Bidding Process (fake bids)

[Leo]

No prob justo, I'm just cynical that regulation of that type could ever work here in everyone's benefit. Any time the government interfere, it just tends to cost everyone more.

 

[justo]

Fair enough Leo - Interesting to see if it ever gains traction.

 

[gnf_ireland]

For example:

A house goes on the market for 500k which is a reasonable price relative to other houses on the market.
After a month, there are no offers on the house.
As a purchaser, the upper limit on my budget is 550K
I view the house and offer 475k.

The next day the EA tells me there is another bid in of 485k and asks if I want to increase my bid.
I do, and the EA tells me the other bidder increased their bid, and asks if I want to increase my bid again, etc.

In the end I purchase the house for 525k.

Ok but in this same scenario what happens if I say no, I don't want to increase the bid. The vendor loses out on a 475k sale and the EA must put in more effort to sell the house.

For every story one way, there are stories the other. My brother was bidding on a house a while back and was convinced the EA was creating phantom bids. In the end he walked away and say he would not go any higher. The house went sale agreed shortly afterwards as the other bids were actually real.

Every purchaser needs to educate themselves on how much money the house is worth and bid accordingly. They also need to have an upper limit on the house and not go above that without serious consideration.

 

[gnf_ireland]

I want EAs to be regulated, not vendors.

There is another alternative here also. We could move to the Scottish model where all bids are unopened until the close date and all bids must be submitted via a solicitor who confirms funds are available etc. Each and every bid is final best offer, and on the close date the seller decides who gets the house, if anyone.

This works in the favour of the seller (normally) as everyone has to put their final best offer on the table initially. There is no room for bids going back and forth, but if you are putting a bid on a house you believe will sell for 525k (another example), you need to pretty much put 525k on the table or realise its unlikely you will get the house. That said, if you believe the house is only worth 500k, you can still put 525k on the table, but you know you are probably paying 25k over the odds.

This would change the process dramatically, but there are downsides as well. Everyone needs to be careful for what they wish for.

 

[gnf_ireland]

Why didn't you say 500k or some other intermediate figure was your final offer? If the EA said fine and walked away, you know they're happy they'll get more. I did it myself when I purchased, and I know many others who have done the same. Not all got the property, but in a few cases the EA came back to them stating the higher bidder had withdrawn and they were now the highest bidder.

Or drop the bid in this case to say 10k lower than the previous high bid and let the vendors then decide. If a bidding war has just occurred and you lost, and then suddenly you won again, I would definitely drop the offer. The worst they can say is no.
Simple answer is - I have an offer in on another property after I lost that bid so I need an answer from the vendor relatively quickly. Final offer is x and they can say yes or no. The other bidder has disappeared, so its accept or back to viewings again ! You may win or lose, but at least you might not feel duped by the EA.

 

[comer911]

Interesting thread and one that sheds light on a process (buying and selling property) that is not well regulated and not well policed in Ireland. Is there not a strong case for EA's to only represent a single client in any transaction. 1 EA represents the seller and other EA's represent each individual prospective buyer, each paying their own EA fees. Would this not remove the likely hood of any conflict of interest or dishonest practices.

 

[cremeegg]

Is there not a strong case for EA's to only represent a single client in any transaction.

This is an excellent suggestion. There should be legislation to allow this brought in. It seems to me that it would resolve most of the problems.

 

[Leo]

This is an excellent suggestion. There should be legislation to allow this brought in. It seems to me that it would resolve most of the problems.

No need for any more legislation, that already happens. Purchasers are free to hire an agent to advise them and negotiate on their behalf, some offer full service and will source property based on your criteria for your review and arrange surveys and inspections as required.

It happens a lot more in commercial property where purchasers are prepared to pay for this service. Most private purchasers would prefer to spend the money (€5k and up) elsewhere though, especially as this fee would have to come out of cash and that might impact on hitting the deposit criteria.

 

[newtothis]

Interesting thread and one that sheds light on a process (buying and selling property) that is not well regulated and not well policed in Ireland. Is there not a strong case for EA's to only represent a single client in any transaction. 1 EA represents the seller and other EA's represent each individual prospective buyer, each paying their own EA fees. Would this not remove the likely hood of any conflict of interest or dishonest practices.

What I'm about to say will be seen by some as a completely unfair generalisation, buy hey, it's just my observation.

I've spent quite a few years in business now, and most business relationships, whether with customers or suppliers are pretty straightforward. There may be some negotiation around price or other details, but generally things are straightforward, reasonably transparent and honest. However, whenever I've had any dealings with property I've gone into it with the feeling I was entering a nest of vipers, and have generally come out of it with the feeling confirmed. As an industry it just seems to be full of sharp practice and attempts to get one over on the poor mugs with cash and something to buy.

I know there are honourable people in the property business (I've met a few), and it's completely unfair to castigate an entire industry, but it can't just be me with this view can it?

 

[comer911]

No need for any more legislation, that already happens. Purchasers are free to hire an agent to advise them and negotiate on their behalf, some offer full service and will source property based on your criteria for your review and arrange surveys and inspections as required.

 

[comer911]

Agreed, purchasers are able to hire agents to assist in the process, but maybe it is necessary to legislate that EA's cannot represent both seller and buyer in any deal. As for the additional costs to the buyer, I suggest buyers would be happy to pay a fee to be better represented in any price negotiations, and to know that the agent they engage represents them, not the seller.[/QUOTE]

 

[Leo]

Agreed, purchasers are able to hire agents to assist in the process, but maybe it is necessary to legislate that EA's cannot represent both seller and buyer in any deal.

The existing legislation already rules that out.

As for the additional costs to the buyer, I suggest buyers would be happy to pay a fee to be better represented in any price negotiations, and to know that the agent they engage represents them, not the seller.

It would be well worth while for many purchasers to do so, but very few do.

 

[gnf_ireland]

Agreed, purchasers are able to hire agents to assist in the process, but maybe it is necessary to legislate that EA's cannot represent both seller and buyer in any deal.

I am curious - do buyers really believe EA are representing them in a transaction? Surely everyone realises the EA is hired by the seller to sell the property and represents their interests only.

I am also curious to know what level of fake bids do people genuinely believe happens? Assuming the EA fees are around ~1.75% (recently involved in a sale of a rural property and assume an urban one would attract less fees), an extra 10k in the price would mean an extra 175 euro for the EA.
I also assume that towards the end of the bidding process, most people would go up in 1k, 2k and max 5k increments.
Is it really worth it for the EA? I am not convinced that it is to completely skew market forces, but maybe I am wrong !