One of the pitfalls of buying property is bidding for a house but how do you win the bidding process?
The process to bid on and then buy a house of your dreams can be fraught with obstacles.
However, our guide to bidding for a house includes:
- Successfully bidding on a property that is up for sale;
- Bidding on a home being sold at auction;
- Bidding on council properties.
Here, we will look at making an offer on a property, sealed bidding, and a sale by auction.
We also look at the bidding process for council houses and flats.
However, it’s important to appreciate that you should never bid more than a property is worth and you should try to avoid an estate agent trying to get a higher offer for property from you.
Losing the bidding process can be upsetting, but house sales do fall through so you need to keep in touch with the estate agent and ensure they know that you will still be interested in the property.
How to bid on a house – and be accepted
You have undertaken the long search for a property that’s just right for you, and you want to buy it.
The first step is to make a bid which is your way of negotiating on the seller’s asking price.
Essentially, as we highlighted earlier, you want to make a bid that will secure the property, but you don’t want to pay more than it’s worth.
This is a particular issue if you are a first-time buyer and it is the first time you have begun property negotiations.
How much should I bid on a property?
The first tip for anyone asking, ‘How much should I bid on a property’, is to not rush.
That’s because you need to work out how much you can afford before making any bids.
For many homebuyers, the accurate and easy way of doing this is to apply for a mortgage first.
This means that the budget for any bidding on a property will be the deposit you have saved (or equity), plus the maximum amount a mortgage lender will give you.
You should always aim to remain within your budget to ensure you can afford the house you are buying.
These are our tips on making an offer on a property:
- The asking price is the starting point for negotiations;
- Don’t be shy about offering a lower price – particularly if the property has been on sale for a long time;
- Research those properties in the area that have been sold recently. This will give you a good idea about the guide price;
- Ask the estate agent if the seller wants to move quickly and if they will accept a lower offer;
- There’s an advantage to being a first-time buyer because you are not involved in a chain. This makes you an attractive bidder;
- If a lower bid is refused, then it’s time to start haggling;
- Be aware that when you do start haggling that you should move your price in thousands of pounds – or by hundreds – and not five or tens of thousands;
- Don’t be taken in by the estate agent saying other bidders are offering more money – ask for evidence;
- Walk away if the price goes too high.
This last point is perhaps the most important since you already know what your budget is and there’s no point overstretching yourself financially to buy a property you cannot afford.
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Our tips on having a property bid accepted
Let’s face it, it’s easy to bid on a house, get on well with the seller and then make an offer.
The real work will come should a bidding war start.
It’s also worth mentioning that some houses will be sold with terms like:
- OIRO – this means ‘offers in the region of’ and the seller may be open to lower offers;
- Guide price – the seller is open to negotiation;
Our tips for having an offer accepted include:
Details
We’ve mentioned before that being a first-time buyer may make you attractive but details such as being a cash buyer or being chain-free also boost the attractiveness of your bid
Do not rush
It can be an exciting prospect bidding on a house but do not rush to make a bid. It’s best to consider a potential offer and speak with the estate agent about whether any other buyers are interested
Second viewings
To establish yourself as a series bidder, ask for a second viewing. This will also make you reappraise your offer
Bidding figures
While you may be tempted to make a bid in round figures, for example £300,000, it’s worth considering using an odd number such as £300,500
Estate agents
You need to get on with the estate agent because they are trying to get the best price for their client, but they do have the information they will share.
How to make an offer on a property
After working out how much you can afford, plus however much you have saved up as a deposit, you also need money for moving costs and legal outgoings such as paying a conveyancing solicitor.
It’s also a good idea to get a mortgage in principle from a lender.
This will make clear how much a mortgage provider is willing to offer based on the information you give them.
It’s also worth highlighting that a ‘mortgage in principle’ is not actually an agreed mortgage and when you do apply, the lender will undertake a more stringent check of your creditworthiness.
You will also need to understand:
- Do not make an offer to the house seller;
- Any offer must be made to the estate agent;
- Your offer can be made over the phone, but follow up with an email;
- Your email offer should include your name and contact details, the price you are bidding and remind the agent that you are a first-time buyer or cash buyer.
How do I make a sealed bid?
There’s another aspect to bidding on a property and winning it, and that is the issue of sealed bids.
Normally, when an estate agent offers a property, they will tell potential buyers that the bids are open or sealed.
With an open bid, the agent will be able to tell you what others are offering and whether the price is acceptable to the seller.
A sealed bid means you make an offer in a sealed envelope and you and the agent have no idea what anyone else is bidding.
The buyer will then open the bids when the process ends and choose the best one.
The downside to sealed bids is that there is no leeway for raising your offer.
Instead, sealed bids are used as a way to speed up the house selling process, but they also make potential buyers make a higher bid than they would do otherwise.
What happens when my offer is accepted?
One of the issues in England and Wales is that until you exchange contracts, any offer you make is not legally binding.
This means you are open to gazumping – that’s when someone makes a higher offer after a price has been accepted, so you should ask the seller to take their home off the market.
You will receive from the estate agent a formal letter of your offer being accepted.
You will then need to engage a solicitor or a conveyancing solicitor to take care of the paperwork.
It may take up to 12 weeks to exchange contracts but can take longer, and this can be a frustrating time because either you or the seller can still back out before contracts are exchanged.
How to bid on a house and auction
For those who want to bid on a house at auction, and win, then these tips will help you.
Homes sold at an auction are generally cheaper because the house seller, for a variety of reasons, is looking for a quick sale.
This means the sale price will be lower but there will be a guide price for you to buy the property.
You will need to contact auction houses, ask for their auction catalogue and view the property being sold.
These tips will help you buy a property at auction and win your bid.
Research
Decide on the area you want to buy a house in and then contact property auction houses. They will tell you of upcoming auctions and add you to their mailing list for catalogues.
Arrange viewings
If there is a property you like the look of, then you need to arrange a viewing by contacting the auction house.
Take a professional
It’s also worth taking a surveyor or a professional builder to see what might be wrong with the home – and how much it will cost to rectify.
Auction particulars
You will need a separate legal pack to get the property’s particulars. This will include legal documents including searches – though you can ask a conveyancing solicitor to do these before the auction takes place.
Act fast
Remember that property auctions are for those wanting to sell quickly so you need to act fast from the catalogue’s publication to the auction date. This may just be four weeks.
Budget
When bidding at an auction for property, set your budget and have a maximum amount to bid for. Do not be tempted to exceed the budget.
Guide and reserve price
When you attend the auction, you will know what the guide price is. Some properties also have a reserve price. The difference between the two is that the guide price is the starting offer for bidding, while the reserve price is the minimum amount a seller will accept.
Making a bid
You need to be clear when making a bid so the auctioneer can identify you.
Hammer falls
When the auctioneer’s hammer falls, you’ll need to sign a contract and pay a deposit. You also need to organise property insurance – and be aware that pulling out of the sale could be a costly exercise.
Auction deposit
The auctioneer will be looking for a 10% deposit and you will need to complete and pay the balance between 14 days and up to six weeks. Always check the terms and conditions of the auction house’s sale terms.
Bidding on a council house
For those who are interested in bidding on a council house, you need to start the process with your local council.
You can apply for council housing, but each council will have its own rules.
They will have a council housing waiting list and there’s no guarantee that you will get a property.
However, the council will be able to tell you how long you will have to wait.
Council house waiting lists
When bidding on council properties, you will bid on those properties that you have enough points for.
That’s because councils will use a banding or points system which is based on housing needs.
The criteria will vary depending on your current circumstances if you are, for example:
- Living in cramped conditions;
- Currently homeless;
- Your current home is making a medical condition worse.
Once you start moving up the council house waiting list, the council will be in touch about any available properties.
Making a bid
First, when you make a bid on a council house, you are not making an offer of money.
Instead, you are highlighting your interest in a particular property that has become available.
Also, most councils run a bidding cycle and put their homes up for bid on a Thursday morning, and close for bids on the following Monday.
The council will restrict bids on certain types of properties, for example if the house is only suitable for disabled people or families.
If your bid is successful, then you will have a short time to accept the offer of a house.
How to win a council house bid
You need to be realistic when bidding for a council house and you may need to wait years before a bid is successful.
Basically, the higher up you are on the list, the more successful your bid will be.
The council’s online system will tell you where you are in their list – so if someone ahead of you bids on the same property, then they are more likely to win the bid.
Bidding for a house – and winning
When you need to bid for a house – whether you are buying it on the open market or at auction, or whether you want a council house – there is a lot of luck involved.
While you should research thoroughly the process for making a bid, the bottom line is to make you as the bidder, and the bid itself, as attractive as you can to the house seller, the auctioneer or the council.
Your bid may be unsuccessful initially, but this is part of a learning process so that you will be better prepared the next time you begin to bid on a house with a better idea of how to win.
