Making an offer on the purchase of a new home can be a daunting task, especially if you’re not familiar with the process. But it is also an exciting time and likely to be one of the most significant transactions you will make.
Before making an offer on a UK property, there are a few things you need to consider to get you prepared. When viewing properties, prepare a list of questions to ask the estate agent to get as much information as possible.
Impacts on the property’s value
This can include:
- How long has the property been on the market?
- Is it freehold or leasehold?
- Why is the current owner selling, and how long have they lived there?
- How much are utility bills and Council Tax?
- Have there been any other offers?
- What is the EPC rating?
- What’s the minimum asking price the seller would accept?
And remember to go into a viewing with an open mind, as there are lots of ways to update an older home.
What the property is made from is all important to the mortgage lender. Although it may look like a ‘brick house’ from the outside, many homes have been built using single skin walls, internal timber frames, or steel frames, and some of these may need a specialist property mortgage. Specialist advice will be needed for concrete house mortgages and, depending on the construction, also for ex-council houses.
You need to understand whether the property has ever suffered from subsidence (this should be disclosed by the seller), as buying a house that has been underpinned is a bit more involved. Likewise, some flats can either have a share of the freehold or are pure freehold flats, the latter being quite difficult to mortgage.
When buying a repossessed house there are two aspects to consider. First, the speed of the transaction. Many will need to be completed with 28 days, hard to do with a normal moving home mortgage. Second, it can be harder to establish the method of construction before incurring fees.
It’s not just the property itself that will determine the value, there are external factors to consider that can also affect the price. These can include school catchment areas, transport links, crime levels, flood zones and development applications in the area, which can all impact on the property’s value.
Having room to negotiate upwards
Once you’ve an idea of how much you’d like to offer, you can then start the process of making an offer. Set yourself an upper limit of what you can afford to pay and consider going in with a slightly lower offer – around 5% – so you have room to negotiate upwards with the seller.
However, if other people are also interested in the property, it might be worth offering the asking price or even slightly higher, but you need to make sure you’re still not paying over the odds for the property.
If things are going your way then you may wish to ask for certain items to be included in the sale, such as light fittings or appliances. This can be a great way to save money on items you would need to buy anyway.
How quickly you are looking to progress the sale
Submit your offer to the estate agent either over the phone or in person. You should also provide a written offer (email is usually fine – but check this) and ask that this is passed on to the seller.
Needless to say, the seller will be mostly interested in the price you are offering; however there may be other deciding factors that are important to them, depending on how quickly you are looking to progress the sale, or you having a mortgage Agreement in Principle, so they know upfront you can afford to buy the property. Getting organised in advance and making sure you are mortgage ready will also instil confidence.
Indicating to the seller you are serious
It will also go in your favour if you are a cash buyer or chain free, a first-time buyer who doesn’t need to sell their own property to finance the deal. And it may help if you can be flexible on the moving date, as the seller themselves might still be looking for their new home.
By showing the seller you are organised and already have a conveyancer set up, so if your offer is accepted you are ready to proceed, this will indicate to the seller you are serious about buying their property.
Contact a mortgage broker about your options and ask them to arrange an agreement in principle for you. This is a document from a lender that states how much they would be prepared to lend you based on a number of factors including your income, outgoings, credit score and employment status.
An agreement in principle or decision in principle is not a guarantee you will get a mortgage, but it does show the seller you are serious about buying their property and can afford to do so. It also means when it comes to making an offer, you know exactly how much you can afford to pay.
A property chain is a group of people who are all buying and selling houses at the same time. The seller’s house is usually the first to go on the market, and they will be waiting for the buyer’s house to go through before they can complete their sale. This can often cause delays, as each person in the chain needs to agree and sign off on each stage of the sale.
Make sure you don’t overstretch yourself
You should make it clear to the seller that your offer is subject to the property being taken off the market, so no more viewings. This is only likely to happen if you are a cash buyer or your mortgage is already agreed and you can provide proof of this.
The last thing you want to do is get caught up in a bidding war and end up overpaying for the property, so make sure you don’t overstretch yourself.
Keep in mind there might be other people interested in the same property as you, so it’s important to stay calm and not get too emotional about the situation. If you really want the property, then put your best foot forward, but remember there will always be other homes on the market.
When entering into negotiation, there are a few things to keep in mind. Try to keep your budget private – revealing the maximum amount you are willing to pay might make the agent tell the seller to hold out for more money.
Having fallen in love with the property
Don’t act desperate. If the seller knows you have fallen in love with the property, the agent might think you’ll be willing to pay more.
Don’t be overly influenced by things the seller might throw in with the deal. For example, white goods – unless nearly new, these are worth very little so you shouldn’t pay too much for these to be left in the house.
Don’t be afraid to walk away from the deal
Always take your time to consider your options; the agent might try to rush you, but this is a big decision, so make sure you think it through before increasing your offer.
And finally, don’t be afraid to walk away. If the seller isn’t budging on the price and you really can’t afford to pay any more, then it might be best to look for another property.
If your offer is accepted that’s really great news, but don’t be discouraged if it’s not – another home will be waiting for you just around the corner. There are plenty of other homes out there, and you don’t want to end up overpaying for one just because you got caught up in the moment.
You will need to agree on the contract
The buyer and seller need to have a contract drawn up by a conveyancer or solicitor. This document will state the price you have agreed to pay for the property, as well as any conditions of the sale. Once both parties have signed and exchanged the contract, it is legally binding.
If the property you’re buying is in England and Wales, your offer is not legally binding until you and the seller have exchanged contracts.
In Scotland, once the seller is happy to accept your offer, you’ll receive a ‘qualified acceptance’ letter, informing you that the seller accepts the offer and lists any conditions to be agreed before the sale is finalised.
Do your research and get prepared
Solicitors will then send a series of letters – missives – between each other, negotiating the conditions. Once both parties are happy, a final ‘concluding missive’ will be written and, when signed, is a binding contract between you and the seller.
Once you find a property to buy, you need to make your offer and negotiate the price, which can be daunting. But by doing your research and getting prepared, you’ll stand a higher chance of having your preferred offer accepted.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
