Are you afraid that your cheeky offer will be laughed at? Do not be! The vast majority of property sales agreed are at lower prices than Asking Price. Our guide to cheeky offers and low offers is the definitive answer to submitting offers below the asking price.
Sections to this Guide on Cheeky Offers:
- What is an acceptable offer
- How much lower can you offer on a house
- What % is a cheeky offer
- Can I be blacklisted for cheeky offers
- What should I offer
- Putting in the offer – verbally or written
What is an acceptable offer on a house?
There are only three numbers that you need to think about when putting forward an offer for the property:
– What you think the property is worth. This is your Bid Price. This is a combination of what value you see in the property, as well as with one eye to the future. When you come time to sell, if the market has not gone up or down at all, what do you think you could get for it? A good way to visualise this is to imagine if you had to sell your property the day after you bought it. What do you think you could achieve?
– What you think your bank will value it at. If you are getting a mortgage, the Bank Valuation is important as that sets how much the bank is willing to lend against the property. If the bank’s valuation is lower than your offer price, then you will have to put more equity deposit into the property.
– What you think the seller will accept. This number is different from the Asking Price that you see in the advert. All sellers will have the higher amount this wish to achieve (the Asking Price), but also the lower amount they will accept (there is no terminology for this, but I will call it the Accept Price).
All three numbers need to overlap, for a successful property purchase to go through.
In a scenario we see quite often with first time buyers, buyers feel pressure to go above the Bid Price that they are willing to pay, and sometimes above the Bank Valuation too. This results in either the first time buyer overpaying for the property, or the sale collapsing due to the bank not willing to lend against the full offer agreed price.
Your goal as a buyer, in the price negotiation, is to secure your dream property successfully, for as cheap as possible. We have a whole guide to negotiating price on your property purchase. By securing a good price, you lower the risk of the Bank Valuation coming in lower, and also the risk of you overpaying for the property.
How much lower can you offer on a house?
There is no fixed percentage or amount here. Within the team at First Time Buyer Help, we have seen ridiculous seller Asking Prices, where the property actually ended up selling for 25%-30% less. We have also seen Asking Prices where the property was in such high demand that the final sale price was up to 10-15% higher too.
Remember – the Asking Price is a number that is just a wish from the seller. It might not be grounded in market value, estate agent recommendation, or demand and supply.
The first step is to determine your Bid Price. This is personal to you, and why this property is ideal for you. It should also be very close to the fair market value – we have a long in-depth article here on How to Determine the Market Value of a Property.
However, putting in offers and negotiating takes time and effort. There is no point to proceed to negotiate on price in the following two scenarios.
– The first is if there are other buyer offers, much higher than your offer. Unless you are in a better position to transact (e.g. chain free, cash buyer, etc). The seller is looking to maximise the money they get for the property.
– The second is if you think the seller’s Accept Price will still be much higher than your Bid Price. Then there is no use to spend time and effort putting in an offer. Generally, we have found that when a property has only been on the market for less than two months, sellers have an Accept Price no lower than 10% below their Asking Price. However, after two months, they will be more desperate and flexible for a sale.
What % is a cheeky offer?
Many First Time Buyers are scared to put in lower Bid Offers, fearing that they will get laughed at, not taken seriously, or even fearing blacklisting by the agent or seller.
But that is far from the truth. Estate agents are (mostly!) professional and this is a business transaction. As a buyer, you have the power as you are the one with the cash looking to buy.
However, clearly there will be some offers that are ridiculous, and cause estate agents to assume you are a time waster. For example, if you offered 50% below the asking price. In this situation, you should just decline to make an offer, as there is almost no chance it meets the seller’s Accept Price, rather than formally making an offer.
But anything in the 10%, 20%, 30% range is still plausible and not a cheeky offer. In fact, estate agents would have seen some sales go through at those offers below Asking Price, so they will not laugh at you. Do not feel pressured to put in an offer higher than your Bid Price, just because you want to avoid being laughed at. It is your hard earned money after all!
Can I be blacklisted for cheeky offers?
The short answer is yes – if you persistently put in lowball cheeky offers with no chance of being accepted by the seller and waste your estate agent’s time.
But if it is just once or twice, you will be OK. Estate agents know that what might seem like a diamond to one buyer will seem like dog poop to another, and therefore the range of buyer offers they get will vary. They are also professionals – and have seen it all before – so your cheeky offer is not as shocking as you think it is.
Estate agents are obligated to pass on formal offers to sellers. However, I recommend if you are looking to put a lowball cheeky offer, to ring up the agent and share your concern that you think the Asking Price is way overvalued. Often, you can get a sense from the agent whether they agree, whether there are other offers close to Asking Price already, and what sort of level the seller’s Accept Price is at. In this way, you can sound out from the agent whether your cheeky offer has merit, or not, before you formally submit it.
What should I offer on a property?
This will be unique to the property you are looking to buy, your attraction to the property, the market value of the immediate area, and what the seller’s Accept Price is!
However, we at FTB.Help will leave you with three bits of insight:
– The first is that Asking Prices are almost never achieved, except in boom times. Typically we see about 3-10% lower sale prices compared to asking prices.
– The second is almost 35% of properties in 2019 (the latest year with stats) listed on Rightmove had their Asking Prices reduced. This shows that Asking Prices can be inflated. Agents do not set the Asking Price, the market does not set the Asking Price, it is 100% down to the seller to set the Asking Price. Some sellers are greedy, some are delusional, and the vast majority are not property experts and hence do not know the true market value in their areas.
– Thirdly, many buyers wrongly think about the property price in an abstract way when buying with a mortgage. On a £250k property at 90% LTV, a buyer might think they are only “spending” £25k (your equity deposit). So overpaying by 5% means only coming up with £1,250 more deposit. But they fail to realise that actually, they are overpaying by £12,500, based on the full amount. As a buyer, they are liable for the whole mortgage too!
Putting in the offer – verbally or written?
Estate agents have an obligation to pass on to the seller, any formal offers they receive. Offers can be either in writing or over the phone.
At First Time Buyer Help, we recommend calling the estate agent with an offer. This is a golden opportunity to find out from the estate agent whether they think your offer is sensible, whether there are any other offers already, and what they think the seller’s reaction will be and whether it is close to the Accept Price. You do not get any of this when you submit an offer via email.