For a number of years I have helped clients find property. Having inspected hundreds of properties and viewed thousands online, bids were made on many but regularly didn’t get the desired outcome of going “sale agreed”. The lessons learned is that to be a successful bidder there is no magic recipe, but there are some common sense tips.
Knowing the seller is the most important starting point. If the sale is taking place due to a death (probate sale) that is a different set of circumstances and motivations than if a receiver is selling the property. Equally, an occupying seller is different and has different criteria than a new home sale has. Each seller will want different things and knowing that can spare you some hardship.
Thankfully estate agents tend to be very open about the sellers, they don’t reveal personal details, but they will let you know the “type”, such as whether it’s an investment property or family home being sold. Asking questions is important, don’t ever make a bid without trying to find out what type of sale you are dealing with.
An example should help to demonstrate the point. A receiver sale will often have a “minimum marketing time” which means that even if you come in on day one and give a really good bid that is above the asking price the sale cannot go “sale agreed”.
So why make an offer early on? In some cases it will only draw out other potential bidders, and in others it gives the selling agent credibility to a base price that doesn’t need to be established early on in the process.
Estate agents act for sellers, don’t ever forget that, they are also generally good at that job and want to get as many offers as possible, knowing that it increases the chances of getting a higher price.
Back in early 2011 you could get a viewing whenever you wanted and the idea of a counterbid wasn’t even realistic. In 2012 there were a few more bidders but you could walk away and have a huge selection of stock. In 2013 that changed, in particular in the fourth quarter of the year when many started rushing into the market because of a fear that a tax amnesty was about to end.
Now we have a factual supply shortage in many areas and it means that any bid has to be done right because you want the opposite of what the estate agent wants, to be the successful bidder with the lowest price.
So here are some tips (in no particular order) worth using.
- Never bid on a property while you are at the property, always walk away, you can show interest and say you’ll be in touch, but offers there and then serve you no purpose other than to scream out “I’m eager and inexperienced!”
- Try to slow down any counterbidding process. Sometimes, unfortunately, you’ll have to face down other bidders, don’t ever make more than one counterbid in a day. Whipping up a storm is an estate agent speciality, don’t get caught up in it. Say whatever you need to in order to delay, but try not to get into a “fast bid” situation, you’ll always pay top dollar by letting that happen and if you lose it just bids up the clearing price of other properties in the area which may be your “plan B”.
- If you counterbid pretend it’s like a punch, if you are going to bother throwing one at all then make sure your intended target gets knocked out. I see people go up in €1,000 sums, that creates a dynamic that can often end above where things would have settled if you had gone up by €5,000 in the first place.
- Know your upper limit, getting over-extended on a purchase is a mistake, know when to accept you have lost.
- Look at lots of property, the more you do the more you realise there are lots of great places for sale. There is a huge risk of getting too focused on "the one". If that happens you risk becoming the buyer equivalent of Jennifer Jason Leigh in Single White Female and any estate agent worth their salt will make you pay for that . . . dearly.
- If you ever suspect the estate agent or seller isn’t being totally upfront, walk away if you can. Don’t do deals with people you don’t trust unless there is no alternative (which is rarely the case).
- Put timelines on any conditions and stick to them, if you make an offer that is only good for 48 hours and requires a “yes” or “no” answer, then stick to that timeline.
- Although there is no evidence I know of to support it being a trend, some of the best bids we got accepted were made in the dead of winter, December and January, which are typically slow months. Seasonality can be a factor.
- With a trend for prices to go above asking prices don’t bother with places that are right on the cusp of what you can afford, although this doesn’t apply everywhere. In a falling market you can afford to wait, it makes sense to do so, you can make demands that would never wash in a regular market. Now that prices are not falling, tactics need to change. The strategy remains the same, be the winning bidder, but the long game doesn’t work in that situation. So aim to get in and close fast or maybe consider being a long term renter, that’s a perfectly good lifestyle choice too.
GAZUMPING
This unethical practice is sadly back in vogue. It’s unfortunate because it also means that greed is once again prevailing over a person’s word. It happens when a seller accepts a higher offer than the one they went “sale agreed” at or that they sent contracts to the buyer at.
Property contracts are not binding until the seller signs and they sign last, so until that happens there is a risk. There is also no comeback on it despite the fact that you may have paid a valuer, structural surveyor and started the legal process meaning you’ll owe a solicitor as well.
There are only two defences I know of, the first is to avoid dealing with sellers who are prone to this, and thankfully greedy unethical people can’t hide their modus operandi very well. Tell-tale signs are that they “want a quick close or it’s back on the market”, or “we’ll keep showing the property until you have returned signed contracts”.
That isn’t to say you outright blank these sellers, but be aware that they are the type of people who facilitate gazumping so don’t be surprised if you try to do a deal with that kind of seller and it backfires.
The second defence is to ensure your side of the deal is operating as quickly as possible. If for instance you were taking six months to close a loan and the seller lost faith, then why should they hold out for you given that prices have risen in the interim?
In that instance getting gazumped rests partly with the buyer – so don’t give the counterparty the justification for it. Also remember, it happens to everybody, amateurs and professionals alike. I got gazumped in 2013 twice on the same property! At the time I couldn’t believe it had happened because it was a practice that was assumed extinct. Then the same property showed up in an auction after it had been pulled the second time.
From a pure bottom line perspective the seller made the right choice, that I had already paid the deposit, had architects do inspections and survey carried meant that there was cost to be suffered and nothing to show for it. I felt bad for the estate agent too (a rare event) as they didn’t get the sale they had worked hard for.
Karl Deeter is a mortgage broker and media commentator
