How to make a successful offer on a house
The basics: What determines house prices
What is the price of a house?
The first thing to know is that the price of a house, like the price of a piece of art is very subjective. Every home across the UK is unique. Two homes might have the same design and floor plan, but no two homes occupy exactly the same space and it is very rare for two homes to have identical specifications of kitchens, bathrooms and decoration etc etc.
No two houses are therefore perfect substitutes for each other, therefore the price of every home across the country could be different.
Remember that only two people decide the price of a house: the home buyer and the home seller. It is only when the amount offered by the buyer is accepted by the seller that the price of the house is agreed. The asking price might be used as a guide, but it is important to remember that the ‘asking price’ is like asking for a salary increase, the seller can ask whatever they want, but that does not mean that is what they will get.
The key determinant of the price is how eager are you to buy this particular home and how keen is the owner to sell their home. They only have one home to sell, whereas you could buy any number of homes.
The extent to which you really want to buy this particular home ‘vs’ this is one of several homes that I’m interested in will make a big difference to how big an offer you will choose to make.
What have similar houses sold for?
Whilst no two homes are the same, what similar homes have sold for provides a useful guide as sold prices show how much the house actually sold for rather than what house price was ‘asked’ for.
If similar homes in the same street or area have sold for around £249,000 it is not unreasonable for the homeowner to ask for a similar amount.
You can look up any home across the country on Twindig to see our estimate of its current price and its sale history since 1995. This will show you what other people have paid for similar houses and how we believe that price has changed since the last sale.
If similar properties sold for less than the asking price and if their Twindig price is less than the asking price you can use this information to support making an offer on the house below the asking price.
Bear in mind, that you also have to consider what state of repair the similar property was in at the time of sale, a ‘doer-upper’ will command a very different price to a home recently refurbished to a very high standard. If these houses were listed on Zoopla and Rightmove you can often still find their pictures in their house price archives.
Assessing current housing market conditions
If the home you are interested in is on Zoopla the listing will show you how many times in the last 30 days the property advert has been viewed. This will give you an indication of how popular the property is and how many buyers are interested in it.
Zoopla also shows the asking price history so you can see when the property was first listed and any changes to the asking price. The longer the property has been on the market, the more likely you are to be able to talk the price down.
Should I ask the estate agent what to offer on a house?
By all means, ask the estate agent, but never forget that the estate agent works for, and is paid by, the homeowner. The agent works in the seller's interests and not the buyer's interests. They will have given guidance to the homeowner about both the asking price and what house price they believe is realistically achievable in the current market conditions.
Should I make the highest offer on a house that I can?
The highest offer is not necessarily the best offer. Let’s say the asking price is £325,000. An offer of £300,000 in cash today may be worth more to the seller than an offer of £350,000 but where the buyer needs to both secure a mortgage and sell their own home. This is a classic case of a bird in the hand being worth two in the bush.
How disappointed would you be if you were not able to buy this particular house.
A helpful thought experiment is to come up with your offer and then spend a day thinking about how you would feel if you lost out to a higher offer.
You can always raise the offer
We would suggest that it is better to start low. If your offer is accepted straight away, you may end up suffering from buyer’s remorse, a sense of regret that you offered too much money. It is much easier to raise a rebuffed lower offer than to renege on an offer that has been accepted. By starting low you minimise or at least cap the potential pain of buyer's remorse.
Stick to your budget
We have all seen or heard stories wherein a bidding war on a house the heart rules the head. As difficult as it is, try hard to remain emotionally detached from the house at the offer stage.
Work out what you are happy and able to pay for the home you want to buy and do not offer a penny more. Always remember the seller is trying to sell one home whereas you can buy any number of homes, you have more choice than they do.
When you ready to make an offer on a house, never go above your budget.
How much should I spend on my mortgage?
Unfortunately, there is no substitute to good old fashioned hard work when it comes to working out how much you can afford to spend on your monthly mortgage repayments. It all comes down to household budgeting.
Just as studies regularly show we under-report how many calories we consume, the same goes for expenditure. The Twindig Household Budget Template provides a comprehensive will walk you through all of your income and expenditure allowing you to see very clearly how much money you have and where it gets spent. Most people are surprised by the results and able to make some easy savings!
We recommend that you also use the Twindig Stamp Duty Calculator to see what size of mortgage you can afford and the Twindig Stamp Duty Calculator which will calculate the Stamp Duty you will need to pay on your house purchase.
How much can I borrow?
Firstly you need to work out your household budget, which you can do using the Twindig Household Budget Template. This will help you decide how much you can afford in terms of a monthly mortgage payment. You can then use our mortgage calculator to see how these monthly payments translate into how much you can borrow mortgage. A rule of thumb is three times the largest salary in the household or two and a half times both incomes in the case of a joint mortgage. Once you know what your mortgage capacity is (how much you can borrow) you will know the maximum amount that you can make an offer on a house.
How do I improve the quality of the offer I am making on a house?
Now you have worked out how much you can afford you can work on increasing the quality of the offer you are making.
The best offer will be in cash today, but without flexibility on the moving date. You are ready to complete the purchase when the seller ready, but you are not putting time pressure them.
The best offer for the seller is not the best offer for the buyer, if you are ready to move today you do not want to have an undefined completion date
We show below in order of attractiveness what makes the best offer on a house
In order of attractiveness:
Financing the offer
Low Loan to value mortgage (LTV). This means there is a large cash element to the offer, which makes securing a mortgage easier because the lender is taking on less risk
Mortgage agreed in principle this means that the lender has agreed to lend the amount required by the offer made on the house subject to making its own enquiries and valuation reports
High loan-to-value mortgage. An offer on the house may have been agreed, but if the lender’s valuation report or a survey raises issues the mortgage lender may not agree to lend as much as is required
Flexibility on moving date
You can complete the transaction and move when the seller is ready
You can arrange a moving date within one month
You need to move in by a certain date
Where are you in the housing chain?
No chain – and ready to move.
Chain free and renting it is usually quicker and for the buyer to end a rental contract than it is for them to sell a home. This gives the seller more certainty over the timing of completing the sale of the house.
A short chain. The more links in the chain, the higher the risk that the transaction will fall through for no fault of your own.
Your reason for wanting to buy this particular house
If you want to buy this particular house, rather than any other house, your offer is stronger as you are less likely to be considering alternatives which could lead you to pull out of this potential purchase
The home is in a particular school catchment area
It is close to important family members
The design of the house is ideally suited to your lifestyle and family situation
Negotiating the offer you make on a house
Never disclose your budget
Estate agents will ask you and some will try to pressure you into telling them what your maximum budget is. Do not tell them. Always remember that the estate agent is working for the buyer and in the buyer's interests, not yours.
Negotiate with a poker face
Remember the price will come down to who wants it more – the seller to sell or the buyer to buy. Even if you are about to make an offer on your dream home, play it cool. If the seller knows you have found your dream home, you have revealed your hand and given them the upper hand in the negotiation. If you do not reveal your emotions and enthusiasm, all they can do is judge the quality of the offer you have made.
Get a full structural survey
Buying a house is likely to be the biggest purchase you ever make. Always remember that a mortgage survey doesn’t offer you any protection. You cannot rely on a mortgage survey because it is written for the lender’s benefit, not yours and the lender has no obligation to share a copy with you. The report is for the lender to gauge financial risks and it is not designed to find or report on the structural condition of the home.
A full structural survey or RICS Building Survey will provide an extensive inspection of the structural condition of the property. It will include descriptions of any visible defects and potential problems caused by hidden flaws and an outline of the repair options.
If a full Building survey highlights any issues, you can use these to negotiate a lower offer price.
In any case, the survey may also highlight that if you purchase the house there is significant work to be done and you will want to factor these costs into your overall financial situation – there is no point agreeing to the purchase only to find out you do not have enough money left to fix the leaky roof.
Do not exceed your budget when buying a home
Stick to your guns. As with art, a home is only worth what you are willing to pay for it. Art is a great analogy. Consider buying a picture. If you think a painting is worth £1,000 and another person offers to pay £2,000 you would not try to outbid them as you believe it is only worth £1,000.
The same is true with housing is someone else sees more value than you do, walk away. You will end up regretting paying over the odds.