Does backing your offer with an AIP hand the advantage to the EA/seller?

Arthur_Sleep

This topic cropped up in another thread - which is handy as it's something I've been wondering about for a little while now. Rather than hijack that thread, I've created a this one.

ValHaller wrote: »

Never show an Estate Agent your AIP until an offer is agreed. And preferably not even then, but get your solicitor to confirm you are good for the offer.

I'm a FTB who will start looking at properties next month (our deposit won't be in place until October, so we've been waiting). I was fully intending to get an AIP just before we begin so that we can show that we're serious about any offers we make. That's certainly the advice the guides all give.

What confuses me about this is that it seems to hand the advantage (with regards to price) over to the EA and the seller, as it reveals probably the most crucial bit of information: the most you are prepared to pay. How do you get around this, realistically?

ValHaller suggested getting your solicitor to make representations, but then I don't plan to get a solicitor involved until I've had an offer accepted. I'm interested to hear how others have dealt with this.

richardw

Your 'final and best offer' should be just that, all the EA needs to know is that you're a genuine buyer, your solicitor can confirm this.

Best not to fall in love with properties and get into an auction type scenario.

ACG

I try to avoid giving an AIP with any figure on until an offer has been agreed, otherwise they know what you can go upto and will push for that.

Some estate agents insist on an AIP before they will show you any properties, in which case i get one with a lender who only do a soft footprint and where it does not show the amount the lender is prepared to offer.

monty-doggy

I have made four offers on houses this year without showing AIP. Only after an offer was accepted did I provide it.

ValHaller

Arthur_Sleep wrote: »

.... I'm a FTB who will start looking at properties next month (our deposit won't be in place until October, so we've been waiting). I was fully intending to get an AIP just before we begin so that we can show that we're serious about any offers we make. That's certainly the advice the guides all give.

What confuses me about this is that it seems to hand the advantage (with regards to price) over to the EA and the seller, as it reveals probably the most crucial bit of information: the most you are prepared to pay. How do you get around this, realistically?

ValHaller suggested getting your solicitor to make representations, but then I don't plan to get a solicitor involved until I've had an offer accepted. I'm interested to hear how others have dealt with this.

Get the AIP directly or via your broker if you have one. This is for YOUR reassurance that the lender thinks that you are good for the money - although there can be a few slips between cup and lip.

And I suggest you do your research on solicitors beforehand so that you have a choice in mind who have given you at least an out line of costs. This will mean that you can be up and running with a solicitor within hours of an offer being accepted and the solicitor can just confirm on the basis of sight of your AIP and statements confirming savings.

The more I think on it, the more I think that the guide on this site - wherever it is, should be modified to recommend not showing your AIP to the Agent. This would give people a little more basis to argue with pushy agents that they should wait for the solicitor to confirm.

kingstreet

Arthur_Sleep wrote: »

What confuses me about this is that it seems to hand the advantage (with regards to price) over to the EA and the seller, as it reveals probably the most crucial bit of information: the most you are prepared to pay. How do you get around this, realistically?

If you had a mortgage certificate for £200k would you pay £200k for a £100k property?

I don't really understand why you should pay more for a property than what you think it's worth, because your borrowing power is more than the offer you've made.

Tell the agent you are making your best offer and have the wherewithal to proceed quickly to unconditional exchange of contracts. If providing them with the certificate, look them in the eye and tell them this does not mean you are daft enough to pay more than you think the property is worth.

There are always other properties and other agents. Make them aware of this.

Arthur_Sleep

Some good and helpful advice here, thanks for your replies.

Voyager2002

At one time I asked my mortgage lender to provide an AIP for twenty grand less than the amount they were actually willing to lend me. This was what I showed to the agent, who then put pressure on my vendor to accept an offer that he believed was the most that I could afford.

zappahey

kingstreet wrote: »

If you had a mortgage certificate for £200k would you pay £200k for a £100k property?

I don't really understand why you should pay more for a property than what you think it's worth, because your borrowing power is more than the offer you've made.

Reductio ad absurdum doesn't really help the discussion.

The more likely scenario is that the AIP is a few percentage points higher than the offer and would certainly be seen as within negotiation range.

So, effectively, by showing the AIP, you're showing your position to (for most of us) a far more experienced negotiator and the reality is that many fall in love with a house and are negotiating with one hand tied behind their back.

Best to keep the AIP out of sight of the EA or, as others mention, get one for a lower amount or that does not show the amount.

kingstreet

It was a little extreme, but it does serve to illustrate the point.

Perhaps I just find it difficult to comprehend a person's inability to say "no" at the appropriate time.

TBH if the traditional method of qualifying an offer is used, an adviser asking about income/deposit etc, the likely borrowing power is just as apparent as a piece of paper with it written on.

Where I've worked in financial services in Staffordshire for 25+ years, I've never once heard one of my colleagues in estate agency tell a vendor they would get the potential purchaser to offer more because their AIP says they can borrow more. I'm sure it does go on and I have been out of estate agency 12 years, but is this quite as big an issue as it appears on here?

Arthur_Sleep

zappahey wrote: »

The more likely scenario is that the AIP is a few percentage points higher than the offer and would certainly be seen as within negotiation range.

So, effectively, by showing the AIP, you're showing your position to (for most of us) a far more experienced negotiator and the reality is that many fall in love with a house and are negotiating with one hand tied behind their back.

This was precisely the scenario I had in mind; thanks for the advice.