Putting an offer on a house

DogSlySmile

Say you've been approved for a mortgage of €300k and the house you want is €295k. Is it better to make a low offer (say €280k) and expect other bids to come in from other potential buyers but you still have an additional €20k to offer; or is it better to go all in, offer everything you can and hope nobody matches it?

Sorry for the newb question, will probably be putting an offer in on a house tomorrow but dont know how to approach it. I'm leaning towards bidding low but then I'm worried about getting into a bidding war with other buyers as we have 300 max to spend and thats as high as we can go. But then again I'd be reluctant to bid everything as I'd be "showing my hand" and dont think anyone will be blown out of the water by a bid €5k over asking price.

Thanks for any input

Valetta

I think you need to focus more on what you yourself thinks the house is worth.

Then decide how badly you want that particular house.

If you really want that one, bid the highest you are prepared to pay and leave it at that.

You will either get it or not, but won't pay a penny more than you were prepared to pay.

It may result in you paying more than necessary, but this is an unknown that will always be there.

DogSlySmile

Valetta wrote: »

I think you need to focus more on what you yourself thinks the house is worth.

Then decide how badly you want that particular house.

If you really want that one, bid the highest you are prepared to pay and leave it at that.

You will either get it or not, but won't pay a penny more than you were prepared to pay.

It may result in you paying more than necessary, but this is an unknown that will always be there.

Thanks for the reply. We are prepared to pay everything we have. I suppose taking the all or nothing approach will make it easier on us emotionally and take away a lot of the worry and stress of negotiating/bidding wars.

johnp001

http://www.askaboutmoney.com/threads/how-to-deal-with-an-estate-agent.123191/

Read this years ago and thought a lot of the things it says make sense.
Starting with a low bid and being prepared to go up a bit (very slowly though) makes the seller think he has got all he can out of you.
Any seller getting a bid above what they expected straight away re-evaluates the value of their house upwards and will probably turn it down on the basis that there might be someone else next week who would offer more!
If someone else wants to bid on the house too then one of you will end up paying just above what the other is prepared to pay and there is no way around this. Might as well bid low to start with.

TheDriver

You can always go up but can't go down. Also high bids encourage greed in sellers who will always try to get more

MarkAnthony

It's really a matter of strategy. Me I like to know, good or bad, as soon as possible. Recently I made an offer, told the EA (truthfully) it was the only offer we would make as we were at the limit, come back to us in 48 hours or we were going with another property we had our eye on.

Accepted and sale agreed. I have a niggling feeling that we paid a little over the odds but that'll go away. Others will argue there are other houses and they're right but that approach wasn't for me.

Best of luck, but to echo what others have said, decide what it's worth to you and don't go any higher.

DogSlySmile

johnp001 wrote: »

http://www.askaboutmoney.com/threads/how-to-deal-with-an-estate-agent.123191/

Read this years ago and thought a lot of the things it says make sense.
Starting with a low bid and being prepared to go up a bit (very slowly though) makes the seller think he has got all he can out of you.
Any seller getting a bid above what they expected straight away re-evaluates the value of their house upwards and will probably turn it down on the basis that there might be someone else next week who would offer more!
If someone else wants to bid on the house too then one of you will end up paying just above what the other is prepared to pay and there is no way around this. Might as well bid low to start with.

Thanks for that thread. Lots of good tips there.

Woshy

When we were bidding for our house I had the same dilemma. Part of me just wanted to say x is my highest offer take it or leave it but the rest of me knew that probably wasn't the smartest.

When we bid on our house I exoected a bidding war but still went in low, €10k below asking price (and €5k above the current offer on the house). To my surprise the other bidder pulled out, and the vendors accepted our offer within 4 hours. So in my experience it is better to go in low and build up if there are other bidders.

Valetta

TheDriver wrote: »

You can always go up but can't go down. Also high bids encourage greed in sellers who will always try to get more

You certainly can go down, if you put a time limit on your bid.

I know of one case where this actually happened.

Initial bid was not accepted within the time specified (Seller obviously holding out for more).

Purchaser finally bought the house for 5k less when no other bids were made.

You should try to put as much pressure on the seller as possible.

TheDriver

Valetta wrote: »

You certainly can go down, if you put a time limit on your bid.

I know of one case where this actually happened.

Initial bid was not accepted within the time specified (Seller obviously holding out for more).

Purchaser finally bought the house for 5k less when no other bids were made.

You should try to put as much pressure on the seller as possible.

True but by going down, you are effectively telling the EA that there is indeed more money to be had. Depends on location and markets

P. Breathnach

In my view, fictitious bids are not as common as many who post here suggest. In reality, you are likely to bidding against others who want the property.

I bid on several properties last year, and dropped out when the bidding went higher than I was prepared to go. In no case did he EA come back to me with a cock-and-bull story about the other bidder failing to come up with the funds. In a couple of cases I followed up by checking the PPR and found that the properties did indeed sell for a price higher than I had bid.

So picture yourself competing with another interested party. What strategy will remove that person from the market? In my opinion, the only really effective strategy is to offer more than the other party is able or willing to pay. You can feel your way to that point by making an optimistic low-ball bad; if you are outbid, top the opposition by €1k at a time until one of you has had enough.

I don't see any advantage in making a preemptive high bid. If anything, it might backfire on you, as it might suggest that the "right" price for the property is higher than the asking price. You might distort the market for that property.

iguana

Are you hoping to buy in Dublin, or a Dublin commuter area OP? If not, I wouldn't make any asumption about there being other bidders.

DogSlySmile

iguana wrote: »

Are you hoping to buy in Dublin, or a Dublin commuter area OP? If not, I wouldn't make any asumption about there being other bidders.

In Dublin yep. Went to see the house last night. Talked to the EA, he says there are 3 parties who have made an offer on the house so far. The first bid went in at 270 and the three bidders have been steadily increasing since and the current highest bid is 290.

Not sure how this changes our position really. We will still need to put a bid in but now slightly over 290.

The other option is to bid everything we have and hope the other bidders can't match it. But if they can we are out of the running.

MarkAnthony

DogSlySmile wrote: »

In Dublin yep. Went to see the house last night. Talked to the EA, he says there are 3 parties who have made an offer on the house so far. The first bid went in at 270 and the three bidders have been steadily increasing since and the current highest bid is 290.

Not sure how this changes our position really. We will still need to put a bid in but now slightly over 290.

The other option is to bid everything we have and hope the other bidders can't match it. But if they can we are out of the running.

Two scenarios to my mind.

(i) People keep bidding up in 1K (say) increments. The advantage is the parties might be close to running out of puff. So you close at 295K - happy out. The flip side is people think 'it's only 1K more' and keep going - I think the majority of people can't bid as logically as everyone tells them to do here. You might find that thing get out of hand and the property ends up going for 315K

(ii) You go balls to the wall at (say) 310K your max offer: Three possibilities here.

(a) People think you're serious/mental and drop out despite they could go to 315K
(b) Someone is equally as in love with the place as you and bids 315K and you're out
(c) You over pay because it was actually scenario (i)

I know this is a blinding flash of the obvious but sometimes it's good to just lay it out there. I took route (ii) as I said before but that link that was posted was equally if not more valid.

No right answer really - other than make sure you pick an upper limit and stick to it.

EDIT: I suppose I'll elaborate a bit further on my process.

-I worked out our absolute max €275k
-I looked at what property was asking in the area
-I looked at what property had gone for in the area (new builds slightly smaller with less garden @265 so added a bit)
-That to me justified (rationalised?!) a €275k offer even though it was over asking and substantially higher than the other two parties.

I wouldn't have done that had the property not been worth that to me, the to me part is always the killer though, so easy to get emotionally attached.

sonandheir

I got my house with the strategy of going 1k over and above my last bid.
They bid 291k
You bid 292k
They bid 293k
You bid 295k
They bid 297k
You bid 300k

It worked for me as I had 2 other bidders who were always going up in 1k intervals so anymore put them under pressure and they gave up.
Also it's very important to stress that the offer be accepted immediately by vendor and booking deposit paid and house sale agreed.

Hope you get it.

herself81

We are in the process of buying a house as well. We have our eye on one house at the minute but we're finding it hard to fully trust the EA. We were told the asking price is €250,000 we put in a bid of 245,000 but we were told if want to get the house off the market the EA told us we need to pay another 25,000 over the asking price and that the vendor isn't going to accept anything less. Does this sound suspicious? We don't want to fall into any traps and pay way more than the house is worth. Has anyone any advice?

Woshy

herself81 wrote: »

We are in the process of buying a house as well. We have our eye on one house at the minute but we're finding it hard to fully trust the EA. We were told the asking price is €250,000 we put in a bid of 245,000 but we were told if want to get the house off the market the EA told us we need to pay another 25,000 over the asking price and that the vendor isn't going to accept anything less. Does this sound suspicious? We don't want to fall into any traps and pay way more than the house is worth. Has anyone any advice?

This happened to us. We bid under the asking price and were then told the vendor wouldn't accept below asking price. Against our better judgement we upped our bid to asking price (there were no other bidders). Then the EA told us the vendor wanted €40k above the asking price and what was our best offer. We decided to walk away - imo it's foolish to bid against yourself. I didn't trust the EA in the situation either and we didn't think the house was worth that much. In the end, we got a much, much better deal on another house. I wouldn't be surprised if it was the same estate agents actually!

herself81

Woshy wrote: »

This happened to us. We bid under the asking price and were then told the vendor wouldn't accept below asking price. Against our better judgement we upped our bid to asking price (there were no other bidders). Then the EA told us the vendor wanted €40k above the asking price and what was our best offer. We decided to walk away - imo it's foolish to bid against yourself. I didn't trust the EA in the situation either and we didn't think the house was worth that much. In the end, we got a much, much better deal on another house.

It is foolish to bid against yourself but in these situations the EA can put pressure on you to do the silliest of things. If we thought the house worth it we would consider it. it's hard to gauge the value of houses though in this climate at the minute.

Woshy

herself81 wrote: »

It is foolish to bid against yourself but in these situations the EA can put pressure on you to do the silliest of things. If we thought the house worth it we would consider it's hard to gauge the value in this climate at this minute.

It is tough to know. In our case we got a similar house for €20k below the asking price of the original house, so €60k less than the vendor/EA wanted us to pay for that. That's a hell of a lot of money - the original house did have a nice finish but not €60k nicer. You can do a lot to a house yourself for a hell of a lot less money than that.

If similar houses are going for €250k, not €275k I'd have a serious think about it

Woshy

Oh and the house next door to this one who wanted the €40k over asking was on sale at the same time for €15k less than her asking price (and that's what it sold for), so €55k less than she wanted for hers. It was absolute madness and pure greed. It did go sale agreed but is not on ppr yet. I'm dying to see what she got for it in the end!

Hopefully there are enough other houses for sale in the area so you can compare

herself81

Woshy wrote: »

Oh and the house next door to this one who wanted the €40k over asking was on sale at the same time for €15k less than her asking price (and that's what it sold for), so €55k less than she wanted for hers. It was absolute madness and pure greed. It did go sale agreed but is not on ppr yet. I'm dying to see what she got for it in the end!

Hopefully there are enough other houses for sale in the area so you can compare

That's part of the problem there aren't an awful lot of houses to choose from at the minute in our area. So that is skewing things a bit. Also since this house is out in the country it's harder to compare. A house did sell in that area about 8months ago and that went for 275,000 but it was a much nicer spec overall.

The property register is a great tool. Sounds like you did really well in buying your house in the end. I guess we need to sit tight a bit longer and see what comes up in the spring.

BenIrishHome

Herself81, can you post the link to the property. I'll let you know what I think about the value and might be able to give you advice about what to do.

Sadly an agent or the vendor the selfs will price a house lower to bring the interst in, but not be willing to sell for that price. At the end of the day, you need to know what you are willing and able to pay. If it's a long term home then it's better to get in then to not, the market will catch up, especially in rural areas.

I bought outside Arklow last year and we paid about €20k more than I knew it was worth but that's what they wanted (to clear their mortgage) and we're going to live here 10 years so it doesn't matter. There is so little on the market it's better to ge the house you want even if short term you feel like you paid a little too much, it's nothing compared to what people paid in the boom!

seamus

TheDriver wrote: »

True but by going down, you are effectively telling the EA that there is indeed more money to be had. Depends on location and markets

That's not really important though. If you're not willing to up the bid and the agent has nobody else on the hook, they can't bring you up.

I've heard of a number of people get into a bidding war and "lose", only to be told a couple of days later that the "other party" pulled out and the seller was willing to accept their last offer.

In that case, the smart move is always to say that offer has expired and drop it by €10k with a 48 hour time limit.

johnp001

BenIrishHome wrote: »

Herself81, can you post the link to the property. I'll let you know what I think about the value and might be able to give you advice about what to do.

Sadly an agent or the vendor the selfs will price a house lower to bring the interst in, but not be willing to sell for that price. At the end of the day, you need to know what you are willing and able to pay. If it's a long term home then it's better to get in then to not, the market will catch up, especially in rural areas.

I bought outside Arklow last year and we paid about €20k more than I knew it was worth but that's what they wanted (to clear their mortgage) and we're going to live here 10 years so it doesn't matter. There is so little on the market it's better to ge the house you want even if short term you feel like you paid a little too much, it's nothing compared to what people paid in the boom!

In reference to the last point, see this post from last week in the Property Market 2015 thread and its link which compares mortgage affordability at height of boom vs now.

http://www.boards.ie/vbulletin/showpost.php?p=93761625&postcount=175

The main gist is that affordability is the same now as at the height of the boom when interest rates, taxes and incomes etc are taken into account despite the lower house prices.

Paying over the odds for a house would be hard for me to reconcile with the hard saving that it required to get one. I would feel I might be being pennywise and pound foolish. Especially now when it is acknowledged the market is falling.

herself81

BenIrishHome wrote: »

Herself81, can you post the link to the property. I'll let you know what I think about the value and might be able to give you advice about what to do.

Sadly an agent or the vendor the selfs will price a house lower to bring the interst in, but not be willing to sell for that price. At the end of the day, you need to know what you are willing and able to pay. If it's a long term home then it's better to get in then to not, the market will catch up, especially in rural areas.

I bought outside Arklow last year and we paid about €20k more than I knew it was worth but that's what they wanted (to clear their mortgage) and we're going to live here 10 years so it doesn't matter. There is so little on the market it's better to ge the house you want even if short term you feel like you paid a little too much, it's nothing compared to what people paid in the boom!

Hi BenIrishHome,
The house we are looking at still hasn't gone up on the market officially. The EA let us have a preview of it before Christmas. I'm expecting it to go up in the next few days. We're actually wondering why the delay. What you say is true. It will hopefully be our family home and we don't want to let that pass is by. Then again that kind of extra money could go to other things down the line. Like some of the other posters have said above mortgages are not as affordable despite the much lower house prices. The standard variable rates are crucifying. It's a hard one too call.Every paper has its own spin on the property market and all only to suit their own intentions and interests. Are you in the property business yourself? Thanks for the offer by the way. :-)

BenIrishHome

herself81 wrote: »

Hi BenIrishHome,
The house we are looking at still hasn't gone up on the market officially. The EA let us have a preview of it before Christmas. I'm expecting it to go up in the next few days. We're actually wondering why the delay. What you say is true. It will hopefully be our family home and we don't want to let that pass is by. Then again that kind of extra money could go to other things down the line. Like some of the other posters have said above mortgages are not as affordable despite the much lower house prices. The standard variable rates are crucifying. It's a hard one too call.Every paper has its own spin on the property market and all only to suit their own intentions and interests. Are you in the property business yourself? Thanks for the offer by the way. :-)

I am indeed but can't discuss that here! Happy to help, let us know when it's online.