If you are selling are you likely to accept a lower offer? If you are a buyer are you likely to submit a lower offer?
In short, buyers hoping for money off will need their best negotiating skills and sellers may end up forgoing a sale by refusing to accept an offer below their asking price. Learn more about seller and buyer behaviour so you can use this insight to your advantage.
Seller and Buyer Behaviour
A recent survey by Strike, an on-line estate agent, shows that:
since the first lockdown began, 45% of sellers received requests to accept offers, most commonly ranging between 5-10%, less than the asking price
25% of sellers would consider a reduction of between 5-10% compared to the asking price
29% of sellers would not accept an offer below the asking price
19% of sellers have not been asked to drop their price by prospective buyers
70% of buyers in London have made lower offers (the most popular location to do this), whereas buyers in Northern Ireland, the South West, South East, West Midlands and Yorkshire are less likely to ask for a price reduction
50% of sellers confirmed that the pandemic will not stop them from moving home
35% of sellers believe that average prices in their area will rise post the pandemic
Over 50% of those surveyed are confident that they will complete their sale in 2020
18% of sellers have confirmed they've received more interest in their property than expected, despite the pandemic
Sam Mitchell, Strike's chief executive, says:
"Over the past few months, we’ve seen at least a 50% increase in demand from buyers now versus before lockdown and we are on average agreeing twice as many sales per week as we were pre-lockdown which is astonishing,"
and
"Many of our own customers are seeing multiple offers to choose from – an ideal situation to be in. But it is also important to remember, the quality of any offer is also worth weighing up."
and
"Now that restrictions have been lifted, property demand is booming.
While buyers are always going to try and get a good deal on a property, and who can really blame them for trying, demand is so high that sellers might not feel the need to lower prices in the current market."
For those sellers that are refusing to accept a lower offer, this is driven by the mini-boom as a result of the housing market re-opening on 13 July combined with the stamp duty holiday (which is due to end on 31 March 2021).
Achieving a lower sale price, can involve tens of thousands of pounds. For example, a 10% reduction on Nationwide's average house price of £245,747 results in a saving of £24,574.
The buying and selling process is daunting for many reasons - not only is this likely to be one of the largest investments you'll ever make, there are many cogs to the wheel, any of which can fall off at any time!
As a Buyer, What Offer Should You Make?
The housing market is buoyant and as a result, estate agents may well use this to try to increase your offer. Before putting in an offer, you should consider the following - your offer should:
be based on the value you will derive from the property - key elements you'll need to consider include eg:
- does it mean you will be in the desired school catchment area?
- does it offer sufficient outdoor space or access to green space?
- does the size fit your family's needs now / in the future (or have the potential to do
that)
- if you need to work from home, is there a home office or space to create one?
factor in your specific financial situation
what property prices have sold for in the immediate area (these can be used as benchmark but not a definitive position unless the properties involved are identical)
whether there has been a price reduction (this information is available on Zoopla) - this could indicate that the seller is needing to sell quickly, there is a problem with the property or it could indicate that the property is overpriced
be nice with the estate agent! Although the estate agent's role is to represent the seller, building a good rapport with them will help smooth your interaction. Let the estate agent know that you are a great potential buyer by lining up the following:
- let them know you are a cash buyer and can proceed quickly
- if you need a mortgage - share the mortgage decision in principle. Lender's borrowing has changed significantly as a result of the pandemic and as a result, they are amending or even withdrawing their borrowing offer subsequently. Also share proof with the agent
- let them know if you are selling or are in rental property (and when the rental period ends and whether you can proceed before that comes to an end)
- you should find out if the property is being marketed by multiple estate agents. If so, the estate agent you've been engaging with may be open to taking a lower offer so they can secure their sales fee.
When thinking of making the offer, you can always negotiate up, but you cannot negotiate down! It is better to test the waters with the estate agent - they will likely say whether the seller will or will not accept such an offer. Based on your interaction with the estate agent, you should be able to gauge whether the offer is offensive.
As a Seller, How Do You Achieve Your Asking Price?
Setting the right price at the outset, doubles your chances of finding a buyer.
A Rightmove study has confirmed that one third of sellers listing their property between May and September had to reduce their asking price, the other two thirds did not.
Rightmove’s Tim Bannister says:
"If sellers are serious about selling, then starting with too high an asking price can cause unnecessary delays, and also make it a lot less likely they will actually find a buyer in the end."
It is important that you familiarise yourself with what's selling and what's been recently sold in your area. These are great indicators about what price buyers are prepared to pay.
It's also important that you select the right estate agent. Learn more about how to achieve your sale price here.