“That offer is simply insulting” wailed an estate agent a few weeks ago. This is not the first time this has happened to me and it won’t be the last. And quite frankly I don’t care.
Now this may sound rather blasé and some of my clients worry that I will “insult” the seller, when I tell them what I plan to put forward as the initial offer. But you should not be worried about putting forward “low” offers.
Firstly, an offer in and of itself cannot be insulting. It is merely an offer. The seller can simply accept it or refuse it. If the seller happens to get emotional then that is their problem not yours.
Secondly, I have never had a situation in 18 years of negotiating property purchases where the seller has refused to listen to another offer, even if they labelled the first offer “insulting”, i.e. more often than not the perceived “insult” is not life threatening…
This is not to say that you should simply make gratuitously low offers on every property you see in the hope of getting lucky. This will be a disastrous strategy as the estate agents will quickly think you are not serious and stop showing you the best properties (or at least only tell you after they have shown the property to all the other potential buyers in your target market).
In most instances, you should put forward an offer that is well researched and which can just about justify your price. In the most recent example, the apartment in a prime street in South Kensington had been on the market for three months. They had accepted an offer of £4.2m but the buyer disappeared. Other than that they had not had an offer.
Our initial offer was £3.6m. However, this was backed up with good comparables, indeed using some of the properties that the estate agents had used to justify their price of £4.25m. In fact the offer referenced three properties that had sold recently in the street. Nevertheless this was regarded as an insult…
As it happens we did not reach an agreement on this property. The sellers were wedded to their price of £4.2m and so we have moved on to other opportunities.
But “the insult” was not the cause of the problem. Indeed, if I was “insulted” every time I saw an asking price that was far too high, I would be the most insulted, miserable dope on the planet. In fact, it is interesting how estate agents and sellers never regard their asking prices as insulting. Go figure…
Let me give you an example of how “insulting” offers can work.
Firstly you must remember AN OFFER CANNOT BE INSULTING. You must get that line of thought out of your head. It is emotionally loaded and emotions do not help in negotiations (although you must be aware of yours and the other parties’ emotions and handle them accordingly which is a topic for another day).
I recently bought a fantastic three bedroom apartment for a client for £1,935,000. The initial asking price was £2.7m. Admittedly it had been reduced to £2.35m by the time I put forward an offer of £1.9m. Note that this offer was 19% below the asking price as opposed to 15.3% in the first example above. Yet the seller was not insulted. I imagine they were disappointed, but we reached an agreement and bought the property in a fairly short timeframe.
It just shows that you can never tell how someone will react to an offer, so you might as well start as low as is possible to justify, because you might find that you will achieve a price lower than you thought achievable. And when I say justify, this does not always have to be justified with comparable property transactions. There are other reasons, you can use too.
Please trust me when I say that you will not lose a property because you have made an offer that you are worried might be insulting. If someone is truly insulted and refuses to deal with you, then they are unstable and will only accept a price that is wholly unreasonable. In which case, you will not agree a price anyway unless you are keen to overpay.
The asking price and your offer are just starting points. Of course, there are exceptions to this, but one of the reasons why I achieve prices that my clients didn’t believe would be possible is because I know that if someone reacts emotionally that is a reflection on them and not me.
Next time, I will walk you through how I achieved such a large discount to fair value and highlight the mistakes the seller and their estate agent made.
In the meantime, good luck with your search for a property in London.