Struan Ferguson, Partner at Blackwood & Smith LLP.
You have found a property you want to purchase, the first question you will likely have is, how much should I offer? The question of how much to offer on a property is not dissimilar to the age-old question, how long is a piece of string?! The best answer we can give to this question is, it depends. The best advice we can give is, speak to your solicitor!
Struan Ferguson, a Partner at Blackwood & Smith LLP. has shared some thoughts on this:
The question of how much to offer on a property is one which doesn’t really have a definite answer. It’s not an exact science but I would suggest there are four key steps:
- Affordability – This is probably the first, and most important, thing to consider. You need to know what your budget is. If you require a mortgage, it is very important to know exactly how much you can borrow. Speak to your bank or a mortgage adviser to obtain a mortgage ‘Decision in Principle’ (and remember: your lender will base their lending on the lower of the price or the valuation, so if you offer higher than the Home Report value, be aware that the mortgage amount will be based on the valuation figure, and you will be funding the part of the price over and above the valuation from your own funds). Make sure you know what additional costs you will incur so that these can be budgeted for. A solicitor will give you a quotation for the likely purchase costs but be aware of Land and Buildings Transaction Tax, which changes according to the exact price and can go up steeply.
- Take advice. Unless you are a property tycoon, your solicitor will know a lot more about buying properties than you do. We submit offers every day. Some are successful, others are not; but this gives us a picture of what is happening in a constantly evolving property market. We don’t have crystal balls; we are still guessing, but it’s usually an educated guess.
- What’s it worth to you. Having worked out what you can afford, and taken advice from your solicitor, the hard part is working out what the property is worth to you. Is this your one and only dream home or just one of many you like? Would you regret not offering more if you didn’t get it? Would you regret offering too much if you did get it? Only you will know these answers, but you will ultimately just have to make a decision here and give that all-important figure to your solicitor.
- Cross your fingers. Regardless of your budget, the advice you have taken, and how much thought you put into your offer, there’s always a chance that someone else has made a higher offer (or one with less conditions). So you do need to have some luck on your side too!