Pitfalls when Making an Offer
Making an offer on a property can be an exciting time. No doubt you will have viewed many houses before coming to a decision on which one of those to make an offer on and will hopefully come to an agreement with the seller for the home’s purchase. It can, however, be a stressful and confusing time, not only for first time buyers, but buyers that have been through the property buying process before.
There can be various pitfalls when making an offer on a property, hindering a potential buyer’s chances of completing the purchase. These can be, but are not limited to,
- Issues with finance
- Issues with the mortgage
- Offering too little
Issues with Finance
Beginning with the obvious, issues with finance are one of the major culprits in preventing a buyer from purchasing a property. Having a clear idea of how much you are willing to spend on a property is crucial, particularly at the start of the property search. Having a realistic grasp on your finances will allow you to identify the property’s best suited to you and your needs in a price range that you are comfortable with.
If your offer is accepted, the chances are that you and the property surveyor will identify repairs or renovations that will need to be made prior to your moving day and it is important that you factor these costs into the buying price
Lastly, if you are applying for a mortgage in order to help you purchase a home, it is important that you have enough money to be able to pay the deposit. Deposits fall in the 5% to 15% range and are used to lower the risk to the mortgage lender. Deposits often require a large amount of money on the buyer’s part, so it is important to identify how much of your own money you are willing to part with before you purchase your new home.
Issues with the Mortgage
Most potential home buyers will apply for a mortgage to help them complete their purchase. Simply put, a mortgage is a sum of money to help a buyer purchase a property and is then paid off monthly with interest to the mortgage lender.
It is important to note that a mortgage is not essential when viewing properties or making an offer on one of those properties, but an Agreement in Principle (AIP) will often be required in order to elevate your chances of securing your home. An AIP is an agreement with the mortgage lender that they are willing to contribute a specific sum of money to the purchase of the property. An AIP is not a guarantee and will often change after the surveying and conveyancing of the property, should your offer be accepted. An AIP will also signify your intent and will show the buyer that you are serious about purchasing their house from them and that you are in a position to do so.
Offering too Little
As you may well expect, offering too little when making an offer on a house can be detrimental to the completion of the purchase. There are a lot of factors that go into valuating a property, ranging from the property’s size and number of rooms to its catchment area and access to local transport. Despite this, potential buyers often make an offer that falls way below the value of the property. While negotiation is important, it is also important to be realistic when making an offer. The Cornish property market moves at a high speed, and the likelihood is that there are many parties viewing the same property that you are, with many of them offering more than you are. With the competition being so high, it is important that you are willing to negotiate paying a higher price than you might have originally wanted to, and it is therefore important to not drop out of the competition early.
‘Gazumping’ is the act of offering more money on a property after a verbal agreement has already been made with another buyer. It has become common in Cornwall because of high demand for homes in the South West. Because verbal agreements are not legally binding, it is important that potential buyers know how to minimise the risk of being gazumped before the final exchanging of contracts.
It is important that buyers:
- Obtain Home Buyer Protection insurance in order to claim back some of the surveying fees, conveyancing fees, or any other money lost in the event of gazumping.
- Have an AIP (Agreement in Principle) with the mortgage lender to show to prevent any delays in regard to financing the purchase and to show the buyer that you are serious about buying their property from them.
- Move quickly, particularly during the conveyancing and surveying stages. Instructing professionals early on I the process will prevent any delays with the purchase and can dissuade the seller from entertaining other potential buyers.
- Build a relationship with the sellers. Here at Lillicrap Chilcott, we pride ourselves on having great relationships with the people that sell their properties with us. We also believe that it is important that strong and effective communication between all parities is a crucial factor in the progress of any property purchase.
If you do have concerns or feel that you need guidance on making an offer with us here at Lillicrap Chilcott, please don’t hesitate to contact us. One of our colleagues will be more than happy to help you begin the process of securing your dream home.