How to make an offer on a house
Buying a house is the most expensive purchase most of us will make in our lifetime. It’s a scary, exciting, daunting and giddy time, and it can be easy to get carried away.
Because it’s such a big decision, you must take your time and approach the offer logically and sensibly.
So here are our top tips when making an offer and how to get the best price.
Before we dive in and explain how to make an offer, here’s an explanation of some of the key terminology around house prices and offers.
The listing price is just the asking price and is often a guide. Sellers set this price knowing that people will try to negotiate, so their ideal price is usually slightly lower than this.
Offers in the region of
Some listings have ‘OITRO’ which gives buyers an idea of how much the seller wants. This is usually just one number but is a definite indication that they are willing to accept lower.
Offers in excess of
This is signified as ‘OIEO’ and indicates to buyers that the seller will only accept offers higher than the listed price. There’s no room for negotiating down here.
This works in a similar vein to offers in excess of, except there’s no room for any negotiation at all. The price listed is the price the seller wants.
There’s also terminology after an offer is made.
STC, or subject to contract, indicates that an offer has been accepted but not completed. This technically means that other offers can be put forward.
Under offer might sound like an offer which is under the asking price, but it actually means the vendor has accepted an offer but contracts haven’t been exchanged yet.
Research is key
Once you’ve found a property you love, it can be easy to rush in headfirst and offer the asking price. But you need to consider if it’s worth it. At best, overpaying could cause valuation issues further down the line, and you might not make a profit when you sell. At worst, your mortgage lender might value the property lower than the agreed offer and lend you less than expected.
The easiest way to confidently arrive at an offer is by doing your research.
Find similar properties in the area and see what they sold for. How does this compare against the property you want to buy? Is the bigger price tag justified, or does it now seem too high?
You should also look at which catchment area the property is in, crime levels, transport links, and future development or infrastructure plans. These could all influence the value of the property both now and in the future.
Do I need a mortgage in principle to make an offer?
You don’t legally need a mortgage in principle to make an offer, but having one does mean your offer is more likely to be accepted. A mortgage in principle demonstrates that you can secure the finance from a lender to buy the property. If the seller has no evidence that you can afford the property, they’re not as likely to accept your offer.
The best time to secure a mortgage in principle is just before you make an offer. You don’t need one when you’re looking for a property because you don’t know what how much you theoretically need to borrow. Securing a mortgage in principle when you start looking at houses could draw out the process and may mean you need to reapply when you’ve found the property for you.
Having a mortgage in principle at the point you make the offer can also work in your favour if you’re up against other parties. It shows the vendor that you can afford the property, that you’re serious, and that you move quickly.
If you’re working with a mortgage advisor, instruct them to get a mortgage in principle just before you put in an offer. If everything runs smoothly, they should be able to get you the documentation on the same day.
You’ll also need to provide the estate agent with a copy of your official ID like a passport or driving license. So make sure you have these to hand and are ready to provide a scanned copy if necessary. You don’t need a scanner to do this; there are plenty of apps that use your phone’s camera as a scanner.
How much to offer on a house
How much you offer will depend on what you can afford, what your research has uncovered, and whether you’re in a position to negotiate.
Your research will tell you if the advertised asking price is reasonable or not, giving you a good jumping point for making an offer.
Remember that while the estate agent works for the seller, you can still ask them questions that can inform your offer. For example, understanding why the property is on the market, how long it’s been for sale, whether previous offers have fallen through, and if the seller is part of a chain. All of this will help you understand the likelihood of the seller accepting a low offer.
For your offer to be entertained, you must make a serious opening bid. Not doing so runs the risk of a drawn-out negotiation and will set the vendor off against you from the get-go.
Your personal circumstances also dictate if you’re in a position to negotiate. If you’re chain-free, this is an appealing selling point for the vendor and gives you a better negotiating position. However, if you need to move somewhere quickly, you’re not in the best position to haggle.
In really competitive markets, you might find that you’re negotiating with the seller and are up against other parties. If this happens, it’s important to remember your budget and to push the benefits of the seller picking you. Not part of a chain? Great! In a position where you can move quickly? Tell them!
In some circumstances, you might find yourself taking part in sealed bids. This isn’t common but can happen in locations where demand is high. Sealed bids often result in the seller getting more than the asking price as buyers put forward their highest offers to avoid being outbid. This is a difficult situation as there’s not a lot you can do as the buyer, just stick to your budget and cross your fingers. If it doesn’t go your way, you can still emphasise why you’re an ideal buyer.
When you’ve arrived at the figure you want to offer, call or email the estate agent to let them know. A paper trail is undoubtedly useful in case there is any confusion further down the line. Make it clear to the agent what you want to offer and any circumstances that work in your favour, e.g. a large cash deposit. By law, the estate agent has to inform the vendor of all offers.
How long does it take for an offer on a house to be accepted?
Once you’ve submitted your offer, all you can do is sit back and wait. The estate agent will put the offer to the vendor and then will get back to you once they’ve had a response. Depending on how easy it is to get hold of the seller will decide how quickly you hear back. Generally speaking, you should have a response within 24 hours.
If you haven’t heard from the estate agent, you can always get in touch with them to see what they know. It might be that the vendor is mulling it over and has to discuss with other people before coming to a decision.
Changes to offers
Having an offer accepted isn’t always the end of the story. Until contracts are signed and exchanged, other people can make an offer and the vendor can accept. This is known as gazumping and is incredibly frustrating. In these circumstances, you can again reiterate to the vendor why you’re the best pick or walk away.
Up until contracts have been signed and exchanged, the seller can back out at any point. So maintaining the pressure on your solicitor and estate agent to help the process move along smoothly will help. If you find yourself in a position where your house purchase has fallen through, read more on what you can do in that situation.
Making an offer on a house before selling yours
You don’t have to have sold your house or have an offer on it before you make an offer on a new property.
However, if you don’t have a buyer lined up, your seller might have some stipulations to ensure the sale goes through. They may only provisionally accept your offer, keeping the property advertised subject to contract.
In these circumstances, you must be calm and patient. Selling and buying as part of a chain can take as long as six months.
How long to sell a house after an offer is accepted
Once an offer is accepted, the completion time depends on a range of factors. As we’ve already mentioned, if you’re selling and buying it can take up to six months to complete on both.
If you’re at the start of a chain, completion can take roughly 12 weeks.