property presenter, having co-presented Location, Location, Location and Relocation, Relocation for over 10 years. Phil'ls blog posts focus on adding value and advice/ tips for when you're buying or selling your house.

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6 Comments

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  3. I remember selling my house in North London.

    A couple came to view and a day later put in a fantastically low offer (over 30% less than the selling price, which reflected the market and recent sales in the same street. That offer was rejected straight off.

    A week later the same couple put in another offer, this time 25% less than the selling price…only to be told by the estate agent that another offer (for the asking amount) had been received and I’d accepted it. This was long before the Web sites like rightmove existed to see a houses’ status change to ‘STC’ or ‘Under Offer’.

    Low-and-behold the couple turned-up on my doorstep one evening, hugely indignant that their offers had been rejected – how dare I reject their offers!

    After a brief introduction to basic economics and house-buying (the bloke in the couple was a social sciences lecturer and struggled with ‘scientifical’ concepts) they finally accepted that they had blundered – having decided that they thought my house had been the one they loved.

    Nonetheless they fouled-up their offers well-and-good.

  4. In 2018, what percetage can I reduce the asking price of a flat and have the offer accepted?

    No other offers
    Property been on the market for 3 months
    One previous offer for the full asking price, fell thought, due to a clause in the lease, now rectified.
    Flat appears to be in good condition
    Good area and good views. Allocated parking

    Flat based in East Sussex

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