Ideally, when you are trying to purchase a new home you are the only one trying to make an offer on the home. That way you can make an offer, keep it within your budget, and have a new place to call home in no time. However, life is not always perfect, and oftentimes home buyers will run into a bad situation when trying to buy a new home called a bidding war. We will define what a bidding war is and provide advice on hoe to approach it should you find yourself wrapped up in a bidding war for the home you have made an offer on.
What is a Bidding War?
A bidding where is a circumstance associated with the home buying process where two or more prospective buyers for a piece of property incrementally increase their monetary bids for the property in competition for the right to claim ownership of the home.
How Does A Bidding War Work?
Bidding wars usually happen at a rapid pace, and cause inexperienced and vulnerable home buyers to make ill-advised investment decisions and stretch their budget to the breaking point. A bidding war could even lead to buyers pushing the final price agreed upon for purchase above and beyond the original value of the property.
Bidding wars usually occur when buyers are vying for ownership of a particularly valuable home. The higher the quality the location of a home is, the more likely you are to find a bidding war taking place on the home you want. Bidding wars are also more likely to happen in the midst of a seller’s market (where the demand for homes from buyers exceeds the supply of households).
Ireland is currently experiencing a period of low supply and high demand for homes in 2021, so you should be warry of running into a bidding war for the home you want. To read more about Ireland’s house supply shortage follow the link below to another blog post from Yes.ie discussing the issue.
What Should I do?
Getting into a bidding war and can be dangerous if you let your emotions get the better of you, so the most important thing to do is remain calm and composed. If you have a strong understanding of your budget and remain disciplined you can make it through this, and maybe even win!
Towards the beginning of the home buying process when you are planning your budget, you may want to keep the possibility of a bidding war on the back of your mind. If you know that you are going to be looking in an area that is very desirable with a low supply of homes for sale, it would be a great idea to set your budget lower than what you can actually afford. This way, when you get into a bidding war for the home you want, you can feel comfortable raising your offer to remain competitive during the bidding war, and increase your chances of successfully earning the right of ownership for the home.
However, it is important to make sure you have a hard limit that you will not go over no matter what, even if the other parties in the bidding war make a higher offer. It can be difficult to accept defeat if the offers start to go beyond your budget, but in the long term you will be glad that you kept your cool and stayed within your budget.