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Bidding war going ABOVE asking price
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# 1
NickDurham
Old 06-05-2009, 9:00 PM
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Default Bidding war going ABOVE asking price

Here's one for you that's got me thinking through so many aspects.

We've been looking for a house for ages - over a year. We've finally found one that's beautiful. We love it. The area isn't as good as we've been looking at, but it's OK. The house is by some stretch the best in the area (though, as I say, it's not a "bad" area). This means it's hard to use other properties' recent selling prices to gauge the value of this one. It's on at 129,950, and only came on last week - 3-bed, large garden, big lounge, conservatory - will need new double glazing at some point, though. Lots of potential for converting storage houses and extensions. Mouseprice values it at 128,700, though I have no idea how accurate those valuations are. It's some 15,000+ above the value of other houses in the road, for the reasons I've stated. The last house in the street to sell was in August 2008 at 120k, a house which has no conservatory, a much smaller garden and plot, no car port, and is uglier (!). Mouseprice now values it at around 103k. Not sure how accurate this is as prices haven't fallen that much really up here.

Anyway, after the 1st (extended) viewing we loved the house and made an offer of 120,000. The vendor wanted to see what the other viewers thought, and someone came in at the asking price. We raised our offer to 132,000, and now that has been met. We are both now being invited to make a final offer by 1pm tomorrow for the vendor to make his decision (highest one gets it, I assume, as we're both ready to proceed).

We can afford 135,000 without any problem with a 10% deposit (mortgage with Natwest), BUT my concerns are that the bank's valuation will come in below this (if our offer is accepted). However, I am thinking that if this is the case, then we tell the vendor that we can only get a mortgage for x amount given the bank's valuation, and if he can't drop then we pull out. This is one way - in my way of thinking - of preventing us from overpaying.

HOWEVER, is it always/generally the case that the value given by the bank giving the mortgage is a true (conservative) reflection of the house's value? Is it possible they could just say it's worth our agreed price to get the mortgage through? I know a house is worth what someone is prepared to pay for it, and this house is clearly not going to have problems selling if it has 2 bidders only 4 days after being put on. But at the same time, I'm terribly worried about overpaying and being left in serious trouble in 5 yrs when the fixed-rate mortgage ends and finding myself in negative equity. Equally, I am aware that being in a bidding war is the best way to ensure you pay over the odds.

Any thoughts?? I have till 1pm to get my renewed offer in (or say I'm sticking at my current offer, which is still 2k over the asking price!). In particular, any thoughts or help re. the way bank's value a property? Am I right in thinking that it is a good way to judge if I have (wildly) overpaid, and hence prevent myself going through with the purchase?

Thanks!
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# 2
alexlyne
Old 06-05-2009, 9:03 PM
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Lenders are being very conservative these days with their valuations - I don't think it's possible that they will want to lend you more than they think it's worth - it's what got them into trouble in the first place. Once bitten, twice shy - at least for a few more years.
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# 3
NickDurham
Old 06-05-2009, 9:06 PM
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Quote:
Originally Posted by alexlyne View Post
Lenders are being very conservative these days with their valuations - I don't think it's possible that they will want to lend you more than they think it's worth - it's what got them into trouble in the first place. Once bitten, twice shy - at least for a few more years.
Thanks for that - that's what I thought. So basically I COULD use the bank's evaluation as a yardstick to judge whether I am overpaying and hence pull out having only paid for the valuation and a hundred quid or so for the solicitor to receive a few letters from Natwest?? Like I say, that's my preferred course of action: get accepted even if it's at a high price, then if the valuation comes in lower, either use this to get a lower price in discussion with the vendor OR pull out if he won't budge. Sound a reasonable course of action??
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# 4
kunekune
Old 06-05-2009, 9:21 PM
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If you are thinking negative equity could be a issue in five years, that makes me wonder.

a) You don't expect to have paid off any capital? If you don't think you can overpay significantly at current interest rates, you probably shouldn't be affording the house. Interest rates are low. You need to think in terms of interest at at least 9% when working out affordability, and in the meantime, add to your equity by overpaying as much as possible. If your mortgage doesn't let you do that, match what you could overpay in a separate account and then use it to reduce the mortgage when you refinance.
2) You think prices are going to drop so low that ordinary repayment and a bit of overpayment will STILL have you in negative equity in five years. If you are so negative about the future, then you're not in the right frame of mind for buying, and would be better hanging around HPC (and this board) for a few more years.
Mortgage started on 22.5.09 : 129,600
Overpayments to date: 3000
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# 5
Blacksheep1979
Old 06-05-2009, 9:24 PM
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are you sure there is another person bidding on the house?
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# 6
jamtart6
Old 06-05-2009, 9:30 PM
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depends how much you want the house. will you be kicking yourself in a couple of months if you dont add another £2k on to your offer? I wasn't convinced we were actually bidding against anyone, but for the sake of 2k it wasn't worth losing the house over (£30k cheaper than anything else that has come up before and since!) We then said to the estate agent "we have bled every relative dry of money, we have no more money so if we don't get it this time, we will NOT be upping our offer this is our LAST and FINAL offer" - we meant that as well as we decided on a final price and stuck to it. To be on the safe side, stick and extra £10 on the offer e.g. £120'010 ...just in case someone goes up to £120 000, yours will still be the highest bid.

Funnily enough we got the house I 100% think we were played by the EA's but we still know we got the house £30k cheaper than anything else in the area so are happy.

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# 7
NickDurham
Old 06-05-2009, 9:31 PM
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Quote:
Originally Posted by Blacksheep1979 View Post
are you sure there is another person bidding on the house?
The thought has crossed my mind. Is there any way of checking whether this person actually exists?
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# 8
NickDurham
Old 06-05-2009, 9:34 PM
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Quote:
Originally Posted by jamtart6 View Post
depends how much you want the house. will you be kicking yourself in a couple of months if you dont add another 2k on to your offer? I wasn't convinced we were actually bidding against anyone, but for the sake of 2k it wasn't worth losing the house over (30k cheaper than anything else that has come up before and since!) We then said to the estate agent "we have bled every relative dry of money, we have no more money so if we don't get it this time, we will NOT be upping our offer this is our LAST and FINAL offer" - we meant that as well as we decided on a final price and stuck to it. To be on the safe side, stick and extra 10 on the offer e.g. 120'010 ...just in case someone goes up to 120 000, yours will still be the highest bid.

Funnily enough we got the house I 100% think we were played by the EA's but we still know we got the house 30k cheaper than anything else in the area so are happy.
As my above post, is there any way of finding out whether the person exists? One of the owner's works at my University (where I work) in another department... I'm guessing contacting her to check would be out of order!?!?

If we were getting it cheaper I wouldn't mind - my concern is precisely that we're going OVER value because of this bidding war.

EDIT: The exact same thing happened 10 days ago on another house we bid for - we ended up not raising our offer (again over the asking price). This was a different agent - it now says "sold", so I'm guessing that was genuine.
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# 9
NickDurham
Old 06-05-2009, 9:40 PM
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Quote:
Originally Posted by kunekune View Post
If you are thinking negative equity could be a issue in five years, that makes me wonder.

a) You don't expect to have paid off any capital? If you don't think you can overpay significantly at current interest rates, you probably shouldn't be affording the house. Interest rates are low. You need to think in terms of interest at at least 9% when working out affordability, and in the meantime, add to your equity by overpaying as much as possible. If your mortgage doesn't let you do that, match what you could overpay in a separate account and then use it to reduce the mortgage when you refinance.
2) You think prices are going to drop so low that ordinary repayment and a bit of overpayment will STILL have you in negative equity in five years. If you are so negative about the future, then you're not in the right frame of mind for buying, and would be better hanging around HPC (and this board) for a few more years.
We're getting a 5.99% repayment mortgage. Things will be OK but not great for the 1st year, - we will be able to overpay by about 2k. Following years by a bit less initially if we have another baby, but due to pay rises and student loan coming to an end, we should be able to average 2k a year. My only worry about negative equity is if we overpay by 15k above value now and prices stagnate. We won't be in "negative" equity but mortgage deals for such a poor LTV wouldn't be great. Hence my wondering whether I can use the banks valuation to judge whether I'm overbidding.
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# 10
Blacksheep1979
Old 06-05-2009, 9:40 PM
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not at all out of order in my view - it's one of the largest purchases you're ever likely to make and if there is another party I bet they'll be thinking the same thing too. You'll know instantly by the look on their face if you mention it to the seller if there is someone else or not, go see them unannounced at work and see what they say - they might not even know what's going on. Play it like you just want to get to know them or something as you both work in the same place.
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# 11
NickDurham
Old 06-05-2009, 10:12 PM
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Quote:
Originally Posted by Blacksheep1979 View Post
not at all out of order in my view - it's one of the largest purchases you're ever likely to make and if there is another party I bet they'll be thinking the same thing too. You'll know instantly by the look on their face if you mention it to the seller if there is someone else or not, go see them unannounced at work and see what they say - they might not even know what's going on. Play it like you just want to get to know them or something as you both work in the same place.
Hmmm I'm seriously wondering now. It would be a real shame if we ended up losing a house at a decent price because of something like that. TBH if they are getting us to overpay then they'll lose the sale because we'll pull out if the valuation comes in low.
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# 12
Banderman
Old 06-05-2009, 10:20 PM
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Quote:
Originally Posted by NickDurham View Post
As my above post, is there any way of finding out whether the person exists? .
In all such delaings you've got to assume that this other bidder doesn't exist. Otherwise you are in severe danger of being played by the Estate Agent, this is the sort of thing they do
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# 13
NickDurham
Old 06-05-2009, 11:11 PM
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In all such delaings you've got to assume that this other bidder doesn't exist. Otherwise you are in severe danger of being played by the Estate Agent, this is the sort of thing they do
OK, now I'm genuinely getting suspicious.

Here's how it went... does it sound dodgy to anyone?

We offer 120k on Saturday, 10k below asking price on a property just on the market (nice house).

We're told others are viewing this weekend (bank holiday) and that the owner wants to wait to see what comes of those viewings.

Tuesday: we're told someone is seeing the house for a 2nd viewing that night, so owner wants to wait till then.

Wednesday (today): Another offer is in. "Considerably more than yours". I ask how much - they tell me the asking price has been offered and leave it with me to raise my offer.

I raise to 132k (a mistake - should have equalled the asking price).

A few hours later, they call me to tell me that the other bidder has raised the offer and that rather than having a tit for tat bidding war, the owner just wants us both to present our final offer (Quote "It may be more or it could just be what you've already offered" - this sounded suspicious) by 1pm and he'll decide. They wouldn''t tell me what the other bidder had offered, just that it was "in the same price bracket".

This could all be true, but leaving it to a closed bid effectively is trying to guarantee one of us (or just me??) will go as high as possible in case the other one bids higher - mental games to raise the offers. The suggestion that I might want to stay at my original price could maybe be because they're worried in case a too-high bid was shot down by the bank's valuation...

Anyway - anyone any comments? Does any of this ring alarm bells???
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# 14
jamtart6
Old 06-05-2009, 11:26 PM
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exactly what happened with ours except it was a repo so we couldnt appeal to a real person's better nature.. we were buying off a money-hungry bank. The EA's definitely played us but luckily it was within 5k (first offer 115k, last offer 120) so it didnt make much difference to us (not saying 5k isnt a lot, but we were willing to pay 140k+ for the size of the house, so a bargain every which way for us!) anyway, we decided 120 was our final and "if it is meant to be it is meant to be"....

perhaps get your missis/mum/friend/dog to ring the ea's and be interested in the house for themselves (pretending), and they might tell you if there is one or more offers on it...but they could be lying here anyway. We did this and the EA still offered a viewing to my Mum after we'd exchanged contracts. I majorly kicked off about that! They are a totally different species of people!

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# 15
NickDurham
Old 06-05-2009, 11:32 PM
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Originally Posted by jamtart6 View Post
exactly what happened with ours except it was a repo so we couldnt appeal to a real person's better nature.. we were buying off a money-hungry bank. The EA's definitely played us but luckily it was within 5k (first offer 115k, last offer 120) so it didnt make much difference to us (not saying 5k isnt a lot, but we were willing to pay 140k+ for the size of the house, so a bargain every which way for us!) anyway, we decided 120 was our final and "if it is meant to be it is meant to be"....

perhaps get your missis/mum/friend/dog to ring the ea's and be interested in the house for themselves (pretending), and they might tell you if there is one or more offers on it...but they could be lying here anyway. We did this and the EA still offered a viewing to my Mum after we'd exchanged contracts. I majorly kicked off about that! They are a totally different species of people!
I think at the very least I'll get someone to call. Also I'll email the vendor at work - be as polite as possible, not trying to curry favour or influence you, just trying to make sure I'm not being played, etc...
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# 16
jamtart6
Old 06-05-2009, 11:36 PM
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hmm if you do e-mail them at work, think carefully about what you say, they will probably know what the EA is doing and want as much money as possible too

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NickDurham
Old 06-05-2009, 11:43 PM
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hmm if you do e-mail them at work, think carefully about what you say, they will probably know what the EA is doing and want as much money as possible too
Yes, that thought had crossed my mind! :S

I guess I'm back to my original question: if I think I'm being played and end up offering way more than the house is worth, then will I be able to use the bank's valuation to protect me. I.e., if I'm really being made to offer too much, then the valuation will be way below my accepted offer and so they'll either HAVE to come back down to a reasonable offer OR I walk away having lost about 400 quid - not nice, but it's a hit I could take without it affecting my ability to buy another house at least.
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# 18
jamtart6
Old 06-05-2009, 11:52 PM
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can you get a mortgage that offers a "free" survey? the options we had were:

1. 400 survey + Mortgage arrangement 999 (5.1%)

or

2. Free Survey + mortgage arrangement 800 (5.8%)

we were advised to go for the latter so that we wouldn't lose money if the valuation came back wrong as the survey was free etc. and if you walk away you dont have to take the mortgage product.....

we went for the first as it was cheaper over 5 years, gambled and it paid off, but largely because we had a good idea the house would be fine and it was valued at 15k more than we bought it for.

may be an option to consider products with a free survey?


it is a hard descision to make, and i would base it on how much you want the house. If it sold for 135k to someone else would you be gutted or glad you hadn't forked out the extra 3k? how much do you like it? others in the area coming up?

we had to go for ours as I say, none in the area had been up for that price since about 2003, and houses dont even come on the market that often, perfect house, perfect road, exactly what i'd always wanted at a bargain price....2k more was well worth the extra imho

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# 19
NickDurham
Old 07-05-2009, 12:04 AM
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Quote:
Originally Posted by jamtart6 View Post
can you get a mortgage that offers a "free" survey? the options we had were:

1. 400 survey + Mortgage arrangement 999 (5.1%)

or

2. Free Survey + mortgage arrangement 800 (5.8%)

we were advised to go for the latter so that we wouldn't lose money if the valuation came back wrong as the survey was free etc. and if you walk away you dont have to take the mortgage product.....

we went for the first as it was cheaper over 5 years, gambled and it paid off, but largely because we had a good idea the house would be fine and it was valued at 15k more than we bought it for.

may be an option to consider products with a free survey?


it is a hard descision to make, and i would base it on how much you want the house. If it sold for 135k to someone else would you be gutted or glad you hadn't forked out the extra 3k? how much do you like it? others in the area coming up?

we had to go for ours as I say, none in the area had been up for that price since about 2003, and houses dont even come on the market that often, perfect house, perfect road, exactly what i'd always wanted at a bargain price....2k more was well worth the extra imho
If I could thank you many times I would! Cheers for all this jamtart and at such an hour!

The mortgage we've found is Natwest 1st time buyer 5 yr fixed special - there's NO product fee, valuation at about 250 - and it's by far the cheapest (5.99%) at 90% LTV. We want a full structural survey, but rather than risk losing 750ish quid I figured on getting the basic valuation done through Natwest and then arranging my own structural survey if the valuation is OK and/or if the vendor lowers the price if that valuation is low. The independent structural survey is apparently cheaper - about 500 - so it should work out the same, but I won't have to risk losing so much if the valuation is way down.

Basically, we love the house. Area is OK- not great, but not bad. Best house in the area and there are no others that come close. Other areas we've been looking at for over a year - very little has come up. We just lost the one house we found which ticked all the boxes - VERY similar scenario, but that one genuinely WAS priced to sell. This one is priced about right - which is why we might be paying over the odds... BUT it IS a great house - all the space we need, biggest garden we've seen in any house for a year, lots of potential for converting outhouses...

All in all, I think my best option is to bid high to get the offer accepted and then if WHEN the valuation comes through at below what we've agreed, go back to the vendor and try to make him see sense (ie this will only happen again, if not get lower, so only cash buyers will be able to buy the house) and lower the price back down to more like what we'd like to be paying. If he doesn't we've lost a few hundred quid. If he does, we've got a house we love at a price of roughly what it's worth (acc to the bank!).

Any flaws in the plan let me know! lol

Last edited by NickDurham; 07-05-2009 at 12:08 AM.
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# 20
PasturesNew
Old 07-05-2009, 12:11 AM
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There was a Kirsty/Phil episode where some woman went to sealed bids and won the house .... but there was a mixup in the paperwork a bit later and the EAs accidentally sent her a copy of the other sealed bid - and it was significantly lower than what she had offered... so she felt really ripped off.

I'll see if I can dig out more details in the next 10 minutes. If I do I'll update this.

Update: I can't find specifics, it looks like in that sealed bid Kirsty ramped them into giving it their highest shot and they bid 140-200k more than the next nearest... if I track down the episode/details in the next half an hour I'll update again.

Last edited by PasturesNew; 07-05-2009 at 12:24 AM.
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