Finding your dream home is the first step – once you’ve found, you’ll need to make an offer.
Making an offer on a house can be daunting, but in this guide, we’re taking you through the process and everything you’ll need to consider.
“Googling a property before making an offer is a great way to investigate previous sales, how long it’s been on the market and any price reductions since it’s had since going live,” says Rob Smith, Managing Director of Parkers.
“Also, remember your estate agent does this for a living and will be a fountain of knowledge for anything you’re unsure of.”
What to do before you make an offer on a house
Before you make your opening offer on the property you like, you should:
1. Take another look at the property
Buying any property is a huge step, not to mention a huge amount of money.
So, before you make your offer, speak to the seller’s estate agent, and ask if you can have another look around the property.
Whether you’ve had one viewing, two viewings, or even more, one final examination of the property is always worthwhile so you can be sure it’s the right one to offer on.
2. Make sure you know your budget
Before you make an offer, you should have a full understanding of your budget to buy a property.
That budget should include:
- The maximum amount you can afford to pay for the property
- How much your mortgage and deposit will be based on your maximum purchase price
- What your monthly mortgage payments would be based on your maximum purchase price
- How much stamp duty you’ll need to pay based on your maximum purchase price
3. Get a mortgage agreement in principle
When making an offer on a property, it’s important the seller can see you’re able to proceed.
One way to show that is through a mortgage agreement in principle (AIP).
An AIP from a mortgage lender shows what they would be prepared to loan you, subject to a full mortgage application being successful.
Most lenders offer AIPs online within a few minutes, with a few simple questions about your income, monthly expenditure and previous address history.
4. Get all your paperwork in order
Once you’ve had an offer accepted by a seller, things really start to move quickly.
So, having all the paperwork you’ll require in place before you make that offer means you can hit the ground running.
Documentation you’ll need to complete your mortgage
application includes:
- Proof of identity (driving licence or passport)
- Utility bills (proof of address)
- Latest P60 showing you annual income
- Three months’ payslips
- Three months’ bank statements showing incoming and outgoing money
- An SA302 tax calculation form if you’re self employed
- Two- or three-years’ certified accounts if you’re self employed
You’ll also need proof of identity and address when you engage a solicitor or conveyancer
How do you put an offer on a house
Making an offer on a house is logistically straightforward – but there’s also a lot you’ll need to consider along the way.
Step One: Decide on your opening offer
Your opening offer is hugely important and will dictate how much you end up paying for the property you like even if it’s not accepted by the seller.
Before you decide on your opening offer, you should think about:
- How long the property has been on the market
- The seller’s position and how keen they are to sell
- What comparable homes nearby have sold for recently
- Any work the property will require once you own it
- How many other buyers are interested in the property
- Your maximum purchase price based on your mortgage agreement in principle and budget
Weigh up all of this before deciding where to pitch your opening offer in relation to the property’s asking price.
If the property is attracting a lot of interest, you may need to offer closer to the asking price to secure it.
But if it’s been on the market for a long time, with little interest from other buyers, you may be able to start with a lower offer and test the water with the seller.
Step Two: Make your offer to the seller’s estate agent
When you’re ready to make your offer, contact the seller’s estate agent, either over the phone or by popping into their office.
The agent is obligated by law to tell the seller of any offer made on their property, but it can also be worth putting your offer in writing, either by letter or email, to the agent.
If you’re in a strong buying position, with no property to sell, remind the agent of this when you make your offer.
A buyer who can move quickly but who offers slightly less than one in a long chain can sometimes be more attractive to a seller if they need to move quickly.
Step Three: Negotiate your offer if it’s rejected
Only three possible outcomes can happen when you make an offer on a house:
1. Your offer is accepted
If the seller accepts your offer, their estate agent will let you know.
When you have an offer accepted, you should ask for confirmation in writing from the agent and request that the property is taken off the market.
Remember, your property purchase
isn’t legally binding until you exchange contracts with the seller, so do all you can at the offer stage to protect your position.
2. The seller counter offers
Rather than rejecting your offer outright, the seller may put a counter offer to you and let you know what they expect you to pay for their property.
In this case, it’s your decision on whether to accept their counter offer or go back with an improvement on your first offer which is below their counter offer figure.
Often, offering on a property can mean lots of back and forth negotiating with your seller, until you reach a figure you’re both agreed on.
3. Your offer is rejected
In most cases, a seller who declines an opening offer will be open to receiving more offers from you and negotiating.
However, if your offer is rejected out of hand, it may be because the seller is not ready to sell.
If your opening offer was too low, though, the seller may feel you’re not able to offer the price they’re looking to achieve.
That doesn’t mean you can’t make further offers, but sometimes going in too low with your opening offer can damage your chances further along the negotiating process.
What is a reasonable offer on a house?
In most cases, an offer of 5% to 10% below a property’s asking price is considered ‘reasonable’.
While you may wish to test the water with a lower opening offer, you should consider the market and how much competition there is for the property you’re keen on.
How low can you offer on a house?
Any offer lower than 10% below a property’s asking price would probably be considered ‘cheeky’ by a seller.
The truth is you can offer whatever you like for a property.
But you should consider the potential damage a particularly low offer could do to your future negotiations with the seller.
What happens if you make an offer and change your mind?
Once you’ve exchanged contracts with your seller, you’re legally bound to go through with your purchase and pulling out after exchange could have serious financial consequences, including losing your deposit.
While you can change your mind after your offer has been accepted but before you exchange contracts, you’ll need to factor in other costs you could lose, including:
- Non-refundable mortgage costs, like your booking fee or valuation fee
- Work already carried out by your solicitor
- Survey fees
You should also think about the effect pulling out of your purchase will have on your seller, who may also lose money through up-front costs.
What does gazumping mean?
Gazumping is when a seller accepts an offer from a buyer, only to later accept a higher offer from another buyer.
While gazumping isn’t illegal, it can cause heartache for buyers, as well as having financial implications.
When your offer is accepted by your seller, make it on condition that the property is taken off the market.
This can help limit the chance of being gazumped but won’t remove the prospect completely.
Gazumping often occurs when a buyer who previously showed interest in the property returns with a bigger offer after yours has been accepted.
Ultimately, the decision on whether to accept it lies with the seller, but the quicker you can progress your purchase to exchange of contracts, the less time there is to be gazumped.
Further reading…
- All the fees you need to know about when you buy a house
- 10 questions you should ask on a house viewing
- How to buy a property at auction
Still have question? Contact your local Parkers branch today: www.parkersproperties….
