How to make a sensible offer

[Paul Green]

Mexibob,

Why offer just 5K below - you need to get straight to the botton price. This is a skill easily learned.

I hope this helps.

[Dan S]

Paul is right, you should try to widen the negotiating bracket as soon as possible.

[Helen_M]

Haggling can be very useful! But you need to have some significant arguments why your price is reasonable.

[Pablito]

This is my most recent offer - rejected. It is pruned to fit the available space and posted as a suggestion for others to base their bids on or for constructive criticism (not vilification).

This property is one of 3 which my wife and I have selected as potential purchases, he others are also comparable 2 bed bungalows. It is, though, more expensive than both of those.

Buying a home is never easy and the current social and economic climate make this task harder than ever. For the first time in our memory purchasers face the realistic possibility of house prices falling dramatically; our offer has been prepared thoughtfully. We understand it represents a significant reduction in price to the vendor, who we hope, will see the relevance and rationale of our approach.

It is a serious offer and one which we are able to proceed with immediately and without the prospect of a chain collapsing.

Median sold prices for detached properties in this postcode area since 16 August 2011 (when this house appears to have been first brought to the market at £234,995) have reduced by 20%. [1] Assuming that the property would have achieved its full asking price at that time the data suggest that it would now realise 80% of that figure i.e. £187,996.00.

No. of properties

Median sold price

Average asking price

Two bedrooms

34

£135,475

£170,000

Three bedrooms

58

£200,000

£199,400

Sources: [1] & [4]

Although marketed as 2/3 bedroom this property is by design a two bedroom bungalow. A third bedroom would compromise that design and come at the expense of the second reception/dining room, confusing the delineation and use of space.

This house is offered for sale at a price in excess of the median sold price for both 2 and 3 bed properties in this postcode area.

Land Registry House Prices Index (HPI) for this post code shows that number **--** sold in March 2009 for £207,500. This bungalow property is larger, having 3 bedrooms, a double garage and a larger garden with greater privacy; it should, therefore, realise a higher price. In March 2009 the HPI was 232.9 and the most recent figures available show the HPI for this address at 240.4. The figures indicate that would translate to approx £213,725 now.

I have obtained the following estimate values for this property (based on my description):

Average Valuation: £195,000.00. What we would suggest the property would be worth in a reasonable market, with properties selling steadily in the area.

Upper Valuation: £225,000.00. What we would suggest the property would be worth in strong market with a particular demand in the local area for properties of this type.

Lower Valuation: £165,000.00. What we would suggest the property would be worth in a slow market, or there was little demand in the local area for properties of this type.
The current market is very poor and house sale transactions are near record low levels. The Royal Institute of Chartered Surveyors (RICS) suggest that sales could possibly lift slightly but, go on to say that, sellers without an in-demand home in a popular area, or who do not price competitively could get stuck on the shelf. This view is supported and Rightmove’s straight-talking director, Miles Shipside BSc. MRICS, has repeatedly pointed out, ‘With all but the most appealing properties, pitching at too high a price and waiting for offers is a route to stagnation.’

Properties within this post code by time on the market.

Less than 1 month 15

Between 4 and 6 months 51
Between 1 and 2 months 35
Between 6 and 9 months 25
Between 2 and 3 months 39
Between 9 and 12 months 10
Between 3 and 4 months 25
Between 12 and 18 months 7
More than 18 months 5
Source: [1]

This house has been on the market longer than the average number of days for detached property in **--** and now sits firmly within the band remaining unsold for over 6 months. Significantly longer than the national average 10.1 weeks [1]. This would suggest that the lower valuation figure would be appropriate, if judged on this criterion alone.

RICS and other analysts predict a further fall in house prices in 2012 and estimates range from 1% to a scary 5% [1]. If this were to happen, the reflected median achieved price of 2 bed property in **--** could be £128,701.

Inevitably, this will vary across different regions but, it is expected to follow a similar pattern to 2011, where the only region to experience growth in prices was London. This area has not fared well with The West Midlands experiencing a 1.8% fall and East Midlands declining by 2.5% [3].

Offer: The figures quoted above would indicate that a realistic property value for number ## lies somewhere between £187,996 and below £213,725 (the estimated current value of house number ##, a larger three bed property).

The market situation would place this property firmly within the average to lower price brackets of the estimates I have obtained and certainly no higher than £195,000.

The midpoint of these three estimated values is £200,860 and the average is £202,620.

Based on this rational evaluation our offer to purchase is for the sum of £202,620.

We have not used the lower figures in arriving at our offer and would point out that this offer price is £32,600 greater than the average value of 2 bedroom properties in the **--** area and over £3,000 more than the average value of 3 bedroom properties (see table above).

Our circumstances

· We are cash purchasers, living in rented accommodation (informal arrangement with friends - no contract period to hinder progress) without a property to sell and no chain to break down.

· Finances are immediately available and we do not require a mortgage or loan.

· Able and willing to exchange contracts and complete as soon as possible (within weeks).

This offer is subject to contract and independent survey by qualified surveyors.

This offer is made subject to the property being removed from the market and no further viewings taking place on acceptance of this offer.

References:
[1] Home-track monthly national house price survey 26 Dec 2011
[2] RICS Housing Market Forecast 2012, Published 22 December 2011.
[3] Figures from HM Land Registry House Price Index November 2011, released 30 Dec 2011.
[4] Mouse price CV23 average house prices

[drhouse]

Too much information and too much justification and hard to find the price you are actually offering hidden in all these figures. Also you said it was rejected so not really to be recommended. Just make an offer at what you want to pay, if they say no then walk away or increase if you really want it - don't overcomplicate it.

[sturner10]

I think you are right in what you are doing. At the end of the day the person selling the house is going to want the most for it as they can get just as you want to buy it for the least...this is where the negotiation game begins. Agents usually place the value of the property higher than what it is actually worth as they will be anticipating that you are going to come in offering a lower value...if anything I say you go in lower than 5% and work up...