Househunters can take advantage of gloomy predictions for the housing market and negotiate a better price. Just follow these five simple steps...
About to buy a property? Told your friends and family? Did the conversation go something like this?
"You're mad! I saw an expert on the news predicting house prices will crash next year! What are you thinking?!"
If they're really well informed, they might even grab a copy of a newspaper and add: "According to Halifax house price index, house prices in November fell by 1.1% - their biggest slump in almost a year - leaving the average house worth £5,000 less than it was worth in August. Oh yes, it does say that, year on year, house prices still rose by 6.3%... but if I were you, I wouldn't buy now for love nor money!"
If you're currently looking to move home or get on the ladder, this sort of conversation no doubt stirs up a mixture of emotions. Because on the one hand, you think: "Great! If prices are falling, it means I will finally actually be able to afford to buy a property bigger than a shoe box!"
But on the other hand, you think: "Uh oh! What if I'm buying at the top of the market? What if the property I buy drops in value? What if I can't sell it again?"
The best way to deal with these mixed emotions is to work out exactly why you are buying the property. Ask yourself: are you nesting or investing? Is your primary motive finding a home to live in, that will better suit your family's needs than your current home? Do you need to move because of a job or another commitment? Or are you only looking to make a sound investment for your future?
To some extent, you'll no doubt want both: the home of your dreams and an investment that will make you rich. Finding a property that will live up to these expectations in today's uncertain property market, however, is likely to be difficult.
Then again, in some ways, the market is on your side - because it is a buyer's market. This occurs when there are fewer buyers for every seller. And, as I explained in How To Get The Best Price For Your Property, the average number of house hunters per estate agent has dropped by 21% since October 2006, from 360 to 282, while the average number of properties per agent has risen by 2% over the same period.
This gives buyers the upper hand. Already, the average gap between the asking price and the sales price of a property has increased to 4.2% -- a gap which is likely to widen further over the coming year.
So if you are looking to buy, what can you do to take advantage of market conditions -- and knock thousands off your property price?
1) View as many properties as you can. You need to get a sense of the direction the local market is moving in and how much demand there is from other buyers for that type of property in that location. I highly recommend a property search engine called Zoomf.com, because it allows you to refine your search by property type, using categories such as 'garden' or 'Victorian'. So if you wanted a Victorian property with a garden, you could see exactly how many are on the market and what price they are going for.
2) Do your research. The Land Registry will show you the changes in house prices in your chosen area -- have prices increased, decreased or stagnated over the past few months? It's also a good idea to visit nethouseprices.com to look up actual prices paid in your postcode. Finally, check out the estate agent's nemisis, Propertysnake.co.uk, to find out whether sellers in your area are being forced reduce their property prices, as this indicates low demand.
3) Decide how much the property is worth -- to you. If you've followed steps one and two, you should have a pretty good idea what the current market value of the property is, in general, to all and sundry. But you also need to decide how much it is worth to you -- i.e. how much you want that particular property -- and factor this into the equation. This should help you to determine the maximum price you would be prepared to pay. If there are no other buyers interested or if the property has been on the market for some time, consider offering below your 'maximum' price, especially if the seller urgently needs to sell.
4) Get a Homebuyer's Report. This is a type of property survey, carried out by a surveyor, and it will tell you whether any repairs are needed and also whether anything needs to be checked out. Try to get the vendor to knock the cost of any repairs or professional surveys (such as a gas safety check) off the price. Don't shy away from negotiating at this point, as offers are normally made subject to survey -- and as a buyer, you are in a very strong bargaining position right now, particularly if the seller is involved in a property chain.
5) Save, the Foolish way. Make sure that all that the thousands of pounds you save by reducing the price aren't eaten up by an uncompetitive interest rate on your mortgage. Use The Motley Fool Mortgage Service to get fee-free advice from a professional broker who can search the whole of the market and come up with the best deal to suit your individual circumstances.
With any luck, you'll save so much on both the property price and the mortgage that you'll have enough left over to buy yourself everything you need for your new home -- including a bottle of bubbly to celebrate with when you move in.
Happy househunting!
More: Seven Handy Hints For Hard-Up Homeowners
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