Negotiating and making an offer
Once you have found the property of your dreams, the next step is to make an offer. It is important to consider a variety of factors when choosing your price level in order to achieve the right deal for you. Take a step back to logically look at all the things that matter before making your offer.
First time buyers, buyers with no chain and buyers who have pre-arranged mortgages have a head start on most of the competition. If this is you, then make the agent and seller aware of this, as this can put you in a very favorable negotiating position, especially if the seller is in a chain. Be sure to check if they are in a hurry to sell or have been trying to sell for a long time. If so, they may be willing to accept a lower offer to make the sale. Sellers who are not in a hurry to move are more likely to hold out for a higher price.
Knowing your budget ceiling is crucial so decide your maximum limit from the start and stand firm. If the seller refuses to budge, you need to think very carefully if the property really is worth the extra money and of course, what you will have to live without over the long term. Do your homework and check what the property is truly worth. Whilst sold house prices can help give an idea of recent sales, it's better to see what the competition is like now. If there are few similar properties for sale in the area, chances are the seller has the upper-hand. Also, if there are any faults or repair work required, use this to justify a lower offer. In tougher times when there are fewer buyers, sellers may be more willing to negotiate on price.
Once you make an offer make it clear that it's subject to contract and a satisfactory survey. If you are buying from a developer, while selling an existing property, see if they will offer a part exchange to buy your existing house.
Once the seller has accepted your offer, ask them to take it off the market. They don't have to agree to this, but doing so will shut out other potential buyers.
Now you need to move fast - the seller will want to see progress so try to avoid any unnecessary delays in getting the surveys and other legal work done. Complete the lender's application form and send them the documents they require - this will include proof of your ID, evidence of your earnings, proof of your address over the last few months and your bank statements, so have these ready.
The lender will arrange for a valuation to be done on the property. If you are lucky enough to not need a mortgage, you don't have to get a survey done, though buying a property without one is not advisable and risky. If you are buying an older property, one that needs repairs or just for your own peace of mind, you could consider getting a more detailed survey done than the basic lender's valuation. Ask your estate agent or a surveyor at www.rics.org for a quote.
The lender will use the surveyor's Valuation Report and other information you provided to calculate how much it will allow you to borrow by way of mortgage secured on the property.
Gazumping and Gazundering
Gazumping is a term used to denote a situation where the seller has accepted an offer but subsequently accepts a higher offer from another purchaser. This is legal and ensuring the property is taken off the market is one way of reducing this risk. Gazumping happens most frequently in a seller's market.
Gazundering is the term for when a buyer reduces their offer just before the contracts are exchanged in the hope of forcing the seller to accept less for the property. Again this is considered legal.
Both the seller and buyer need a conveyancer or solicitor working on their behalf to carry out the legal tasks associated with exchanging contracts and finalising the sale. Ask friends, family and your Belvoir agent for recommendations and it's a good idea to get a few quotes.
You can also help to keep the process moving ahead by:
- Giving the conveyancer some basic information to get started; things like your mortgage lender details, the seller's details, proof of your ID and any specific questions you would like them to ask the seller
- Completing mortgage application forms and responding to solicitors' queries as soon as you can
- Use registered post or deliver documents by hand to save time.
- Checking seller's responses to questions carefully
- Asking your conveyancer if you don't understand anything.
It can take anywhere between 6 and 12 weeks from the day your offer is accepted to getting all the paperwork completed and queries answered, even where there is no chain.
In England and Wales, Exchange of Contracts is the last stage of the legal process after which you cannot pull out (without losing your deposit and any legal costs you may have incurred).
Once everything is ready, you'll then be asked to pay a deposit- usually 10% (but sometimes 5%) of the property value before contracts can be exchanged. If the buyer pulls out after this stage, they will lose their deposit and may face legal action from the seller. It is essential to have Buildings Insurance cover in place at this stage and buyers should also consider other protection such as Life Insurance.
A date for completion is usually set for at least two weeks after contracts are exchanged. This should give you enough time to arrange moving in.
Buying in Scotland
In Scotland, the legal process is slightly different and buyers are committed at an earlier stage.
Here, the seller usually sets a guide price and interested buyers put in bids and suggested completion dates. Once the seller accepts their preferred bid, there is a compensation penalty to be paid if one of the parties changes their minds. For this reason, you need to have arranged your mortgage before you put in a bid.
Unlike in England and Wales, many conveyancing solicitors in Scotland also have an estate agency part to their business.