Now I do not intend to preach about the complexities and various skills needed to negotiate! Ways of dressing up, holding notepads, getting your friends to call you while you are with a seller, practiced facial expressions, keeping quite and all the other tricks of negotiating are available through numerous courses and manuals which handle this topic, so what I would say is that the key is to be able to gauge the lowest level at which a seller will accept your offer.

I do have one vital Rule when negotiating that I always remember when negotiating:

The first one to give a number LOSES!

That said, I went away from the meeting, not having given an offer, and did my research. I looked at various online facilities which list house prices. Some of these are included below:

www.upmystreet.com
www.englishhouseprices.co.uk
www.housepricemap.co.uk

There are many other sources of information on the internet and I would encourage you to do your own research to find the best and most accurate ones. Some sites only enable you to search for house prices by using a postal code filter. If you bear in mind that a postal code can cover quite a large area – you may be gathering comparables that, although in the same geographic area, do not actually reflect a comparable value. I prefer to stick with sites that show house prices on a geographic graphic image so I can ensure that the comparables I am using are either in the same street, or if on another street, and a similar type of property. That said, it is also vital that you speak to estate agents and valuers to gauge the true market value. This is a very important point!

If you over-estimate the value of the property you are looking at when doing a BMV deal, you will most likely LOSE MONEY!

Let me illustrate an example of how over-estimating a property on a BMV deal can lose you money!

If you estimate the value of a property to be £150,000 and proceed to make an offer of 75% of this, your discounted purchase price (DPP) will be £112,500. Now ordinary BTL mortgage route will mean you get a 75% mortgage based on the purchase price agreed of £112,500. Your mortgage will be £84,375, which means your deposit you will have to put down will be £28,125! Not exactly pocket change.

Now if you decide to wait for 6 months before you get a remortgage, and then look for a remortgage of 75% of your estimated value of £150,000, you would expect to get £112,500 released through your remortgage. So you would re-coup your initial deposit of £28,125 but not end up with any cash in hand. Now this is where things can get tricky.

Given that some estimates say that house prices have dropped by 6% in the last year and expected to drop any more, you may find that due to an overall market drop your property has lost say 5% of its value. Also consider that if you had over-estimated the original estimated value by say £10,000, you would effectively be sitting with a property worth £132,500! If you then remortgage at 75% LTV, and release £99,375, you will only get £15,000 back of your original deposit. So £13,125 of your money will still be sitting in your BMV property. You may not have ‘lost’ this money in that it is effectively stuck in the property, however, the fact remains that through over-estimating the value of a property you will be £13,125 out of pocket! This ignores the costs associated with purchasing such as mortgage fees, solicitors fees etc. This is not an ideal situation!

Taken from Toby Hone’s fantastic new book ‘Make Money From Property In the Credit Crunch‘. Available to buy online: click here