Making an offer on a house: Frequently asked questions

When you've done the research and you're fully satisfied with a property, it's time to make your offer.

Making an offer on a house isn’t as simple as some people might expect. To help you we’ve outlined the key things to know about the process of buying a home.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Before you jump straight in and submit your offer for the house of your dreams, it’s a good idea to set an upper limit that you’re comfortable paying.

Once you’ve done so, and only if you’re not in a competitive situation, consider going in slightly lower than this limit, perhaps 5% or so, which will allow some room for upward negotiation.

Next, make your offer to an estate agent over the phone or in person. You should also submit a written offer and ask that it’s passed on to the seller.

In this, make sure to include the following:

  • The amount you’re offering.
  • That you have a mortgage agreement in principle.
  • If you’re a cash buyer make this clear, as it means there won’t be any mortgage complications.
  • Let them know if you’ll be taking out a mortgage at a low LTV (meaning you’re putting down a large deposit).
  • Tell them if you’re chain-free, as this means the seller has less reason to worry about the transaction falling through.
  • Flexibility on moving dates, if you can.
  • Your motivation to move, for example being pregnant and needing more bedrooms.
  • Having a conveyancer and surveyor already lined up.
  • Make your offer subject to the property being taken off the market, with no more viewings conducted.

If your offer isn’t accepted or someone else submits a higher one, don’t panic. Weigh up your options as objectively as you can and only consider making a higher offer if you’re confident you can afford it.

If your offer is accepted, agree a provisional timescale to work towards and speak to your solicitor and surveyor.

Negotiating the price

Nobody wants to pay more for a property than they need to so you’ll want to negotiate the best price possible for your dream home. But should you offer under the asking price and, if so, by how much? And how can you make a successful offer more likely?

Preparation is key, both before you even start looking for a property and once you’ve found one you want to make an offer on. This will put you in the best position and give you more confidence in the offer you’re making.

What to do before making the offer

An estate agent will want to know that you can afford the property so if you’re buying with a mortgage it’s a good idea to get a mortgage agreed in principle before you start house hunting. Speak to a mortgage adviser for help with this.

Getting a mortgage in principle will give you the documentation to prove that you’ll be able to borrow the funds you need as well as help you decide your budget. Also take into account the running costs of properties, including bills such as council tax, as well as extra costs like stamp duty, when calculating this. It’s worth underplaying what you can afford to estate agents as they will often show you properties slightly above your limit.

You also need to make sure you have the money to pay your mortgage deposit, which could be 5% of the purchase price or more, and the documentation to prove it. If you’re not buying with a mortgage, you’ll usually need to pay 10% of the purchase price to exchange contracts, when the sale becomes legally binding (in England, Wales and Northern Ireland).

House price research

It’s essential to investigate the prices of similar properties in the area you’re buying in so you can decide what the property’s really worth and what is a fair price to pay.

Look at asking prices (you can assume that most properties will sell for slightly less than the asking price unless the market is very fast moving) by looking at property portals such as Rightmove. Sold prices for specific local properties can be found on the Land Registry website. Also look at overall price trends in the area you’re buying in – these are available through the Land Registry’s house price index.

You’ll need to show ID to the estate agent when you make an offer so have documents such as your passport and driving licence ready.

When is a low bid likely to be successful?

Factors that could make a lower offer more likely to be accepted include that the property has been on the market for a long time (Google the address to see if it’s been listed before and at what price), the sellers need to move quickly or they’ve already found the home they want to move to. Speak to the estate agent about the circumstances of the sale to find out whether any of these apply.

It’s also useful to find out if they’ve had any previous offers and why they were rejected as well as the minimum amount the sellers are prepared to accept. Building a good relationship with the estate agent could make them more willing to reveal information that could help you but remember that they are working for the seller.

The level of offer you should make also depends on the local market. If there are lots of properties for sale but not many buyers looking you’re more likely to be able to offer below the asking price. However, if it’s a fast-moving market with lots of demand for the properties available, this is less likely to be successful.

In some cases you might even feel it’s necessary to offer above the asking price, especially if other people have also made asking-price offers. Or you may be asked to submit a sealed bid over a certain amount or your “best and final” offer by a certain date. How much competition you face is key.

Deciding how much to offer

You need to be seen to be making a serious offer while not offering over the odds and ending up paying more than you need to, so it’s important to get the balance right.

Once you’ve decided how much the property is worth based on all the relevant factors, you can either offer the best price you’re willing to pay (and can afford), making this clear to the agent, or offer less to see if you could get the property at a bargain price while leaving room for negotiation upwards.

Avoid offering a round number as this makes it more likely that you’ll offer the same as another buyer. Around 5% to 10% below the asking price is reasonable depending on the market.

How to put in the offer

You should make the offer over the phone to the estate agent and then confirm it in writing via email. Alternatively, you can make the offer in person at the estate agent’s office, if they have one, and then confirm it by handing them a letter or via email.

Also highlight any points that make you a particularly attractive buyer. Aspects in your favour would include being a first-time buyer, being a cash buyer, buying with a mortgage but with a high deposit, and being in a position to move quickly or flexibly according to what suits the seller.

Having evidence that you have the funds available and your solicitor or licensed conveyancer lined up also shows you are well organised and ready to go. It’s a good idea not to appear too keen as you might give the impression that you are prepared to buy the property at any price.

By law, estate agents must pass on every offer they receive to the seller.

If your first offer is accepted, it’s time to celebrate – just remember that the property isn’t guaranteed to be yours until exchange of contracts though. If it’s rejected, you’ll need to consider whether to go back with a higher offer and for how much but be careful not to exceed your budget.

The agent should be transparent about any better offers the seller has received. There could be a few rounds of offers and counter offers before you reach a final answer.

Once your offer is accepted, ask for the property to be taken off the market and for no more viewings to take place to reduce the chances of someone else making a higher offer that is accepted and “gazumping” you.

You may want to reduce your offer later if the survey uncovers problems with the property that are expensive to fix, which could lead to more negotiations.

Can you make an offer on a house without a mortgage?

Nothing prevents you from making an offer before you’ve secured mortgage financing, but sellers might prefer to accept offers from buyers who have a mortgage in principle in place.

When you make an offer without mortgage approval, you’re making what’s known as a contingent offer, which is only valid if you do end up getting your mortgage approved, which means if you don’t succeed, your property offer becomes null and void.

Can you make an offer on a house if yours has not sold?

In short, yes, but the seller may be less inclined to accept it, which means they may side with another bidder instead.

What you can do is make an offer that’s contingent on you selling your home. This simply means making an offer with the caveat that you’ll have to sell your house before closing on theirs. Doing so will strengthen your chances of getting a seller to take a chance on you.

What are the best bidding tactics?

This depends on whether the bidding takes place via open negotiations or sealed bids.

Open negotiations

Like all negotiations, start low. A good rule of thumb is to offer 5–10% lower than the asking price. Sellers often take this into account and deliberately put their house on the market for more than they expect, or would accept.

The estate agent will normally tell you of any bids that are better than yours, before giving you a chance to offer a second or even a third bid. Don’t offer more than the asking price unless you know the seller has already been offered that, or if you’re almost certain you’re going to miss out on your once-in-a-lifetime dream home.

Essentially, you need to play hard to get, while remaining realistic, especially if the seller is desperate to sell.

Sealed bids

If you’re told that bidding for the property is going to be via sealed bids, you’ll have to write down your offer and seal it in an envelope. The estate agent will then give all of these bids to the seller, who will usually choose the highest.

It’s always a good idea to offer a few more pounds and pence than a round number. For example, offer £375,050 rather than £375,000, just in case another bidder offers that round number.

Sealed bids is therefore a method designed to get the highest price possible and very often results in the seller getting more than they asked for originally.

In some areas where demand is particularly high, such as London and the surrounding counties, sealed bids have become the norm.

Bidding via sealed bids can be stressful, especially if certain pitfalls are not avoided such as bidding over what you can comfortably afford and not sticking to your budget. If you do end up bidding more than the asking price, your mortgage company may not cover you, so it’s vital you have adequate finances in place before taking this leap.

Holding deposits

Some sellers insist the buyer coughs up a small amount of cash to accompany their offer, which is called a “holding deposit”, usually used to show they’re serious enough about the offer they’re making.

Not all sellers will insist on holding deposits but those that do tend to be in more volatile markets, like in central London where there are a lot of investor buyers and foreign buyers.

There are a few different types of holding deposit:

  • Sometimes it’s refundable regardless of which party pulls out.
  • On other occasions it’s non-refundable if the buyer pulls out, but will be refunded if the seller pulls out.
  • Sometimes it’s completely non-refundable, which means the seller can sell to somebody else without any penalty for doing so.

In the case of the latter, the only way to get your money back would be to sue the seller.

Unsurprisingly, many estate agents do not encourage holding deposits. Some will even discourage them. If you do decide to go along with it though, never give it directly to the seller. The seller’s solicitor should be the one that holds the deposit in an escrow account.

Can I offer a lower price on a house?

Yes, you absolutely can. In fact, more houses are sold for less than the asking price than you realise.

But if you’re making an offer below the asking price, make sure you have good reason to. This could be to do with the condition of the property and whether you feel there’s work to do in bringing it up to the standard you would like.

In this case, make sure to back this up with an estimate of the potential costs involved.

You may also be able to justify your lower offer if you’ve researched similar properties that are on the market for less.

Lastly, if you’ve sold your current property, or have no property to sell and you have a mortgage in principle, this should be used as a bargaining tool to further back up your offer.

When is a lower bid likely to be successful?

Generally speaking, if the seller of the property is in a hurry to sell, or if they’ve been trying to sell for a long time, they may be willing to accept a lower offer to make a quick sale.

Sellers who aren’t looking to move quickly are more likely to hold out for a higher price.

Can you still be outbid after your offer has been accepted?

Even if your property offer is accepted, there are still things that can go wrong.

Gazumping is when a seller accepts your offer on a property, but then backs out after accepting a higher offer from a different buyer. It’s also perfectly legal, as long as it takes place before the exchange of contracts, which is when the sale becomes legally binding.

Gazumping is most common in areas where demand for property outstrips supply and multiple buyers compete for the same home, even after an offer has been accepted.

While the seller has every right to sell their home to the highest bidder, it leaves the victim both financially and emotionally drained, having spent hard-earned cash on conveyancing fees and a lawyer to take care of the paperwork.

This means when they lose the home, all that money goes down the drain.

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