1. How much can you afford

Let’s ignore the POI. What is the maximum that you can afford in pure cash, and what is the maximum you can afford to borrow from a mortgage company? If you don’t know, start talking to a mortgage advisor now, even before you’ve found a house you want to buy. Being mortgage ready – that is, having a valid agreement in principle (AIP) on hand when you make an offer will put you ahead of the priority list of most other buyers as it shows that the offer you make on the POI is one supported by the AIP, and not a figure that might end up being unaffordable – wasting everyone’s time. Get an AIP that gives you the maximum you can borrow, not the exact amount that you actually want to borrow. Remember, an AIP is there only as a confirmation to the seller that you have the financial ability to fund the offer you will be making.

There is a school of thought that you shouldn’t disclose the maximum since this will play against your ability to negotiate an offer. But, that isn’t the case, as long as you do not show the agents the AIP before any offer has been accepted, there is no issue, and even if the agent tries to be cheeky, remember that your offer price isn’t just about how much you can borrow, but about how much you will need to live after spending on the property. You would have discussed this with your mortgage advisor anyway.

2. Deduct standard costs of transactions

Let’s assume the maximum you can afford (including borrowing, or cash only) is £500,000. Once you’ve successfully gone through the purchasing process, you will have paid a few unavoidable costs. I’ve detailed a very rough approximation of these costs based on experiences in 2024 in South of the UK below, but this gives you an indication of the upfront costs that you will need to pay on before, or on completion:

1. Conveyancy and disbursements fee: £2,300
2. Home-buyers’ survey: £550
3. Mortgage booking and arrangement fee: £250
4. Building insurance: £350

Thus, after these costs, this means that you actually have £496,550 to play with. But actually, this is still not quite right, as you have to factor in stamp duty, which, for a First Time Buyer means that any amount between £425,001 – £625,0000 will be charged at 5%. Working this out manually:

£496,550 – £425,001 = £71,549

£71,549 * 0.05 = £3,577 of stamp duty payable.

The effective tax rate is therefore: 3,577/496,550 = 0.72%

If you don’t want to calculate this, the Money Helper stamp duty calculator will do this for you: MoneyHelper Stamp Duty Calculator

Thus, the maximum offer price you can actually make is: 496,550 / 1.0072 = £493,000. (the original amount less cost, divided by the sum of 100% plus the effective tax rate – I don’t want to go into the maths of this here).

3. Research the area of interest

Rightmove or Zoopla are good initial resources to really get a feel of how much sellers are asking for in the area that you are looking to buy. Remember, these prices are asking prices, sold prices, so they are more often than not, higher than the true market price of the area in the current housing market, however, it gives you a ball-park, and an early indicator of how realistic you can negotiate down to within your affordability. For example, if all of the properties in the area that match your criteria on Rightmove have asking prices 10% or above of your maximum (i.e. £542,300+ in our example), then it is likely that the area is out of your affordability, and so your chances of success will be limited. Be realistic about your opportunities, and this may mean looking slightly outside of the area; or, if you were originally set on finding a detached house, perhaps consider a semi-detached or terraced house instead.

4. Five Priorities, Many Wishes

So now assuming that your maximum possible offer is £493,000, you need to respect this value. This should represent the value you are willing to offer on a POI if it meets all your top priorities of buying a house, and doesn’t compromise on qualities you are looking for either. i.e. almost impossible to achieve.

You must have in your mind some priorities that must be met to motivate you to move, otherwise it wouldn’t be worth your time and money. These are distinct from the countless other wants that you have for your ideal new home – you put these in a wishlist bucket. When you are determining your offer price, your primary focus should only be on how the property has met (or not) your priorities. Examples of priorities are things like: a catchment of good schools (because you have children); close to a train station (because your daily work commute requires this); have two full-suite bathrooms (because you are a family of 4 or more); large kitchen (because you do a lot of home cooking).  Wishes are things like: having underfloor heating; walk-in showers; turnkey finish; or double glazed windows – items that aren’t deal breakers if the property doesn’t have them, if there’s potential to install them after you move in.   

Once you’ve got a list of about 5 priorities, it really is up to you how much you are willing to discount on the value of the property if any one of the priorities aren’t met. Now, bearing in mind that these are “priorities”, logic dictates that you really shouldn’t buy a property that doesn’t meet all of them – but, life isn’t binary, and as much as you try to detach yourself from emotions, it is unavoidable in the whole process as I explain in the next point. Besides, you might be able to meet some of the priorities after moving in, such as renovating the kitchen.

5. Let your emotions speak

So, let’s say after all your rational analysis, you want to make an offer of £470,000 on a POI asked for £485,000, the next step, before you make an offer, is to sleep on it.

Let your emotions speak – are you satisfied to spend £470k on that property, or do you still have some skepticism either about the price or about the property, or both? I forgot to mention that, you MUST have viewed the property in person before even considering an offer, and if you are at an indecisive phase even after rationalizing your offer, then this is a perfect opportunity to visit the property again, and again if you need to. You know an offer you make is right if you have an excited feeling about moving house once you made it. And, even if you’ve accepted an offer, you are still entitled to withdraw it if you have doubts later on – you are not obligated to go through with it before any contracts have been signed. From personal experience, I was debating on two properties – almost identical in size and layout, but in different towns. They were both in my budget but one had a better quality finish compared to another – it had a larger kitchen extension with underfloor heating, and a larger garden. I was very excited about making an offer for it, which was £20k under the asking price. And, in the rush of it, the agent managed to secure the offer on the day. But after sleeping on it, it occurred to me that I didn’t know the town, and there was a slight unease of moving there. I asked the agent to slow down because I wanted to visit the town a few times first, which annoyed him somewhat. And, after several trips, I made the decision to withdraw my offer – I felt bad to both the agent and the seller for potentially wasting their time, but it was the right thing to do. Instead, I made and secured an offer on the other property for £15k less than asking and remained excited about the prospect of moving into it. I believe that is the feeling you should get if you’ve made the right offer on the right property. Only then, can you call it your “dream house”.

6. Finally, make your offer IN WRITING

This doesn’t need explaining, but just as an important reminder, you must make your offer in writing to give you a strong standing in the negotiation process. The agent is then obligated to pass on the offer and any conditions that you have detailed to the seller. It’s just common sense to do this in writing, after all, buying a house involves parting away from a lot of your money, right?