Trying to understand bidding strategy

s7ryf3925pivug

We bid asking price with a hard time limit. The EA tried to ignore time limit but we insisted. Offer was accepted.

My perception is that EAs sometimes like to use bids as leverage to seek larger bids. Time limit seeks to pre-empt that.

blue note

davo10 wrote: »

Are you still within what you can afford?

We're way within budget but just don't want to overpay. It kind of makes it more difficult to stop bidding when we could go higher without putting ourselves under strain!

TheChizler

blue note wrote: »

I've been asked for no evidence that I can back up my bid. I would fully expect that some people bid on houses that they don't have a realistic chance of getting a mortgage for.

Approval in principle is fine - you can get that very easily. Actual approval I hear is more difficult and I've an appointment in the bank tomorrow about that.

Cheers, I mean the more serious approval (before the loan offer) where they've gone through all your payslips and reviewed work contracts and stress tested your possible payments, but you don't have a specific house in mind to get a valuation or structural report on yet, not the online calculator that just multiplies your income by 3.5

davo10

blue note wrote: »

We're way within budget but just don't want to overpay. It kind of makes it more difficult to stop bidding when we could go higher without putting ourselves under strain!

What is overpaying? A house is worth what the highest bidder is willing to pay, if that's you then you paid what it is worth. If it isn't you, then someone paid what it is worth to them. Prices rise and fall, if it rises in the years to come, you got a "bargain", if it falls then you "overpaid" but today you paid what it is worth to you.

Lumen

davo10 wrote: »

What is overpaying? A house is worth what the highest bidder is willing to pay, if that's you then you paid what it is worth. If it isn't you, then someone paid what it is worth to them. Prices rise and fall, if it rises in the years to come, you got a "bargain", if it falls then you "overpaid" but today you paid what it is worth to you.

Yes, to buy a house you have to pay more than anyone else thinks it's worth.

It's best not to think about this too much.

ted1

metricspaces wrote: »

blue note wrote: »

The other went up by 1 at 455 and 470. We're now at 473 and I'm waiting to see if they go to 474.

Blow them outta the water, 500!

That may involve spending 17k more then he needs. While it may work it would also be foolish

metricspaces

ted1 wrote: »

That may involve spending 17k more then he needs. While it may work it would also be foolish

Well as the saying goes, fortune favours the brave. If really you want it, go get it.

Alkers

Is it just you and one other party or are there a few parties in the bidding?

Captain Flaps

Are you going through a broker for the mortgage or dealing with the bank direct? We did the former and the broker was able to supply us with a letter saying our application had gone in and there was absolutely no reason to assume that we would be denied, he was happy to speak on our behalf. That was fine by the agent and we had formal approval by the time the bidding process started slowing.

M.Cribben

Lumen wrote: »

Yes, to buy a house you have to pay more than anyone else thinks it's worth.

It's best not to think about this too much.

That's only true with respect to people currently in the market to buy, in the area the property is for sale, and looking for the exact property type (semi-d, apartment, bungalow, etc).


For example I can easily find 100 properties sold this month alone on the PPR that I would have paid the sold amount (or even higher) for, but I'm not in the market to buy at the moment. Even though I think those properties are worth what was paid for them.

daheff

I think one of two things are going on here


1- buyers is near the top of their limit...so small increments.
2-buyer is smart and only offering minimum increase...and will keep doing so until you reach your limit (or they reach theirs). whose ever limit is reached first loses.


While you may have a good reserve of cash, don't be tempted to keep bidding to win the house. Set yourself an upper limit as to what you would be happy buying the house at and don't go over that limit. Otherwise the only winner is the seller.
In any case you might be better served bidding on another house (if possible with the same auctioneer).

listermint

Third one,

Is the house really worth the money. I have seen first hand experience of bids for houses that are just NOT worth the money. When the bank comes to release the mortgage time you do know they have to send their own valuers. And it doesnt matter a jot what you've been approved for. If they dont see the value in your bid . i.e There is equity in the purchase then no mortgage.


Dont overpay. Dont fall into the negative equity trap straight out the gate.

ted1

metricspaces wrote: »

ted1 wrote: »

That may involve spending 17k more then he needs. While it may work it would also be foolish

Well as the saying goes, fortune favours the brave. If really you want it, go get it.

I could think of other sayings

“I pity the fool”

“ a bird in the hand is worth two in the bush”

metricspaces

ted1 wrote: »

I could think of other sayings

“I pity the fool”

“ a bird in the hand is worth two in the bush”

Absolutely, it depends on your viewpoint. It's a sellers market, so pick your upper limit of what you can afford and if you really want the house then go for it.

If you get it then happy days as you got the house for what you were prepared to pay. If you didn't get it then you couldn't afford it, so it wasn't for you and move on to the next one.

You won't gain much from trying to second guess bidders and worrying about whether you go up in 500s or 1000s. You are just over complicating it.

ted1

metricspaces wrote: »

You won't gain much from trying to second guess bidders and worrying about whether you go up in 500s or 1000s. You are just over complicating it.

Well You could gain 17,000 Euro which if borrowed could be 25,000 Euro.
So maybe you mightn’t consider that to be much. But others do

metricspaces

ted1 wrote: »

Well You could gain 17,000 Euro which if borrowed could be 25,000 Euro.
So maybe you mightn’t consider that to be much. But others do

Or you might just lose the house due to taking so long with your bidding, and pay 30k more on the next one as market has moved on.

You won't gain much about trying to second guess other bidders. More to gain by aggressively trying to secure it quickly to try knock out other bidders, avoid more bidders getting involved, and seller holding out for more as market has risen due to bidding taking so long.

kerry cow

It's a little unfair to a buyer bidding against another who has no funds approved .
You may end up bidding up a property against yourself inessence as the other bidder is a non runner , but they still except his offer !!!

metricspaces

kerry cow wrote: »

It's a little unfair to a buyer bidding against another who has no funds approved .
You may end up bidding up a property against yourself inessence as the other bidder is a non runner , but they still except his offer !!!

Yeah so in a sellers market, if you're the seller, you could just get your mate to keep bidding. When the last person drops out, go back to them and say it's theirs for their last bid !?

GingerLily

awec wrote: »

Every single person applies for a mortgage without having a property in mind these days. Most developers and vendors will not entertain anyone who hasn't.

Maybe some banks like to play around with how they market it, AIP vs full approval etc, but either way before you get a real offer of a mortgage the bank will need your new address and send a valuer to ensure it's something they're willing to lend against.

In your case it seems BOI called it full approval but really it was just AIP. AIP is what you need to start shopping for your house.

We had a full credit assessment from AIB, to get full mortgage approval we needed the property but we were fully assessed financially and we had proof that this had done, it was not AIP

awec

GingerLily wrote: »

We had a full credit assessment from AIB, to get full mortgage approval we needed the property but we were fully assessed financially and we had proof that this had done, it was not AIP

That is exactly what AIP is.

Mortgage approval where everything on your side has been verified and the underwriters are happy, subject to getting a property the bank are happy to secure the mortgage against.

It serves two purposes:

1. You know definitively what your budget is, unless you have a change of circumstances.
2. The developer / vendor knows you have sufficient funds to buy the house.

Any approval that does not go through the underwriters where you are fully assessed financially is totally worthless.

limnam

GingerLily wrote: »

We had a full credit assessment from AIB, to get full mortgage approval we needed the property but we were fully assessed financially and we had proof that this had done, it was not AIP

This is AIP.

kerry cow

metricspaces wrote:

Yeah so in a sellers market, if you're the seller, you could just get your mate to keep bidding. When the last person drops out, go back to them and say it's theirs for their last bid !?

Auctioneers should only take bids from bidders with approved funds only

M.Cribben

kerry cow wrote: »

Auctioneers should only take bids from bidders with approved funds only

They should. But they are acting in the best interest of their clients (sellers), and in the current market, taking bids from every tom dick and harry will push the price up for their client.

blue note

Well approval seems easy. Met a bank today and gave in all our documents. He's happy to confirm approval if we need it on that house immediately based on what we've shown him. Said we should hear back officially in 3-5 days.

GingerLily

limnam wrote: »

This is AIP.

No AIB give you AIP before credit approval - you may disagree with what they call it, but it's what they call it

awec

GingerLily wrote: »

No AIB give you AIP before credit approval - you may disagree with what they call it, but it's what they call it

That is completely worthless though, it's not AIP. How can you be approved for a mortgage in any shape or form without any sort of financial scrutiny, it doesn't make sense.

Banks are trying to market their wishy-washy not-really-approval as AIP when it isn't to try and win customers.

At what stage did AIB send you your letter stating you'd been approved in principle for the amount that you could show to developers? At what stage would you be happy to sign contracts to buy a house? I would hope that nobody with any wit would ever sign any contract without having the mortgage application approved by underwriters.

limnam

GingerLily wrote: »

No AIB give you AIP before credit approval - you may disagree with what they call it, but it's what they call it

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Can you show me where they offer skipping AIP and go to loan offer without having a house to buy?

fritzelly

What's the asking price - ask yourself is it worth maybe 10k more, it is only the asking price and inevitably gonna cost more but how much more has to be within the budget you thought the property looked good at
What are similar properties in the area going for?
Do not get emotionally attached to any property, always another one that you will fall in love with
Think of how ebay works, as someone else said above you will never even know if this other bidder is real or not
Do not get into a routine well it's just another 1k and then another 1k and so on - fools game, you will always be convincing yourself its only 1k more.

Why not look at a new build or from plans?

I feel the property bubble is happening again in Ireland, especially Dublin

metricspaces

blue note wrote: »

I'm bidding on my first house and listening to a lot of people tell me a lot of things about how to bid. One of the bidders keeps upping it by €1k after we put in a bid. It's just annoying! But, I can see why they're doing it. Some people are telling me to blow the other bids out of the water and go in €10k above them. That just sounds dumb to me.

But is there actually any strategy to bidding? I would have guessed that everyone sets their absolute limit on the property and makes one or two bids above that when it gets there. I've set my limit on it and if someone made a bid of less than that I'd come in higher than it, even if it was a jump from where it's at at the moment.


The only strategic thing I'm thinking is that I'd like to slow it down to make sure my mortgage application goes through. The mortgage we'd be looking for for this property is about €200k less than what we could get judging from 3.5 times our salaries, but I really hope it doesn't take unnecessarily long anyway.

Re-reading the original post. It looks like the poster has more than sufficient funds. The smartest thing here would be to pick your max value and bid aggressively - if you really want this house.

Yes by bidding aggressively you may pay 5k or 10k more. But what would you rather - 5/10k in your pocket and no house, or the keys to the house you really want? In 10,20, 30 years time the 5/10k will pale into insignificance (inflation, salary increasing etc.).

The key point here is you have no way of predicting the future (i.e. telling whether you would have paid 5k less if you went along with small bids). Whereas with bidding aggressively you will knock out bidders that are piddling around with tiny increments (for whatever reasons i.e. because they are near their max, they are not serious etc).

The longer you leave it drag on the greater the possibility that someone new will enter the race with greater funds and outbid you.

I think too people are looking at this the wrong way regards "overpaying". If you pick your max value, and you do not go above this, then you have not "overpaid" regardless of whether you bid aggressively or not. You got the house you wanted at a price that is at or below your max, hence you have not overpaid.

Spark Plug

Very good advise from metricspaces above I would up the bid increments to 5k or 10k and you’ll soon flush out the 1k bidder