How To Win A Bidding War
Bidding wars on properties are of course a dream for the vendor, but they can be a nightmare for the parties who each have their heart set on the home - whether they be first time buyers, property developers or some other interested party.
Bidding wars are common in situations where there is high demand and relatively low supply - which has been an accurate description of some areas of the UK recently. Indeed, particularly around London, bidding wars have been known to push up property prices dramatically as two or more interested parties pull out all the stops to get the property they want, in the location they want - being prepared to pay more than they want for this perceived privilege.
If you get involved in a bidding war, what should you do?
First you need to answer a question: do you really want the property or not? Is it a must-have, absolute necessity that you get this house and do all you can to get it? That's quite a tough condition to meet, and when you take a step back, few properties meet this test. Therefore in most circumstances, the right thing to do is to walk away from the deal, and not get involved in an adrenaline fueled slugfest where you keep on raising and raising your price until you are paying way over the odds, only to get cold feet further down the line and pull out or saddle yourself with a huge debt and the pressure of whopping mortgage payments that could become unbearable if interest rates rise.
However, if you answer the question above with a resounding yes, then what can you do to win the property bidding war?
Well, you need to get savvy: vendors will also take into account not just what the offer is, but what the risk is. Therefore if you have no chain, then you need to ensure the vendor is aware of this: it's very attractive because those messy problems that can occur with a chain are not going to be there, making the sale more likely to go through smoothly.
If you are paying cash (unlikely for first time buyers, but not impossible) then again you need to let that be known; likewise if you have been pre-approved for a mortgage on the entire amount you are bidding for, also let that be known as it could help sway the balance in your favour.
Although the sales process can just turn people into anonymous bits of data - seller X is considering an offer from potential purchaser Y - we are all still people, and knowing about who you are and what you are like can influence the vendor's decision. And people like flattery: so if you like the home, you could write a letter to the vendor, potentially via the agent, letting them know just how much you love it - and how you could imagine sipping coffee reading the Sunday papers in their beautiful conservatory and so forth. At this point you become a human with feelings and emotions, not just some abstract source of cash for the vendor, and this too could help swing things in your favour.
The bottom line is that if you must, must have a property, still set a limit so you don't cause yourself financial difficulties and/or pay way over the odds. At the same time, use any cards you have that could swing things in your favour so that your offer proves as attractive as is possible, even if the other party offers more money.
More first-time house buying articles:
- Where To Buy a House: Choosing a Location
- Questions to Ask at a Property Viewing
- What Happens if a Mortgage Application Gets Rejected?
- Dealbreakers When Buying A House
- Types of Property Ownership in the UK