Autumn 2016
Countrywide Quarterly Report
The art of negotiation
Johnny Morris
Research Director
David Fell Research Analyst
Authors
The buyer06
COUNTRYWIDE QUARTERLY REPORT AUTUMN 2016
For many people the idea of a negotiation conjures up the image of a winner and a loser. One person ends up walking away happy with the other leaving in despair. The reality is rather different. While both parties know what they want and have a plan to get it, deals get done when people find common ground and can meet somewhere in the middle.
The property market is no different. Sales happen
when a buyer and a seller can reach a compromise
that leaves both of them happy. While the price
of a home tends to be the focus of the negotiation,
there are a whole host of other factors involved too.
Who the buyer is, how the deal is funded, and the
timescales they’re both working towards all affect
their negotiating position.
But the way in which people negotiate isn’t
only governed by their financial position and
timescales. It’s people that buy and sell homes
which means their personality and the other
options on the table also play a role. This report
looks at the different ways people negotiate
a deal. The first two pages focus on sellers and
ways they push for a sale while the final two
pages examine buyers and unpick their
negotiating strategies.
The art of negotiation
The seller04
Negotiation tactics07
CONTENTS
contents
42
The sellerSelling a home is a big deal and people tend not to do it very often. Owners decide to sell for all sorts of reasons, but what unites almost everyone is their desire to get the best price in the shortest amount of time. But every seller is slightly different, and is driven by a whole host of needs and desires, all of which have an effect on how they go about selling their home.
Given that no two homes are identical, it’s not surprising that there’s usually some deliberation over their value. Owners naturally put a higher price on their home than the buyer, and it’s only when they can agree that it gets sold. The following two pages look at the selling process; from a home first coming onto the market, to the vendor accepting an offer, or not.
Starting the conversationWhenever it arrives, the first offer is a welcome expression
of interest. It takes an average of 11 days between
someone putting their home up for sale and them
receiving their first offer, a figure which closely reflects
the strength of demand in their market and the level at
which the asking price is set. While it might be welcome,
more often than not vendors turn down the first offer
in the hope or expectation of getting a higher price.
In 2016, 71% of first offers were turned down, a figure
which has dropped slightly since last year. London
homeowners are more likely than anyone else to hold
out for a higher offer in the future, turning down 82%
of initial bids.
The length of time a home has been on the market tends
to determine whether or not the first offer is accepted.
Vendors turn down 80% of first offers made on homes
that have been on the market for less than a week, while
at the other end of the spectrum, 55% of opening offers
are accepted on homes that have been for sale for at least
six months.
So is turning down the first offer the right decision for most
sellers? For the most part the answer is yes, with some
exceptions. 78% of vendors who turned down the opening
offer ended up with more money. A figure which varies
depending on who’s making the second offer. If the
person making the first offer comes back with a second,
the vendor almost always achieves a higher price for their
home. But if the first buyer walks away and it’s someone
else making the second offer, their chances of getting
more money drop to 61%. Quite often it’s the first buyer
who walks through the door who is also the keenest.
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COUNTRYWIDE QUARTERLY REPORT AUTUMN 2016
Best and finalWhere they have a choice, most vendors choose
to sell their home to the person who is willing
to pay them the most for it. In 2016, the highest
offer was an average of £4,400 or 1.8% above
the second highest. But while price is important
it doesn’t always determine who ends up buying
a home. Over the last decade around 1 in 5 vendors
decided not to accept the highest offer, a figure which
tends to reflect the strength of the housing market.
In a strong market where prices are going up, sellers are
most likely to accept the highest offer. Should the sale fall
through, there’s likely to be someone else waiting in the
wings to step in to match the offer or even pay a little
bit more. But during a downturn, the balance of power
changes and sellers have to pay much closer attention
to the ability of their buyer to complete on their sale.
In 2010, at the height of the slowdown, a record
28% of vendors opted not to take the highest offer.
Typically this means accepting an offer from a buyer who
they feel is a safer bet in the face of greater uncertainty.
Walking awayMost buyers and sellers fail to agree a price, and the
strength or weakness of the market actually makes little
difference to the chances of two people agreeing a deal.
In 2016 two thirds of buyers and sellers failed to agree
a price, leaving the vendor to find interest elsewhere.
Negotiations typically proceed at a faster pace in stronger
markets with buyers in particular acutely aware of the need
to complete quickly. Between 2010 and 2016, the time
between a buyer making their first offer, and the successful
or unsuccessful conclusion of negotiations fell from two
weeks to four days.
Just under 45% of all homes that are put up for sale
don’t sell, a figure which has steadily fallen as the market
has picked up since 2010. Around two thirds of the homes
which don’t sell have had an offer accepted on them,
which subsequently falls through because either the
buyer or the seller decides to pull out and the home isn’t
re-marketed. Buyers are most likely to withdraw their offer
in weaker markets while sellers are disproportionately
likely to pull out in stronger ones. The remaining third
of unsold homes are withdrawn from the market without
an offer ever being accepted.
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COUNTRYWIDE QUARTERLY REPORT AUTUMN 2016
Mortgage
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIII
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIIIIIIIIII
IIIIIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIII
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIIIIIIIIII
IIIIIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIII
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIIIIIIIIII
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIII
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
IIIIIIIIIIII
IIIIIIIIIIIII
35%
30%
25%
20%
20%
15%
10%
5%
0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sellers who don’t take the highest offer
Source: Countrywide Research
2006:£6,600
2008:£12,900
2010:£8,300
2012:£7,700
2008:£12,900
2016:£4,100
Average amount turned down by not taking the highest offer.
v
The buyerBuyers come in all shapes and sizes but what unites almost all of them is that they try to negotiate with the seller, some more successfully than others. In 2016 just 15% of buyers met the asking price in full with their first offer and a degree of negotiation was required for a deal to be agreed. When making their first offer buyers balance going in too low and risk offending the seller with having a much higher offer accepted leaving them wondering if they could have paid a little less.
Although the strength of the buyers hand is influenced
by the market and how many other people are out looking,
negotiation of one kind or another happens every day
in every market up and down the country. In slower more
buyer friendly markets, negotiations tend to be dictated
by the person putting in an offer. Whereas in markets
where prices are rising quickly and stock is thin on the
ground, buyers often find themselves up against a number
of others, negotiating upwards to give the seller the deal
they’re after.
Typically there is a hierarchy of buyers with seasoned
investors ready to pay in cash at a moments notice
somewhere near the top of the pecking order and those
who are part of a long chain with a small deposit
somewhere near the bottom. This year chain free cash
buyers negotiated an extra 2% off the asking price
compared to someone in a chain with a mortgage. But the
way buyers negotiate makes almost as much difference
to the chance of agreeing a deal as their position. Almost
everyone who buys a home fits into one of the eight
groups listed opposite which trump their wealth and
position. Many first time buyers negotiate in a similar way
to seasoned investors.
Different negotiation strategies are more successful at
different times as markets change. The most successful
buyers are chameleons, quickly changing the way they
negotiate depending on who the seller is and the strength
of the market. What worked for someone buying a home
in Newcastle from a landlord during 2010 is less likely
to go down quite so well five years later with a second
stepping Londoner.
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COUNTRYWIDE QUARTERLY REPORT AUTUMN 2016 COUNTRYWIDE QUARTERLY REPORT AUTUMN 2016
8
25%
UKLondon
60%
50%
40%
30%
20%
10%
0%
Jan-
07
Apr-
07
Jul-0
7
Oct
-07
Jan-
08
Apr-
08
Jul-0
8
Oct
-08
Jan-
09
Apr-
09
Jul-0
9
Oct
-10
Jan-
10
Apr-
10
Jul-1
0
Oct
-10
Jan-
11
Apr-
11
Jul-1
1
Oct
-11
Jan-
12
Apr-
12
Jul-1
2
Oct
-12
Jan-
13
Apr-
13
Jul-1
3
Oct
-13
Jan-
14
Apr-
14
Jul-1
4
Oct
-14
Jan-
15
Apr-
15
Jul-1
5
Oct
-15
Jan-
16
Apr-
16
Jul-1
6
Sept-
16
Home sold for more than the first asking price
Negotiation tactics
Name: The chancerDescription: The largest group of buyers makes just a single, close to asking price offer on a home. While they’re successful around a third of the time, they walk away if they’re not. 2016 habitat: The Midlands Likely 2017 habitat: The South
Name: The peacockDescription: The peacock makes the most of their non-financial assets (babies, first time buyer status etc) to tug at the seller’s heart strings.
2016 habitat: LondonLikely 2017 habitat: The Midlands
Name: The jitterbugDescription: The jitterbug makes a series of increasing offers before withdrawing their best and final, in the fear that they’re paying over the odds.
2016 habitat: The NorthLikely 2017 habitat: The South
Name: The bulldozerDescription: The bulldozer falls in love with a home and refuses to let anyone or anything stand in their way. Rival bids are met by a flurry of punchy counter offers.
2016 habitat: LondonLikely 2017 habitat: London
Name: The chipperDescription: The chipper makes a series of close to asking price offers, increasing in ever smaller steps as they get closer to what the seller of the home is looking for.
2016 habitat: The SouthLikely 2017 habitat: The South
Name: The anglerDescription: The angler makes a very low opening offer to see if the vendor takes the bait before upping their offer to a more competitive level.
2016 habitat: The MidlandsLikely 2017 habitat: London
Name: The wheeler dealerDescription: The wheeler dealer makes a single low offer on a whole host of different properties at a similar time in the hope that one of them will be accepted.
2016 habitat: The NorthLikely 2017 habitat: London
Name: The thinker Description: The thinker is in no hurry to make any decisions. A week of waiting sits in between a rejected offer and a subsequent higher one.
2016 habitat: The NorthLikely 2017 habitat: The North
19%
15%
11%
5%
8%
4%
Source: Countrywide Research
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