What is the current practice for bidders to show that they can afford to buy?

If, for example, a person wants to bid €400k and has AIP for €300k but has €200k cash, is it reasonable for the estate agent to say that the AIP does not cover the amount you have bid and that you should show you have the cash to make it up?

I have a friend who is bidding and most estate agents are happy with the AIP but one has asked to show that he can afford the full amount.

I have seen in other threads where posters have suggested deleting the amount from the AIP letter, but if I were a seller, I would ignore such bids and go for a cash buyer or a buyer with AIP + cash amounting to the full bid.

As a current seller, I know that our auctioneer insists on seeing full proof of funds - AIP + cash - before any serious offer is considered. He did the same with us when we were purchasers, however another auctioneer did not. The former is young, the latter near retirement, so I wonder if that is significant.

It would make sense to ask to see all parts of funding ? Otherwise you can't be sure that they will close, even AIP can change though in practise it probably rarely does. If a gift from parents etc that probably also requires paperwork so it would need to be drafted too?

I provide letter from Solicitor (to whom I send backup docs).

That has been sufficient.

Last time we bought we used the solicitor's letter approach also. Saves revealing your limits to an agent.

That said I remember viewing a house 7/8 years ago where the selling agent was letting off a bit of steam complaining that they had several sales fall through when it turned out the prospective purchaser didn't in fact have the necessary funds to complete. They said they'd never trust a solicitor's letter again.

In reality though, it's likely reliable enough for most agents, someone sufficiently motivated to have their solicitor write a letter is likely to be genuine. Even with AIP for an appropriate amount, circumstances can change or the bank valuer might have concerns rendering it void.

I discussed this with a few other people offline and the main concern was with showing the estate agent your hand.

In cases where there is competitive bidding and the house has reached an acceptable price to the vendor, then showing your hand does not matter. In fact, it shows them that you are not a messer and that you will be able to complete. So if my friend shows capacity to bid €450k , the auctioneer will be reassured that he can close at €400k. Of course, he could pretend he has another bidder at €420k but I think that is unlikely.

In cases where the person is the only bidder and the price is well below what the vendor wants, it would be different. If they want €450k and you are the only bidder at €400k then showing them your hand might discourage them from accepting the €400k offer.

Brendan Burgess said:

So if my friend shows capacity to bid €450k , the auctioneer will be reassured that he can close at €400k. Of course, he could pretend he has another bidder at €420k but I think that is unlikely.

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The issue then is that if that sale falls through and your friend is bidding on a house with the same auctioneer sitting at 385, trying to offer 395, the auctioneer knows they can push them higher.

circle said:

The issue then is that if that sale falls through and your friend is bidding on a house with the same auctioneer sitting at 385, trying to offer 395, the auctioneer knows they can push them higher.

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Yes, but that is a lot of contingencies.

It's better to deal with the current house and they want it and are bidding competitively and want to show the estate agent that they are not a messer and that they can comfortably afford it.

There is no way I would share my AIP or how much funds I have with an estate agent. We used a solicitors letter stating we had the funds. A local solicitor is not going to damage their reputation support someone who doesn't have the funds. Obviously if the agent has put an artificially low asking price there might be an issue if it goes way above but thats the agents fault.

faketales said:

There is no way I would share my AIP or how much funds I have with an estate agent. We used a solicitors letter stating we had the funds.

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Does such a solicitor's letter mention any figure?

In my case the letter was just procured after our bid was accepted, it acknowledged the bid and confirmed we had sufficient funds to close.

I recently submitted a bank statement showing a lower figure than my bid and it showed account closed to one of our leading auctioneering firms.
Within minutes I got a reply accepting my bid and allowing me to continue bidding.
Could this be AI gone crazy?

Clonback said:

Could this be AI gone crazy?

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Lack of attention to detail has been a thing for much long than AI!

ClubMan said:

Does such a solicitor's letter mention any figure?

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No but it did specify the house in question which had an asking price. We had a decent deposit so our AIP wasn't going to be much use. Nor were we going to show multiple accounts that our money was in to an agent.

I really do not understand why this is a never ending problem. Surely the agent should take people at face value unless given a reason not to do so. Then when their bid is accepted proof of funds is requested to be submitted when initial deposit is paid. House does not come off market until deposit (5K usually) and proof of funds provided. The market is none the wiser then if bidder cant follow through on bid...and all parties avoid back and forth

As a buyer I have little interest in showing documents to an agent until committed to buy, life is too busy for needless admin like this.

Think I can understand it to some extent during processes where there are many interested parties and a frenzied bidding war emerges and therefore may be in the interest of (a) the agent, to avoid timewasters who can't ultimately transact and (b) legit bidders who don't want the headline bid being hiked upwards by a party who is winging it.

However, having been in a position during a bidding process last year where the agent requested details from us, I was annoyed when the agent wasn't happy with a letter from our solicitor confirming ability to bid at the level and a redacted AIP from our bank (with our loan amount redacted), but instead insisted on being provided with the unredacted AIP letter (i.e. showing our mortgage approval level). Thought this prejudiced our bargaining position (inferred a low LTV which may have led agent to believe that we had plenty more fuel in the tank for higher bids) and was generally uncomfortable sharing such info with a third party.

Anyway, we didn't ultimately prevail on that house (in fairness, the bidding process was particularly feverish on that one with a number of parties escalating bids at staggering increments, so we dropped out) and agent practice has been a bit more varied and less intrusive on some of the subsequent processes.

A sellers market unfortunately - agents have a lot of leverage to be unreasonable to bidders.

I think the bit that causes the issue is that a potential buyer who is not in a position to purchase the property can drive up the price. For the estate agent / seller that's fine if the highest bidder ends up the one who has their ducks in a row.

When we were purchasing our price went well above the asking price but we were happy too as it really was under valued but I'll never know was the other bidder really ready to go whereas we had our ducks in a row but we paid 50k over the asking price.

presidenttttt said:

As a buyer I have little interest in showing documents to an agent until committed to buy, life is too busy for needless admin like this

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And the seller and their agent have little interest/time for fielding nuisance bidders who can't actually afford to close?

If I was selling one major discussion I would be having with any agent I am paying to help me sell would be around how we can ensure the sale goes through. I would expect this level of evidencing and screening, for one to limit who comes to view my home and secondly so we avoid bids from people who will never complete.

mugsymugsy said:

I think the bit that causes the issue is that a potential buyer who is not in a position to purchase the property can drive up the price.

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I have seen that too.
I suspect that some people are going sale agreed at say €500k when their absolute limit is €450k and they hope "that something will turn up".
The sale falls through and the estate agent goes to the underbidder at €495k.

If the €500k bidder had not been there , the bidding would have stopped at €450k.