05 Jul 2019
Posted in: Mortgage Master
If you’re lucky enough to be thinking about making a bid on a property, you’re in for an exciting time. You can go right ahead and channel your inner Kirstie and Phil (from Location, Location, Location) and start making offers to agents – but we bet you’ve got loads of questions.
Do you bid at the asking price or should you go under? If you’re in a bidding war, how many counter-bids should you make and how much should you increase each bid by? It’s like the highest-stakes poker game you’re ever likely to play.
Luckily, here at EBS, our Mortgage Masters have been helping Irish families buy a home since 1935 so we’ve amassed a few tips along the way. Read these five ways that a first-time buyer may go about playing out the bidding game.
Before you go charging off to open houses and phoning up estate agents, it’s a good idea to get yourself approved in principle for a mortgage. This is a fairly painless process: drop into your local EBS Mortgage Master and they will go through your finances.
Once you’ve got the applicable deposit as required by the Central Bank and you can prove that you can repay the mortgage (also known as repayment capacity) through your earnings, you’re nearly there. The maximum loan we can usually offer is 3.5 times the salary (or combined salary) of an applicant. Provided the facts and figures check out, you will be approved in principle for a mortgage.
This is the primary rule when it comes to bidding. Even if you love the house and it ticks every box, you should still wait before making an offer. A couple of hours cooling off time is plenty – nothing tells an estate agent that you’re inexperienced and eager more than making a bid at a viewing.
Instead, make your bid having clearly thought about the pros and cons of the property. When making a bid, ask the estate agent if any other bids are in. They are obliged to tell you and you’ll then have an understanding of the level to come in at.
Buying in Dublin? Then you’ll know that asking prices are often just a suggestion or a starting point. Standard wisdom is to make an offer under the asking price, but in a market like Dublin, that’s not going to cut much slack. Instead, you’ll want to go in with a strong offer, at or above the asking price.
Let’s say that your opening bid was for €280,000. The estate agent gets back to you and says there has been another bid on top at €281,000. Do you now counter-offer with another €1,000, or try a knockout blow by offering €4,000-to-€5,000 more?
Even though it seems easier to counter-offer with another €1,000, most experts would agree that a stronger offer makes more sense. Instead of getting into a never-ending bidding war where you convince yourself, “it’s just another €1,000”, a stronger bid can discourage other bidders and convince them that you are serious.
However, for buyers outside of the capital, it is often a very different scenario. Houses can be on the market for quite a while and offers under the asking price are often accepted. One of the very first questions you should ask at a viewing is how long the property has been on sale and let that inform your strategy.
As nice as they may be, it’s important to keep in mind that the agent’s job is to get as much for the seller, who is their client, as possible. Most of them earn commission, so the more the house or apartment sells for, the more they’ll net.
Use the agent to your advantage. Find out everything you can about the property from them. Why is the vendor selling up? Have the current owners got a new property lined up or will you have to wait until they move? How long has the property been on the market? How many offers have been made and have any other sales fallen through?
It’s wise to keep your comments to a minimum around an agent. If you can afford to bid an extra €10,000, then it’s best not to tell them that when you place a lower bid. They are likely to tell their client that they have received a bid of [x] amount, but they think they could achieve more if they keep you dangling for a bit.
The next step is to engage a solicitor. Tell them that you are looking to buy and that once you make an offer, you want everything to be completed as quickly as possible. Even after you go ‘sale agreed’ this doesn’t necessarily mean that you are legally entitled to the property.
Think of it this way: ‘sale agreed’ is a bit like being engaged. Nothing’s legal yet – but it’s usually just a matter of time.
Until you exchange contracts, the property isn’t yours. The longer the process goes on, the more likely it is that someone else swoops in at the last minute with a higher offer than you can afford. The best remedy is to let your solicitor know that time is of the essence.
The quicker the process is wrapped up, the quicker you can relax and start planning life in your new home.
If you are thinking about making a move, why not pop into our super-helpful Mortgage Masters who can let you know exactly what to do? Or why not check out our first-time buyer’s guide to help you along the way?
You can also book a 30 Minute Mortgage Meeting to talk to one of our Mortgage Masters and make that dream house a reality.
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