There is always a fear lurking that we are overpaying for the house of our dreams in our eagerness to close the deal. This is perfectly understandable, considering that property prices are generally quite arbitrary. Coupled with pressure tactics of real estate agents and home owners eager to sell house fast, buyers do run the risk of paying too much. Here are some tips you can use to minimise the chances of overpaying for a property.
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Real estate agents, as well as homeowners, always mark up their published prices by at least 10% over what they really expect to get. This margin gives them some leg room to negotiate. The first thing you need to do during negotiations is to wipe off that 10%. Assuming the house is being sold for £200,000, get the price down to £180,000. This is the minimum you should be looking at. If you are not a good negotiator, then bring along a friend or relative with the required skillset during the negotiation.
You need to familiarise yourself with the local market to be able to effectively gauge the price of the house. First off, do a search for other properties sold in the area. Then look at current listings. This will quickly give you a good idea of the property prices here. If you don’t know where to start, try popular online marketplaces like Rightmove, Primelocation and Zoopla.
If there are no houses of comparable size that have been sold, pro-rate the price or divide the price down to per square feet and extrapolate a figure from there. For instances, if a 3,000 square ft. house is sold for £300,000, a 2,000 sq. ft. house should probably cost around £200,000.
Expired listings are also very useful indicators as they will show houses that were priced too high. Keep in mind that a good real estate agent already knows all this, so if he sensed that you are also well-informed, he will quickly conduct negotiations in good faith instead of posturing and play a game of chicken.
Having said that, house prices sometimes do spike up owing to national property price boom, nearby development projects which creates housing demand (a factory, shopping mall, etc.), etc.
Calculate the cost of repairs and compulsory renovations that you will need to do, and use that as a bargaining chip during negotiations. For example, explain that fixing the gate and fence will cost you £5,000. Home owners will usually react quite well to reasonable reasons like this, and will typically make a counter offer – unless they have already factored in the cost in the original selling price. You will have to use your judgement here.
If you are buying a leasehold property, and the seller refuse to budge on the price, then ask for an extension of the length of the lease. Instead of sixty years, ask for the lease to be extended to 80 or 99 years instead. This won’t cost the seller any money right now, and they will probably agree just to close the deal.