Navigating the process of making an offer on a property can be a pivotal moment for any homebuyer. It’s a juncture where financial considerations, market knowledge, and negotiation skills converge to shape your future homeownership. Whether you’re eyeing a cosy apartment in the city or a sprawling countryside estate, understanding the nuances of making a compelling offer is essential to securing your dream home.

Making an offer

Making an offer on a property isn’t just about stating a price; it’s a strategic move that requires careful planning and consideration. The initial step involves assessing the market value of the property, which entails researching recent sales prices of similar properties in the area and considering any unique features or drawbacks the property in question may have. This information forms the foundation for crafting a competitive yet realistic offer.

Here are five things to keep in mind:

In a newly listed property scenario, sellers may not yet be receptive to offers, especially in today’s competitive buyers’ market where larger discounts are becoming more prevalent. Conversely, if a home has lingered on the market for several months, sellers are likely more open to negotiation.

A price reduction indicates that sellers have adjusted their expectations. This adjustment may prompt you to consider offering the revised asking price, seeing it as a fair reflection of current market conditions. However, if the price remains unchanged, there may be an opportunity to submit an offer below the asking price.

There are numerous factors that can cause a property sale to collapse – complications within the buying or selling chain, financial challenges such as failed mortgage approvals, or adjustments to personal budgets. Life events like job transitions, relationship shifts, or health concerns can also derail a sale.

Identifying a property that has returned to the market offers a distinct advantage: it signals that the seller is committed to moving forward.

Sellers are more likely to hold out for the full asking price if they’ve had lots of online hits and in-person viewings. But if they haven’t received much interest, they might be willing to accept a slightly lower offer.

Examining what the current owners originally paid for their property can provide valuable insights into their potential willingness to negotiate, ensuring a fair price for both parties involved. If the owners have resided there for an extended period, such as over a decade, they may have realised substantial returns on their investment and may potentially consider more flexible offers.

In regions experiencing high demand and escalating prices, securing acceptance for your offer can prove challenging.

Conversely, in areas where demand has waned, competition among buyers diminishes. Consequently, sellers may find themselves more inclined to entertain lower offers to facilitate a sale.

Crafting the right offer involves more than just the monetary aspect. It’s about understanding the motivations of both parties and tailoring your proposal accordingly. The offer should not only reflect the current market conditions and the property’s value but also align with your own budget and long-term financial goals.

Real estate is an essential asset for investors, as its value generally appreciates over time. Those who can afford to be part of the property market tend to do so due to consistent income, tax benefits, wealth diversification, and the possibility of leveraging more wealth through it. Property prices vary based on available supply. When there is a rise in demand but limited supply, property prices increase, and rents are higher.

What are the factors driving the real estate market?
The rise and dip of real estate demand varies as per government policies, such as tax benefits, deductions, subsidies, etc. Also, interest rates can affect the demand – lower interest rates and mortgage rates lead to more buyers. But these also lead to a hike in property prices.

Here are the main factors influencing property prices:

• Interest rates and mortgage availability

  Higher interest rates mean higher monthly payments, which lead to lower demand for property purchases. This, in turn, makes renting seem more attractive. Interest rates have a greater impact when borrowers have variable mortgages. When there is a boom, banks are interested in offering more mortgage options, which tempts potential buyers into taking higher-risk investments. However, since the recession, banks have tightened their grip on lending and affected mortgage availability and demand.

• Economy

  The general state of the economy has a significant impact on the real estate market. If economic factors like GDP, manufacturing, rates of goods, employment data, etc., are sluggish, the real estate segment will perform accordingly. When there is higher growth in income, buyers can spend more, thus leading to more demand and more purchases. This will, in turn, lead to a hike in property prices. On a similar note, when unemployment increases, the property market falls as people do not have the income to set aside for property investments.

• Government regulations and policies

  Government incentives can be a good indicator of property market trends and changes in supply and demand. When the government offers more tax benefits and subsidies, it is a boost for the real estate market as these are motivations to potential buyers.

• Demographics

  The demographics of an area – population, age, gender, and income – have a huge impact on trends in the real estate market. For example, will the demand for second homes decrease when people retire? If the income and family sizes are small, they will require smaller homes.

When does real estate suffer the most?
A recession or a weak economy is the biggest threat to property purchases and investments. When people lose jobs and income, it affects their ability to pay mortgages.
Also, another factor that affects the real estate market is inflation. Property prices increase. Construction costs increase, but it would have fewer takers, which in turn affects supply.
When potential buyers don’t have confidence in property prices, that can also affect the market. For example, if they fear property prices can dip, they will defer buying to a more favourable time.