Sleepless nights worrying about putting in a bid
Do you join a bidding war or fix a price in your head? Deciding on a strategy can be a tricky process
It’s not for the faint-hearted, bidding on a house. Having backed out of our first favoured property, we are now steeling ourselves to bid on another. But it’s a tricky process that is guaranteed to lead to many sleepless nights.
Do you listen closely to what the estate agent says about the vendor? Do you take on board what you’re told about other bids? Do you immediately counter with an offer when someone else raises the stakes? Or do you just fix a price in your head that you think the house is worth, and be prepared to walk away if the vendor doesn’t accept?
While the Property Price Register has brought greater transparency to sale prices, the bidding process remains opaque. Given the information asymmetry which is stacked in favour of the vendor, it can be a stressful time for buyers.
Still, it could be worse. At least in Ireland you can work your way up to your best offer and may never get there if other bidders drop out. We could live in Scotland where sealed bids are common. When bidding on a house there, you have to submit your best and final offer to the agent and wait to see who comes out on top.
This puts pressure on you to offer as much as you can afford – even though it might be far in excess of what the other bidders end up offering.
I remember watching an episode of Location, Location, Location where the buyers – aided and abetted by Phil and Kirsty – bid on a house using this process. Their offer turned out to be several hundred thousand pounds more than the closest bidder.
But it could also be better. Last year Trinity College Dublin professor Brian Lucey put forward an argument that Nama should sell all its properties on online auction site eBay. Could the same work in the private treaty market?
Maybe it’s a bit fanciful, but bringing an element of the auction room to the process, and being able to watch the bidding process for a property in real time, is definitely attractive for buyers like us.
If there are multiple bidders for a property – as is often the case now – then the price will still shoot up, but at least the eventual winner can take comfort from the veracity of the other bidders.
In the absence of this transparency, however, the best approach might be to hone our negotiation skills. So I asked some buyers’ agents, who act on behalf of property buyers and assume the burden of negotiation for them, for some advice on how to get the best deal.