Bidding War on House Sale

[biddingwar]

Hello,

We have put our house up for sale Thursday, before it had gone on the market the agents had already found potential buyers. We asked for all viewings to be done on Saturday and yesterday had 9 people in. The last viewing was at 2pm and when I called the agent at 3pm they had already received 4 offers.

When the estate agent came to value they said it would likely sell for £270 but we could try putting it up for OIEO £280. We had another opinion from another agent who also thought it would go at most for £275.

The offers we received were all over £280, one was for as much as £290 and these could be increased further as the agent will be going back and asking for everyone's best offers.

When I first thought of putting the property up I expected around £250-£260 so I'm obviously quite shocked.

My only concern is if it goes to say £300 as the buyer really likes it and the demand for property in this area is so high that the bank may undervalue when they get their mortgage.. does anyone else have experience with a similar situation?

No exp but yes that could happen, I guess the offer would have to be adjusted accordingly

Worth remembering that if you have a first time buyer who lives at home or somebody not in a chain for whatever reason, their lower offer would probably be more appealing than somebody slightly higher who's in a long chain

For the sake of the possible buyers, set a time for best and final offers to be in, say Tuesday at 12 noon. Then get all the offer emails off the EA and look at them yourself. As someone has said, look at the actually ability to proceed from the offers - someone who’s a FTB may be better as they have nothing to sell, but will also possibly be on a tighter budget and have a lower deposit meaning that if the valuation comes back lower that their offer you’ll have to negotiate. A buyer who already has a property will have more flexibility in this respect as they’ll have more equity to play with.

Thank you both for your replies.

They have said best offers by midday Monday. We will consider everyone's circumstances and won't just accept the highest offer however everyone was in really good positions.

I was more wondering if anyone had a similar situation where the property had gone for a lot more due to demand in the area and if the bank undervalued or agreed the value.

I would look at ltv of potential buyers in case bank does undervalue. The house we bought was undervalued by 15k. We met half way.

@Roodicus21 thank you for your response, was this recently? If it is undervalued say by £15k and the buyers have the £15k can they proceed even if the bank don't agree the value? It's all quite confusing!

The problem is if the bank undervalue and the buyers don't have the cash that other properties will then be out of reach as they are all over priced in our area at the moment!

Undervaluing is really only a risk if your buyer has a small deposit and therefore they can’t actually afford the house at the higher price they bid if their mortgage company doesn’t agree with the amount they have bid.

There is a worrying trend of people bidding houses way up so they ‘win the race’ with the clear knowledge their mortgage company will undervalue and they can then get the house for a lower amount.

It totally screws up the bidding process. I was clear when I sold mine that I wouldn’t be dropping for an undervaluation and the risk was on the bidder.

@Ideasplease322 that's a good idea. I will discuss my concerns with the agents on Monday after all the bids are in.

The highest bidder stated they had a 10% deposit. Another stated they had over 50% in cash "coming" from a separation.

Sounds likely to be down valued, like another poster has said you need a buyer with a good LTV to absorb the difference in price/value.

I would get your EA to verify buyers position before accepting an offer. We viewed a property where the sale had just fallen through to cash buyers…turns out they didn’t have the cash and we’re struggling to get a mortgage!! We had to email a screenshot of our deposit funds before having our offer accepted.

At the moment your biggest struggle may be finding something to buy as it seems all decent properties are selling for £££ over guide price in bidding wars at the moment.

So say if the house is valued at £260k and the buyers are only borrowing £260k is that okay? Or does it need to be say 10% deposit (£26k) of what they valued it at so they would only be able to borrow £23k for example? Hope this makes sense not sure it even makes sense to me

It’s the percentage of the valuation and mortgage LTV that is relevant.

Say it’s sold at £280k, valued at £260k and your buyers have a 10% deposit (90% mortgage) the bank will only lend £234k (90% of £260) rather than £252k buyers would need (90% of £280k). The buyers would therefore need to find another £18k cash to proceed or renegotiate.

The highest bidder stated they had a 10% deposit.

Ideally, with offers so far over, you want someone with 10% plus the excess over valuation in order that they can cover any gap between mortgage offer and agreed purchase price.

Another stated they had over 50% in cash "coming" from a separation.

I would want more information around this - is there a court order for the financial settlement? Is the house ordered sold? Has it sold? Are parties in agreement about the sale or might it be frustrated? Do ask, you'd be surprised what information a disgruntled person will freely offer - and that will be useful information in and of itself. Don't accept mere "hopes and wishes" about future financial settlements.

…or they could drop to say 5% LTV mortgage (not sure if banks are offering these at the moment though) but their payments would increase and likely to have a higher interest rate so unlikely.

@SpecificPacific okay thank you, that makes sense. I think I will speak to my mortgage advisor and see what's been going on with mortgages she's put through recently as I'd imagine this is the case with all the sales in the area not just ours as demand is soo high. We live on a good train line to London and it seems everyone wants to move out so I think that's why all the prices are rocketing around here. I'd hope the banks would take this into consideration but we will have to see!

these could be increased further as the agent will be going back and asking for everyone's best offers.

Where has this trend come from?

@Tippexy I think it's quite common when a property is sought after. Obviously this wasn't my idea, it was the agents. They suggested this approach of best offers by x time to prevent us accepting an offer and then someone else offering more etc.

OP just for info, I thought I’d mention the Scottish system for buying a house in case anyone is thinking the English system is not ideal and wondering about alternatives.

Before putting the house on the market in Scotland, the seller legally has to get an independent house valuation done.

This is then included in the info for potential buyers to see. As well as all the faults the house has etc so the buyer has a full picture of the real cost of the property. If the survey shows up anything that needs further investigation like asbestos or rising damp or whatever the buyers can consider paying for an in depth survey.

Buyers can be sure of what price they are offering as they will have their mortgage decision in principle already so they know how much cash they need to make the difference between the sale price they will offer and the amount the bank will give them.

Just mentioning in case anyone is thinking of writing to their MP to complain about the current English system! I think a lot of people, my friends in England included, are a bit fed up with how things are just now. I hope some improvements can be made as it shouldn’t be this stressful for people to buy and sell houses.

It sucks that Scottish sellers have to find cash upfront to pay for a valuation (a hundred quid rising depending on house value) but some estate agents have a deal with the valuers and take all costs from the sale price or something before the seller gets it. So if a seller doesn’t have it they can still sell the house.

@SpecificPacific

…or they could drop to say 5% LTV mortgage (not sure if banks are offering these at the moment though) but their payments would increase and likely to have a higher interest rate so unlikely.

5% deposit is more available to first home buyers (do note that the couple waiting on a divorce settlement are less likely to be qualifying FTB as it looks like one potentially owned previously).

I had this recently when selling a relatives house. We had 17 offers. Whittled them down to 6. Went back to the 6 and asked for their final offers and their situation; proof of where the money is coming from; how much is via mortgage etc.

In the end I decided on the person with a 25% deposit and no property to sell. There were other FTB's who offered slightly more (£5k) but they had smaller deposits. I figured that the 25% gave a buffer in case the valuation was lower than their offer.

@Waspie this is what I will have to do I think. Was the property under valued when it came to it?

It is your EA’s job to present all aspects of each bid: they should check proceedability etc.

Someone who is a ‘cash buyer on completion of their sale’ is a good bet as they don’t have a mortgage lender making demands or laying down conditions. Alternatively a FTB is chain free, etc etc,

Also once you accept, get the EA to ask them to instruct a solicitor and survey within a certain window, during that time you will cease marketing, but if they don’t do that you will look at other offers.

No, it wasn't biddingwar. Mine was a probate sale so the house was rather dated in terms of decoration but structurally very sound so the original list price was less than others locally which had been refurbished. I think it helped that other houses had sold for that amount in the last year. That's different from your situation. Although, I think the property market has just exploded and it's supply and demand so any valuation should reflect the recent uplift in prices.

In your position I would go to "best and final" and ask for a statement of their position and then go through the replies with your EA. AFter all you are paying them for their experience so let them earn their commission! Just don't get stuck on the idea of having to take the highest offer.

Best of luck

Yes. I renovated a two bed house (this is about three years ago) and I had a ftb and an investor both wanting it. Listed for £168,500 (agent said £165 to achieve £160 but I would have lost money), and it went up and up until at 172500 agent said it would get down valued by lender as it was now at a price more than any house had sold in the street, including three beds. So I stopped at that, chose the ftb. Indeed the valuation came in at £165k. Then the buyer offered £160! Partly due to survey, though I did point out it wasn't a new build, but an 120 year old house, and yes renovated but not rebuilt. We settled at £168k, which is what I wanted in the first place.
The buyer must have the cash and not be too bothered by the valuation, which I always think are pie in the sky numbers anyway.

Ours was downvalued by 5% and as our buyers were first time buyers they didn't have additional funds to make up the difference. In the end we met them half way as we'd had a matching offer from a cash buyer and the FTBs didn't want to lose the house. (As cash buyers don't rely on bank valuations so wouldn't have been an issue!)