Should I pay the asking price for a house or flat?

Answer

OK, this is a tricky one. You've seen a property that you want to buy, should you offer the asking price to make sure you get it or are you overpaying? Well actually that's no guarantee that you will get the house or flat. I'll explain when you should and when you shouldn't pay the asking price.

What's your motivation

Let me start with a couple of true stories. The first was a house that was on the market for £1.1 million. Two people made offers on the property so it went to sealed bids. The highest bid was £2.1 million.

I asked the guy who made the bid why he had gone so high. There was no house in the area that was worth anything near that figure. He said this:

"That is the house where I want to raise my family over the next twenty years".

His motivation, and considerable wealth, was to get that house no matter what. Pay the asking price? Hell no, pay twice the asking price.

The second story is about a friend of mine who asked me to look at a one bedroom flat he was thinking of offering on as a Buy to Let investment. He asked me if he should offer £5,000 less than the asking price.

The market was buoyant at the time and I was convinced the area was up and coming, for reasons which I explain in my book. I also knew my friend was looking to hold onto the property over the long term. This was my advice:

"Make your initial offer £5,000 below the asking price but be prepared to move up to the asking price quickly while at the same time demanding that if you do pay the asking price the estate agent will stop showing other buyers the property. If you don't you will probably be gazumped and anything you have paid for solicitors and surveys will be lost. In 10 years time when this property has doubled in value that £5,000 will be neither he nor there."

10 years later the property had doubled in value and he often quotes that advice back to me as something he never forgot.

OK - now I just want to be really clear about this. Not every property will double in value. You have to know the market in an area and I explain how you can do that in my book.

My point here is - what is your motivation?

If the property is something you could take or leave - depends if you can get it for the right price and the right price is below the asking price then don't pay it. If you just simply want that property then pay it but get something in return.

Paying the asking price to get your way

This is how I normally do things if I can see the property is worth the asking price or even if the asking price is a little but over what I think its worth. Remember I buy with a ten year plan so overpaying a little doesn't make a huge difference in the great scheme of things if I've got my general predictions right.

But ... I'll never offer the asking price initially. I'll go in a few percent lower with an offer I'm almost convinced will be rejected.

Then I'll go back with a higher offer, possibly the asking price, but with demands attached. Demands the vendor probably always thought he was going to offer anyway:

  1. The property gets taken off the market for six weeks, the seller must tell the vendor he doesn't want any viewings during this time.
  2. What I expect to be included - carpets, kitchen, bathroom fittings

I might also include something else as well. Perhaps I'm buying to rent and I saw the property had 2 decent double beds as well so I'll ask for those to be included if I'm paying the asking price. You'll have to use your judgment and maybe be prepared to get knocked back on a couple of things but getting the house off the market is crucial to minimize the chances of getting gazumped.

Now the vendor probably thought he was going to do all or most of these things. They probably thought they were not going to have more viewings (although this shouldn't be the case). He or she probably was going to leave the kitchen and carpets and bathroom fittings so he or she will probably feel quite pleased with themselves that they got the asking price by agreeing to what they would agree to anyway.

Not paying the asking price

There are times when I won't pay the asking price. When you're out viewing you really want to get a vibe for what the vendors situation is and estate agents often say far more than they should. I'll also be looking for clues as to how the local market is at the moment. Estate agents will always try and talk things up but if you really get chatting to them they let things slip.

Thats why I try to meet estate agents at their office and then go with them in their car rather than meet at the property. Lots of time to chat and get the vibe.

If the seller has found a property and made an offer themselves they'll be motivated and if the market isn't frantic that's a good sign that there is a deal to be done. They might want £100,000 but if my £90,000 is the only offer on the table and with every day that passes they might lose the house of flat they want then they'll find a way to cover that missing £10,000.

They might get a slightly larger mortgage or renegotiate their offer up the chain. Either way I've got a good deal.

I'll still have made an initial offer I know won't be accepted and I'll be making the same demands about halting viewings when I come up but thanks to things the estate agent let slip I won't be paying the asking price.

Sell yourself big time

If you're offering the asking price the vendor is generally happy about things and won't be looking at you too closely. But if you're paying under the asking price you'll get a better deal agreed if you sell yourself as a buyer.

So when you make the initial offer make yourself sparkle. Explain how you are going to finance the purchase and provide evidence - a bank account statement and, if you need it, an agreement in principle from a lender.

For a seller who is motivating to sell it will help them talk themselves into accepting your offer - "Well its not as much as I hoped for but their prepared and able to buy now so maybe....."

Estate agents should ask your for these documents but many don't. If they don't present them and make it clear you want the seller to know they have been provided. Subconsciously it usually even gets the estate agent to talk about you more positively generally.

It blows my mind when I hear estate agents asking for bank statements and Agreements in Principle and the buyer gets all defensive. If you don't want to show all the cash you have in the bank just open a another bank account and transfer the funds you do want to show in there. It takes minutes and if the bank has annual costs for maintaining that account well just close it down after the property purchase.

So, pay the asking price?

Its all down to your motivation, the current market and the vendors situation. Weigh these three things up and you'll come to your answer.

For the full low down see Chapter 15, How to Really Make an Offer on a Property.

Search Results for 'Asking Price' in
How to Really Buy a Property

"... are many sources of data to tell journalists what is happening to the housing market. Here are just a few: Land registry; Asking Prices (as reported by agents); New applicants registering (as reported by agents); Mortgage application numbers (as reported by lenders); Average incomes..."

"... data can be misleading; Why applying logic doesn't work; Why calculating price per square foot doesn't work; The true story of a buyer who paid twice the Asking Price. - Modelling the Property Market - First time buyers and amateur investors tend to have a habit of modelling..."
"... and, especially if an entire family is on the move, the potential loss is worth it to avoid the hassle of a double move. True Story - Paying Double the Asking Price A house ideal for a well-to-do family had come onto the market in Kensington. Prices were generally stagnant and the press..."
"... house ideal for a well-to-do family had come onto the market in Kensington. Prices were generally stagnant and the press was full of stories about an imminent crash but this did not stop three parties all offering on the property at the Asking Price of £1.1 million. The vendor decided to ask for sealed bids. Each of the three parties would put forward their best offer and the highest bid would get the..."
"... In the event the highest bid was £2.1 million, nearly twice the Asking Price. When the buyer was asked why he had made such an offer he replied, "I want this house as a place to bring up my family over the next twenty years. By then I expect it will be worth about £2.1 million". He..."

"... at some point they will feel values have dropped, values may drop further, but they will eventually rise. They also know that they will be in a good bargaining position to have an offer below the Asking Price accepted. Many see property as a ten year investment so even a 10% loss in the short term will not make a major difference to their..."

"... is essential, when buying through a property investment company, to double check all their figures to your own satisfaction and this is something that can be done, in most cases, over the internet. First look at property prices and rentals in the immediate area. Next call local agents to see what actual values are being achieved. For example, is it the norm at the point that you are buying for property to be selling at 10% below the Asking Price and for tenants to be negotiating 5% off the rental values. These are the real market..."

"... Story - A Property on the Market for 14 MonthsA house had been on the market for fourteen months in Northchurch Terrace, N1. It was placed on the market at £650,000 but this proved too expensive at the beginning. The vendor was not interested in reducing the Asking Price as she had no mortgage on the property and no urgent need for the..."
"... to bid higher. One party did think the price was reasonable and offered the Asking Price. The other two parties believed they were being led up the garden path by the agent and knowing how long the property had been on the market assumed they could get a low offer agreed. They only..."
"... on the market assumed they could get a low offer agreed. They only realised the Asking Price offer from the third party was successful when they were told it had been agreed and the vendor was not taking their interest any further. - Summary - There are good and bad estate agents out..."

Chapter 13: Your Own Homework
"... Property for? - The last time a property was sold (if this happened within the last decade), and the value it sold for, are listed on the Right Move website at http://www.rightmove.co.uk/house-prices.html. In considering the current Asking Price you should take into account: How long ago..."

"... when it is of little financial benefit to them; What to offer and when; How the time of year will affect your offer; When to offer below, at or above the Asking Price; How to handle bidding wars and sealed bids; Why defining your offer can save you money; What should be in your offer..."
"... put it another way if the Estate Agent is being paid 2% of the sale fee and the negotiator is getting 10% of that then on a £240,000 flat the negotiator is going to be paid £480. If you have offered £235,000 and the negotiator is trying to get you to the Asking Price he is not trying to get £10 (the commission he would earn on the extra £5,000), he is trying to make sure you do not get..."
"... buyers. If a vendor is desperate they will still achieve the Asking Price (or more) if the market is booming. A property may also have been on the market for over a year but if prices have been rising the true value of the property may have been realised just as you start searching. ..."
"... your own desire for the property. The graph below represents the level of offers versus Asking Price in an annual market cycle (see Understanding the Property Market) but you should take into account any factors that may have caused the cycle to vary. Offers agreed above or below asking..."
"... should take into account any factors that may have caused the cycle to vary. Offers agreed above or below Asking Price vary throughout the year in an annual property market that has not been affected by other factors - Choosing your Offer Level - The following outline the various ways to..."
"... affected by other factors - Choosing your Offer Level - The following outline the various ways to offer on a property. - Paying Below the Asking Price - If you feel that there is a good choice on the market and you could as easily buy the property you are about to offer on as..."
"... for manoeuvre In any normal market conditions this should never be more than 10% below the Asking Price. To go further may mean the vendor will want nothing further to do with you as they feel insulted. You may increase your offer later but he will refuse it on principle. A very low offer..."
"... the negotiator will then be reluctant to show you further properties and move you to the bottom of his mental list of priorities. - Paying the Asking Price - In a fast moving market seriously consider this. It is an extremely strong way of saying to the vendor, "I like your property, I am a..."
"... the net and thought, what an undervalued bargain! A second line in avoiding this is to make your first offer just below the Asking Price before coming up. Exactly how to do this is explained in the section on pitching your offer below. In exchange for offering the Asking Price you should..."
"... In exchange for offering the Asking Price you should expect, and request, that the vendor withdraws his property from the market although they may not be prepared to do this until you have instructed a solicitor and paid for a survey (i.e. spent some money yourself to show you are serious). ..."
"... do this until you have instructed a solicitor and paid for a survey (i.e. spent some money yourself to show you are serious). - Paying More Than the Asking Price - No one ever starts by making an offer above the Asking Price but very often there may be more than one offer at the asking..."
"... one ever starts by making an offer above the Asking Price but very often there may be more than one offer at the Asking Price. In this instance a good agent will take the matter to sealed bids whereas a bad agent will start a bidding war. If it sounds like you are heading for a bidding war try and persuade the agent or the vendor to use sealed..."
"... two bedroom mansion block flat had been on the market for five months. The vendor had verbally accepted an offer £5,000 below the Asking Price of £137,500. Another party then offered to pay the Asking Price. The original buyer was offered the chance to match this which they did and so the vendor, faced with two very similar offers decided to go to sealed..."
"... original buyers had already, to some extent, damaged their standing in the vendors eyes by suddenly coming up with an extra £5,000 but they then compounded this by saying their sealed bid would be £137,500, the same as the Asking Price and their current offer. The other party offered £341,700 and their offer was accepted. The original buyers then came back and said they would be prepared to offer £343,000. It was too..."
"... could be further from the truth and so pitching an offer in a certain way should ensure your expectations are actually met. Whether or not you are ready to pay the Asking Price or just make an offer there is a way that is far more likely to work than simply bumbling in with your best and final..."

"... view the property. Simon was a first time buyer and knew his strong bargaining position. Over a four day period he negotiated through the agent and eventually achieved an agreement at over 10% below the Asking Price – exceptional for the market place at the time. The chain moved..."

Chapter 19: Time Costs Deals
"... in the meantime, was close to exchange on his purchase when the vendor pulled out after loosing his job. David called the agent to talk about new properties he could buy and asked after Seymour Street. He was shocked to find that after nearly three months, and in the middle of a busy Spring market, it had not exchanged and immediately offered to pay the asking..."

"... the absence of sold signs he calls any local agents and asks them what they have sold recently in the area and tries to match it up. There is nothing more to it than that. If you want to try it for yourself find a sold sign, call up the agent and say, "Hi, this is Fred Smith from Island Surveyors, I see you have sold something in the High Street, can I ask what it was and how much it sold for?". You'll get the complete run down including the actual price it sold for, not its Asking Price. Note that Estate Agents, by law, are not allowed to tell you (a buyer) the actual price a property has sold for until it exchanges as this is confidential information. Agents are however, always trying to please surveyors because they don't want properties down valued, so if you pose as a surveyor you will find out..."
"... market was moving up. The vendor eventually became frustrated and withdrew the contract from Diane's solicitor. Five weeks later he sold the property at the Asking Price and the survey from the new buyer made no mention of the tree or any movement in the property. Diane ended up buying a..."

Search Results for 'Asking Price' in
Property FAQ

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Property Terminology