Sellers: what you need to know about negotiating an offer

Unlike buying a pint of milk or new pair of shoes, a fixed price is always available when purchasing a property. A degree of negotiation is expected and the HomeOwners Alliance has found out how common it is. 

Its latest research found 39% of UK property buyers negotiated a deal and purchased below the asking price. The most common reduction was up to 5% off, which was achieved by 1 in 5 buyers (20%). A discount between 5% and 10% was achieved by 14% of buyers, while 6% managed to negotiate an asking price discount of more than 10%.

For context, 39% paid the full asking price and 10% paid more than what was advertised.

How to avoid haggling low offers

Everyone wants to get moving as soon as possible but time can be wasted going backwards and forwards with offers, especially if a buyer comes in with a ‘cheeky’ price. There are ways to avoid unnecessary haggling.

Being aware of current market conditions

House prices go up and down. As a result, sellers shouldn’t base their asking price on what their home was worth five years ago. What buyers are prepared to pay now, local demand and wider economic conditions influence asking prices.  

A real time, local market average supplied by an estate agent takes all of the above into account. Working with a property professional will result in an asking price designed to generate enquiries, viewings and offers. Pitch above the local market average and your home will need to be exceptional to avoid negotiations.

Pricing right from the start

Early negotiation starts because the buyer doesn’t want to pay what the seller is asking. There’s a wealth of information available and purchasers will check what similar properties are selling for locally before they make an offer.  

If you set an unrealistic asking price, expect to haggle with informed buyers who want to pay less than advertised. We use the local market average to price fairly from day one, minimising negotiations. Additionally, pricing in line with your local market gives you stronger grounds to refuse seriously low offers.

Setting an OIEO benchmark

Many sellers get offended by low offers but there is a way to almost avoid this altogether. You can market your home OIEO. This stands for ‘offers in excess of’. This involves the sellers publishing the lowest figure they’d accept, making it clear all offers should be above this price. 

This strategy works best when the lowest acceptable offer reflects the local market average and there are more buyers in the market than homes available for sale.

When negotiations are acceptable

There are a couple of instances where it is fair for a buyer to negotiate on the asking price, as follows:

• If a survey reveals serious flaws: it is acceptable to negotiate if your home has issues that would cost the buyer thousands to put right. The seller can either lower their asking price or make the repairs, at cost, themselves. 

• If there’s a down valuation: a surveyor sent by the lender to complete a mortgage valuation will decide whether the property is worth what the buyer has agreed to pay. A down valuation is when the surveyor’s figure is less than the agreed sales price. In this situation, a buyer can rightly reduce their offer.

Grey areas – and gazundering - exist

Negotiating can also masquerade as gazundering – when a buyer reduces their offer close to exchange. Sometimes the buyer will have a valid reason. Other times they may want to spook a seller into reducing their asking price for fear of the chain breaking.  

Reasons for delayed negotiations can include:

• The buyer’s mortgage offer runs out: this may mean they have no choice but to agree to a new loan with a higher interest rate. This can put pressure on finances.

• Others in the chain below are being gazundered: this can result in the buyer not getting as much money for their own home. Being gazundered can adversely impact onwards affordability. 

• Stamp duty rates changed during the transaction: if the Government changes stamp duty thresholds between offer and exchange, the buyer may be required to pay thousands of pounds more in stamp duty. This can also affect affordability.

If you are looking to buy or sell a property and would like asking price advice, please contact our sales team.