Writing in these pages last September, I spoke about blood on the streets of
Britain’s housing market. Six months on, it would be more accurate to talk
about a pitched battle between buyers and sellers. All but the most
desperate vendors are unwilling to reduce asking prices, while househunters
are out to cut the best deal they can. The banks and building societies are
making things even worse: by tightening lending criteria and withdrawing
products overnight, they are further complicating the buying process.
One thing is clear. Even though Easter, the traditional start of the spring
season, is behind us, the property slowdown looks set to continue well into
the year. So, what does this mean if you are looking to buy? Put simply, you
must work hard at controlling the only variables you can influence – the
property you choose and the price you pay – and walk away if either isn’t
convincing.
For the first time in years, we have a buyers’ market. The National
Association of Estate Agents reported last week that the number of
prospective purchasers on estate agents’ books is at a record low – which
means less competition. At the same time, the gap between asking and sale
prices has widened to 4.5% – so buyers are driving a hard bargain. Meawhile,
the number of homes on the market in February was 11% lower than in January
as sellers hold back, presumably hoping for better market conditions.
It’s a market full of opportunity for those who do their research and ruthless
enough to haggle.The more information you have, the more confident you can
be of getting the house you want at an affordable price. That is, if you
follow my Top 10 Tactical Tips.
1 Relationship counselling
Work hard at striking up a good rapport with both estate agent and seller.
Make them like you and want to do business with you. If things get tricky
further down the line, a healthy relationship can keep the sale on track.
2 Turn detective
Learn all you can about the vendor’s situation and motivation for selling.
Successful negotiation is a game that begins much earlier than many think.
Ask questions of everybody involved: what does the agent say the reason for
the sale is?
Ideally, you should meet Mr and Mrs Vendor separately and ask them both about
their situation, reasons for moving, forward plans, marketing history and
ideal timescales. If you’re viewing with your own partner, split up and
speak to them individually. Are both partners obviously in residence? Do
they share the same views or even speak to one another? Are they sharing the
same bedroom? Do they need to move because of a new baby, school year or new
job elsewhere? Poke your head around the children’s bedroom door and ask
whether they’re looking forward to their new school. They’re all polite
questions, but with a specific agenda in mind – getting enough information
to beat down the price. (If you’re selling, of course, make sure your
offspring stay shtoom.)
Chat to other local agents who may have viewed the property, but failed to get
the instruction. They may be able to tell you the true story. If anyone is
bluffing, it is sure to come out if you ask enough questions enough times of
enough different people.
3 Bottom dollar
Before making your first offer, invite the selling agent to justify the asking
price. Remember, an asking price is exactly that. It started life as a
market valuation, then had the hopes and dreams of the vendor and agent
added on top. Try to find out what they have based it on and when the
property was first valued. Forewarned is forearmed.
In a court of law, in order to be fair and equitable, any evidence that is
going to be relied on by one side or the other must be produced in advance
of a trial. This does not apply when buying a house.
At this stage, the agent doesn’t know whether or not you will make an offer
and, while attempting to justify the price, may be leant on to reveal all
the evidence he will eventually use to encourage you to pay more. Which
means you can spend time preparing your defence.
4 Play the long game
Maintain plenty of communication before you actually make an offer, and try to
reduce expectations. In a buyers’ market, if you have time on your side,
this can even be strung out over several weeks. My record is six weeks
between first viewing and actually making an offer. By this time, everyone
was suitably grateful to receive one at all and knew not to expect it to be
high. The negotiation process had begun long before an offer was on the
table.
5 Summing up
The amount you are willing to pay will reflect what you can afford and how
much you like, love or need that specific property. It is market forces, not
surveyors, square-foot calculations or even comparable evidence, that
determine value. Nevertheless, the more information you have, the more
confident you will be. The internet is an increasingly useful tool. To learn
about local sales data, visit www.nethouseprice.com,
www.myhouseprice.co.uk, www.landreg.org
and www.hometrack.co.uk .
An important part of a surveyor’s work is ringing local agents to find out
recent sale prices of comparable properties in the area. Try doing this
yourself. And remember: in a changing market, it is just as important to
find out how long ago the price was agreed as when the deal was completed.
The price achieved in a deal that was finalised in January may reflect the
market conditions from months before that.
6 Offers
Having worked out what you would be prepared to pay, plan your strategy for
arriving at or beneath this figure. Anticipate having your first offer
rejected and plan your incremental increases beforehand (these should always
decrease in amount: for example, £5,000 more, then £2,500). This should
leave room to include additional bits and pieces as you go, such as fixtures
and fittings. Gauge the reaction, always ask for a counteroffer and don’t
revise your bid too eagerly. Let agents and owners sweat a bit. They might
be bluffing – near to caving in.
7 Devil’s advocate
Put yourself in the vendor’s shoes and try to second-guess them. What willthe
agent advise them to do? Imagine how they might react to your offers. Given
what you know about their situation, what is most important to them? Are
they likely to be tempted by being able to move quickly or by keeping the
family-size fridge-freezer?
8 Money isn’t everything
It’s not just price that is up for negotiation. Think fixtures and fittings,
too: what could be included in return for an increased bid? Consider the
timescale of the move, too: maybe put in a lower bid, but say the vendor can
stay in the house for another month until their new home is ready. You go on
holiday or stay with friends or family, and get a better deal. There’s a lot
at stake, so be creative and suggest alternatives.
9 Chain reaction
Stubborn sellers holding out for last year’s prices are an increasingly common
species, so think laterally. As activity levels decrease, there will be a
build-up of chains, which become increasingly fraught and harder to link up.
Buyers ready to move can press home their advantage here. If, however, you
are involved in a chain and reach deadlock in your negotiations, try to
obtain price reductions up and down the chain. This way, you could end up
with the house you want at a price you’re happy to pay – with a discount
funded by others caught up in the chain. If you’re still deadlocked, gently
suggest to the selling agents that they reduce their commission fees to free
things up.
10 The buyout
Remember that, in legal terms, the negotiation process is finished only when
contracts are exchanged. Either side can change their minds, move the
goalposts or walk away. So, like any ball-busting legal eagle, don’t allow
principles to blockpro-gress – and don’t expect any favours.
Phil Spencer is CEO of the home-search consultancy Garrington; 020 7376
6780, www.garrington.co.uk
