Whether you are a first-time homebuyer or perhaps you are thinking of selling up and moving to a new home, you will need to consider how much to offer on your home and what negotiating strategy you will use in making an offer.

Factors to consider when deciding on how much to offer

“To prevent falling in love with a place you can’t really afford and later running into financial difficulties as a result,” said Jamie Johnson, CEO of FJP Investment, “set a realistic budget before going out looking at houses. This will then be your guide when looking at properties, so you can save time by narrowing your search.”

There is no substitute for speaking with a qualified independent mortgage broker who can verify your eligibility for a specific loan amount based on your unique financial situation. Mortgage calculators are fine, but they will not be a substitute for qualified professional advice.

If you are considering applying for a mortgage “agreement in principle” (AIP) from a lender, a mortgage broker can help you decide whether or not to do so. An AIP is basically an initial agreement between you and a lender that they will, in principle, lend you an agreed amount for the purchase of your home.

It is common for real estate brokers to ask for an AIP in order to make sure that you can afford the house. They do this to see how serious you are as a potential buyer and to gauge how quickly you will be able to move in the buying process.

However, submitting an application for an AIP might adversely affect your credit score since a search will need to be carried out by the lender. When you apply for a mortgage, this can have an impact on your chances of being approved, so talk to an independent adviser before you do this.

Once you’ve located a house you want within your price range, don’t forget to take into account the potential impact on your budget of making the move. This involves factoring in all the costs that will come with living in that property and area.

If the property is listed on a major property portal like Zoopla, you can likely get an idea of how much it will cost to maintain the property, including the cost of utilities, water, local transport, insurance, and council tax.

What are the current market conditions?

To avoid overpaying for a home, do your homework on the local market for a clearer picture of what’s happening. For starters, look at previously sold homes in the same neighbourhood to see whether the property you’re considering is comparable. This information is available on the Land Registry’s webpage. Since house prices fluctuate each year in response to changing economic circumstances, you will want to see the most recent selling price for comparison.

Research the property

Googling the address of the house you wish to buy may show past postings on property websites, which might help you decide if you should make an offer.

Whether the owners have been attempting to sell it for some time or if the price has changed, this is a useful exercise to do as it could influence your negotiation. It can also flag up any issues as to why the house hasn’t yet sold.

See what you can learn from the estate agent

While it’s true that the estate agent is working on behalf of the seller, they can often still be a good source of information that can help you determine whether the property is right for you. Here are some questions that you can ask:

How long has the property’s current owner been there?

If they haven’t been living there for very long, for example, ask them why they’re moving out so quickly. Someone wanting to move out quickly may be an indication of some issue, like discord with the neighbours.

Remember that if they’ve lived there for a long period, they may have a greater emotional relationship with the place, which is worth noting when making an offer.

Why is the owner selling?

If you find out that they are moving because they are relocating due to work commitments, or something similar that has a time sensitive nature, then the seller may be more willing to move on the price.

Has the house been up for sale for a long time?

The owners may be more open to a lower offer if the property has been for sale for a long time. But note that sometimes owners are in no rush to sell. If it’s been on the market for a long time but the owner has shown no signs of lowering their asking price, it’s possible they aren’t in a rush to sell.

Is the owner still looking for a new place to live?

Many sellers begin looking for a home only after their own is up for sale, so the answer is likely to be no. However, if they have already found a new home, then this will likely make the process move quicker.

How many viewings has the property had so far?

This may give you a better idea of the level of opposition you’re up against when it comes to negotiating price. If there haven’t been many viewings, then your bargaining position is a little stronger.

Is there a history of past offers? Were any accepted?

You have no legal right to know how much prior bids were for, but the agent might be able to provide some insight into how close they were to the asking price.

What price is the owner willing to drop down to?

You probably won’t find out the answer to this question, and indeed, the agent may not be privy to it, but you can still ask it because you never know what response you will get.

Additional factors that affect the value of a property

• Properties located near good schools with an impressive reputation will push up the price of houses.
• If there are good transport links nearby, this will add value to the property.
• Local infrastructure plans need to be reviewed as this may have an impact on things like worsening local pollution levels. For example, is a new road being built nearby that will increase traffic?
• Is the property located on an established flood zone? This will have implications for things like insurance costs.
• What are the crime levels like in the neighbourhood? Is there a pattern of it getting worse? Local lice websites can be of help with this information.

When is a good time to make an offer below the asking price?

The asking price is simply the amount the owner hopes to acquire for the property when it is put on the market for sale. The asking price doesn’t have to reflect what the home is genuinely worth or even what the estate agent recommends.

Sellers, who aren’t in any rush, may begin with an inflated asking price in the hopes that someone will accept it. Indeed, in a hot market, buyers may be willing to pay a higher price to secure the home they want. In addition, many sellers factor in the fact that homes often sell for less than the asking price and set the price a bit higher than the property’s genuine value.

In addition, there are a number of other reasons to offer below the asking price:

• Because a similar home just sold for less.
• The seller is under pressure to move quickly.
• The property has had trouble being sold.
• You’re buying the property with cash and mortgage-free (often with buy-to-let investors).
• You’re not part of a chain. Sellers will see that you can move quickly and with something less likely to go wrong or delay the deal.
• Upgrades are needed or repairs are required (something can be evidenced once you have had the survey carried out).
• It’s possible to negotiate a price between your first offer and the asking price, even if your first offer is rejected.