Buyers have the whip hand as sellers are left with no place else to go
With property prices still plunging and some vendors having to accept low bids, Esther Shaw sees how househunters can haggle for an even better deal
Sunday 15 February 2009
Competition for homes is drying up, prices are plunging and UK property has become a buyers' market with a ven-geance. Househunters now have the chance to drive a hard bargain.
As if to underline the shift away from vendors, the National Association of Estate Agents (NAEA) reports a steady decline in the number of prospective purchasers registered on estate agents' books, from a peak of 276 buyers per agent, in January last year, to just 186 in November. "This was down to both the credit situation and lack of confidence," says Peter Bolton King, chief executive of the NAEA. "And we have also seen agents closing branches, or closing altogether."
Meanwhile, new figures from property website Globrix.com reveal that in a survey sample of 5,200 homes, there has been an average price reduction of £19,133 over the past month. "We are seeing sellers cutting prices across the country," says Globrix's chief executive, Daniel Lee.
This is grim news for vendors who are in a hurry to move, but very encouraging for those buyers who have the deposit and clean borrowing profile needed to calm the nerves of jittery lenders. And if any of these people have been biding their time, the moment may now have come.
"The prices of some properties have been reduced by up to 20 per cent since the peak of the market," says Philip Selway from property consultancy The Buying Solution. "But while there are those who believe that prices will come down a further 10 per cent, no one can predict exactly when the bottom of the market will be. It is better to buy in a falling market than in a rising one, so now is a good time."
Further, given that there are a lot of properties still on the market, making it unlikely you will have to bid against a competitive buyer, you can go one step further and strive to drive the price even lower.
"Without a shadow of a doubt, this is the best market for buyers in more than 10 years. They can now be ruthless with their offers and go in at well below the asking price," says Dominic Griffith from the search company Property Insight. "In some cases, buyers are going in with offers up to 30 per cent below the asking price."
One of the simplest ways of cutting a deal in a falling market is a technique known as gazundering. This is a sneaky practice that involves the buyer in effect stitching up the seller by waiting until everybody is ready to exchange contracts, and then lowering the offer on the property. While this is legitimate, it is also unethical, and there are other, less controversial ways in which you can pick up a bargain.
First, work on striking up a good rapport with the estate agent and then find out all you can about the circumstances of the vendor, asking as many questions as you can about the motivation for selling.
Find out how long the house has been on the market, whether the price has been reduced already, and how desperate the vendors are to sell. It is all about getting enough information to beat down the price.
"If the vendor has already put in an offer on another property, for example, he or she will be keen to act as quickly as possible and may accept a lower offer," says Mr Selway.
"But before making any bid, ensure that you have your finances and mortgage in place," he adds. "This will put you in a much stronger position with the agent or vendor."
Similarly, if you don't already own a home and so are not part of a chain, make sure you capitalise on the speed and simplicity this could bring to the process.
The secret to good haggling is good information, so take the time to find out when the property you have your eye on was first valued, and monitor how much nearby homes are selling for in the dipping market. Useful websites include Nethouseprices.com, Myhouseprice.co.uk, Landreg.gov.uk and Hometrack.co.uk.
"Find out what house price indices forecast for the area in which you are buying. If, for example, the forecast is a further 10 per cent fall, you will want to negotiate this into the asking price," says Melanie Bien from mortgage broker Savills Private Finance. "Aim to get the vendor down by this full amount, or split the difference. Further to this, ensure that any reductions that have already taken place are factored in."
As a buyer, you should focus on being imaginative and on thinking laterally, as it's not just the price that is up for negotiation. Think about what else could be included in the sale, such as fixtures and fittings or an additional piece of land.
"Establish whether the property needs updating at all," says Mr Selway. "If work is required, this will give you leverage for negotiation."
If you have time on your side, make sure you play this to your advantage. Don't be afraid of spinning out the process, leaving a few weeks between the first viewing and the actual offer, because by the time you actually make the offer, the seller may be extremely grateful to receive one at all.
"When making an offer that is lower than the seller's expectations, make sure you present a strong case for it," says Mr Selway. "This might involve providing banking references, solicitor's details and research to demonstrate how you arrived at the figure. Vendors would much rather accept an offer from a credible bidder than someone just throwing in a low offer with no research to back it up."
That said, don't shy away from putting in an offer that you think is cheeky or might even offend the vendor.
"We've been surprised at the low levels of offers that sellers are accepting," explains Robert McLaughlin from the estate agency chain Kinleigh Folkard & Hayward.
"Stick to your guns and don't get downhearted if an initial offer is rejected. Get as much feedback as you can and use this information to your advantage to make another offer."
Ultimately, if you're the buyer, the market is firmly in your favour.
"For the best part of a decade, the seller has been holding the trump card," says Mr Griffith at Property Insight. "Now the buyer has it, which means that in many cases, he can afford to be very assertive."
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