These best tips when buying a house will help you avoid the numerous pitfalls you can easily fall into that make your purchase more problematic than it need be. Homebuyers often get the short end of the stick with the property market geared towards sellers and various unscrupulous tactics estate agents employ.
The great news is there are several ways you can improve your house buying experience and obtain your dream home for less than the asking price.
Let’s explore the best tips when buying a house further.
Estate Agents Aren’t on Your Side – Best Tips When Buying a House
When you show interest in or view a property it might seem like the estate agent is extremely pleased accommodate your needs.
The truth is estate agents are unqualified salespeople that often use unethical tactics to coerce you into paying the seller what they want. Estate agents make money from commissions, typically a percentage of the sale value.
It is in their financial interests to bloat the sale price as much as possible.
The common shady tactics Estate Agents use are:
- Leading you to believe there is a lot of interest in a property when there is not,
- Lying about offers received on the property to entice you into increasing your offer,
- Omitting key information about a property, either because they want to present the property only in a positive light or they don’t know much about the property they are selling.
To mitigate these tactics, you should be prepared to play estate agents at their own game.
You can do this by:
- Informing the agent there are other properties you are considering,
- Not exceeding a price that you have pre-fixed in your mind,
- Putting all questions in writing so answers are recorded, and the agent is liable if they mis-sell the property.
Always View a Property Purchase as a Business Transaction
It can be easy to fall in love with a property, imagine your home decor already in place, and feel like it is the only property for you. The property market is always relatively buoyant and there will always be other properties you will love just as much.
Falling in love with a property leads you into making offers with your heart and not your head. You can easily overpay for a house if you simply must have it, regardless of whether it makes financial sense.
When making an offer, always be prepared to walk away if the offer is rejected or the deal is not right.
Being prepared to walk away shifts the leverage in your favour and you will find sellers who want to sell quickly may come back to your offer if you have stood firm on your price.
Regardless of if your offer is accepted eventually, walking away protects you from overpaying for a property.
Be Cautious of Negative Equity – Best Tips When Buying a House
Currently interest rates are rising, and they will continue to rise until inflation is well and truly under control. This means mortgage costs are increasing and the property market will decline.
In short, you should be making an offer that gives you room to cope with your property value decreasing over the next couple of years.
Most industry experts are now predicting house prices will fall at least 10% over the next year and a half.
Offer 10% less than the asking price to avoid negative equity entirely or at least 5% less than the asking price to provide a buffer against your property value dropping.
If your property is one of the fortunate ones that doesn’t drop in price you have just bagged yourself a mega deal and if it does drop in value, you have covered off the loss and can remortgage without putting more money into the pot.
Pay Attention to Your Property Survey
When you buy a property in the UK the general attitude of the courts is that it is buyer beware. You have some limited protection from seller declarations, but these are not infallible.
Always ensure you are conducting a property survey – even if it is a basic homebuyers report. It is advisable to get a full property survey though, after all it affords you the most protection.
If issues are flagged in the survey, you can either negotiate a lower price to compensate you for rectifying the issues or you can insist the seller completes necessary work before the sale can complete.
Using a survey to strengthen your negotiating position is an underutilised tactic and sellers will often capitulate in the face of official documentation to prevent the sale falling through altogether.
If a seller is unrealistic about the issues flagged in a survey, walk away from the sale. By using Homebuyer’s Insurance, you will be able to recoup the costs of your survey and any other money spent and move onto to a more suitable property.
Research the Local Housing Market – Best Tips When Buying a House
It is no secret that sellers and estate agents overvalue properties on a wholesale basis. Many a mortgage valuation will come in less than the property valuation and sometimes significantly lower.
In my experience, at least half of all mortgages I dealt with had an issue with the mortgage valuation and the sale price and around 1 in 10 times the mortgage valuation was 10% or more lower than the agreed sale price.
In instances where this occurs it will be up to you as the buyer to either renegotiate the sale price with the vendor (seller) or worse, put in additional money as a deposit to make up the difference between the sale price and the valuation.
By researching the local housing market, you will find comparable properties that have sold and the actual sale prices they achieved.
Be extra cautious at the moment as properties sold in 2021 and 2022 were at peak property values so you should expect your comparable properties to be at least 5% more than your current offer.
Be Aware of Your Mortgage Payments
When making an increased offer on a property, you should always bear in mind your monthly mortgage payments will increase. Historically when rates were much lower this wasn’t much of a problem.
With rates more than 6% across the board you will find that every £5000 you increase your offer price to equates to around £100 a month extra on your mortgage payment. Over the course of a 2-year fixed deal, every £5000 you are increasing your offer is an additional mortgage cost of £2400.
Essentially, your offer is costing you £7,400 instead of the immediate £5000 you are focused on. Of course, if you are increasing your offer substantially, the total costs of your increased offer go up exponentially.
A good general rule of thumb is to make a firm but fair final offer for the property and if you are pressured into increasing the offer – walk away. The market with property prices in decline and mortgage rates so high is not a seller’s market, as a buyer you have the most leverage to negotiate a lower value.
All the seller has is the property they own that is losing value month on month and a hope and a prayer they can sell for as much as possible – not a very strong bargaining position at all.
If You Aren’t Embarrassed by Your First Offer, You’re Not Doing it Right
Finally, your first offer should always be much lower than the asking price. You can tailor your initial offer depending on how long the property has been on the market.
- If a property has been on the market for over 6 months offer 30% less than the asking price,
- 5-6 months on the market offer 25% less than the asking price,
- 4-5 months on the market offer 20% less than the asking price,
- 3-4 months on the market offer 15% less than the asking price,
- Anything up to 3 months on the market offer at least 10% less than the asking price.
The idea is to feel uneasy about how little you are offering for the property. If the vendor accepts you have just secured an excellent money-saving deal. If they reject, you have started your bargaining position low and have room to comfortably manoeuvre up to a value you have pre-set as your limit.
Negotiate Effectively – Best Tips When Buying a House
Often, if the seller makes a counteroffer, they will ask for a slightly lower than asking price amount expecting you to increase your offer to meet them halfway.
Never offer at the halfway mark as you are weakening your bargaining position and potentially falling into the trap of overpaying for the property (remember most asking prices are already inflated).
Instead, increase your offer in sensible and measured increments, maybe 1%-2% increase each time. You will soon get to a sweet point where the seller is happy to sell without committing to meeting them halfway on the price.