Everyone loves a good deal. And no more so than when making arguably the biggest purchase of our lives. Valuing is unquestionably an imprecise art.
James Greenwood, managing director of Stacks, offers his advice: “Over valuing occurs for several reasons. Estate agents can find themselves in a tricky position, trying to win an instruction when competing in some kind of beauty parade. Over valuing may be the only way they can take the instruction. Alternatively, they may be pressurised by the vendor to put the property on the market at a higher price than they would otherwise recommend. The successful agent may then further confuse the situation by marketing the property ‘in the region of..’, ‘in excess of..’, or quoting a ‘guide price’.
There is often a great deal of leeway between the sale price and the eventual purchase price. Consider the vendor who has instructed the agent that came in with a valuation 20% above the lowest. At the back of his mind, he’s already accepted that he probably won’t get the full asking price. This is ‘purchaser opportunity’. But the purchaser needs to play a clever game – a low offer made too early is likely to be rebuffed as the vendor is still hopeful; but by leaving it too late, another buyer may be well down the line with their own offer. The trick is getting the timing, and the offer, just right.
Purchasers should start by looking at properties that are on the market at 20% more than their budget. If they restrict their search to properties within their price boundaries, they won’t have had a chance to assess properties until the price comes down and falls within their bracket. By that time there will be plenty of buyers ahead of the game.
There is plenty of information available to buyers that will give them an idea of whether a property is overpriced. Look at historical sale prices, other similar properties that are on the market, and watch for similar properties that show price reductions. The main search engines will always send alerts when a price comes down.
Ask the agent how a value was arrived at. You’ll be amazed how often the agent says the price is based on what the vendor wants. Try to establish the position of the vendor – why is he selling? What’s his position? He may have already found something he wants, and be desperate; or he may be in a rush to move for personal reasons. If this is the case, a low offer may be tempting. If however, the vendor is in no hurry and merely testing the market, a low offer is likely to be dismissed. The best way of gaining useful information is to engage the vendor in conversation or to try and glean something helpful from the agent. There will of course be some reluctance to furnish you with all the crucial facts.
The length of time a property has been on the market, whether there have already been price reductions, and how much interest there has been will all be relevant, so make it your job to establish this information.
Once you’ve established the level of your offer, make it in as attractive way as you can. You need your finances in place and to be clear about your timing. You also need to be extremely diplomatic! If you’re making a punchy offer, the vendor may feel insulted, so don’t be too heavy handed. Nobody likes an aggressive purchaser and some vendors will refuse to deal with you any further if you push too hard – remember this is someone’s home and not just a commodity. It pays to be a likeable buyer. And always negotiate through the agent, not directly with the vendor.
Remember, once you’ve made an offer, there’s only one direction the price is going to go, and that’s up – so don’t start too high!
It’s a calculated risk how far to push negotiations, so don’t back yourself into a corner and allow a third party to nip in whilst you are procrastinating! In the end, the price agreed has to be one that both buyer and seller can live with, and which will encourage all parties to co-operate towards a successful exchange and completion.”