How to master the delicate art of bidding for your dream home

So, you have found the ideal property. What’s the best way to secure it — without paying too much? Karl Deeter has some tips

WE have big problems in Ireland in housing, but it goes beyond that, we have problems in how contracts are created and executed because a seller can pull out at the last minute and suffer no consequence for doing so.

In some EU countries, they’d face a financial penalty for doing this. Our system is the embodiment of inefficiency in many ways, and it means people often get dragged into bidding wars that they don’t want to be in.

That’s great for sellers, but they are typically not the ones feeling the brunt of a housing crisis.

As mortgage brokers, our vested interests are best served by a market with lots of transactions, not one of rising prices where we have to reissue loan offers as they expire due to reasonably priced homes not being available, or seek higher amounts because people are chasing up prices.

The best way to explain this is that lending doesn’t require homes to sell. For instance, there used to be a competitive switching market.

New homes are, thankfully, a way of avoiding having to place bids, but we don’t have anywhere near enough new homes. We have moved from ‘NIMBYism’ (Not In My Back Yard) to the new Irish paradigm of ‘BANANAS’ (Build Absolutely Nothing Anywhere Near Anything Substantial).

The evidence of this is easily found — headlines abound about plans for thousands of homes that are being turned down by local authority planners, clientelist councillors and because of group objections by local residents. They all have one thing in common: they don’t bear the financial burden of these decisions.

The developers and builders, who pass on those costs, do; the people who have to pay overpriced rent do; and in the end the houses that don’t get built are occupied by nobody.

That leaves us in the world of second-hand homes, and something we are asked about regularly in my firm: “What should I bid?”

We start with the caveat that we believe a lot of the asking prices out there are above and beyond the intrinsic value of the property. If you can accept that then you move on to the second step which is that the absolute value doesn’t help you place a winning bid — the relative value of your bid is what gets you the property (or not).

If you go below asking price you will still be informed of new bids, if you wait you open the gates for others to bid, if you go in high you risk paying more than you might need to — so what should you do?

Here are a few things that we have seen work:

The first step is to make your offer time-limited. Before making an offer ask the estate agent to tell you how long the vendor needs to accept or reject an offer? If they don’t answer then low-ball the bid so you are in the running, or don’t bid at all and use your energy to look elsewhere.

The second step is to get a feel for what the seller is trying to do.

If the property is priced high for the area, the asking price may be what works. If it’s priced low they may be trying to create a bidding war between different parties.

Figuring this out requires talking to people. Property is still a business that works best when people are communicating. Use email to record your offer, but in the run up to it talk to the agent in person or on the phone. Ask questions.

Ask any neighbours you might get chatting to at a viewing about the house, or ask the people who are selling.

If it’s a probate sale (selling because somebody died) then there is no rush — an offer of a fast sale doesn’t motivate anybody in that case.

If they are trying to selfbuild elsewhere and are renting then speed carries a premium.

Find out whatever you can, then do your bidding in a way that keeps what you discovered in mind.

So if it’s a probate sale don’t make your offer contingent on lots of things getting fixed. That’s hassle and will often mean a lower but less-hassle bid wins. If there are lots of bidders, a good way to clear the field is to bid up in large sums (which is a risky approach that you will have to pay for).

Try to have more than one place you’ll consider. That way if one falls through the sky doesn’t fall down. We have seen too many people who missed out on two or three places then spent two years renting they didn’t have to had they done it differently.

We should reiterate, we aren’t saying go buy property, but if you plan to then don’t waste your own time. Bid in a way that gets a deal done quickly so you can start paying the place off.

‘Bid in a way that gets a deal done quickly’