How to navigate a bidding war?

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Bidding wars can be a daunting process to navigate especially for those who have no experience with the them. If you are house hunting in a highly sought-after neighborhood with homes that are in high demand, you will likely be forced into participating in a bidding war. Therefore, it is important to understand what a bidding war is, how they operate, and some tips to effectively navigate them.

Bidding Wars Explained

A bidding war occurs when at least two prospective buyers of a property compete by incrementally increasing their bids to achieve ownership of a particular property. Bidding wars can result in the property being sold above its original value, because prospective buyers are put in a vulnerable position which can lead them to make emotionally driven bids. 

Bidding wars usually occur when a property is in a desirable location, especially when the housing market favors the seller. In a seller’s market, there is a shortage in housing supply which leads to an increase in housing prices and the seller’s overall pricing power. 

Bidding War Tips

Research before making your first bid. What is the asking price? How long has the house been on the market? What are similar houses in that neighborhood selling at? Knowing as much as you can about the property and the seller can help you make a reasonable offer and create a strategy for navigating the bidding war.

Don’t go into a bidding war unprepared. Before house hunting, it is helpful to already be preapproved for a mortgage. A formal approval in principle will set you apart from other buyers and show the seller that you are ready to buy. 

Have a budget and limit in mind before entering a bidding war. Bidding wars are emotional. It can be easy for prospective buyers to get overly caught up in the bidding process and make a bid significantly above their limit. Even bidding a few thousand euros above your limit could have a considerable impact on your monthly repayments and overall monthly budget. 

When you begin making bids on a house, always be aware of the market. For example, bidding on a house in Dublin is going to be very different than bidding on a rural property. The market and location will dictate what offers you make and whether you should make bids at or above the asking price.

Don’t make a bid at the property. Take some time to “cool off” and consider what you liked and didn’t like about the property. Additionally, making a bid during a viewing shows the seller that you are inexperienced, and they could take advantage of that. So, even if you love everything about the house, wait a few hours before making your first bid.

It is normal to be intimidated by bidding wars, as they can be a long, emotional process. Being prepared and patient when making your bids can help you be successful in the end.