The psychology of bidding in 5k (or other) increments

airportgirl83 · 08-05-2019 1:07pm #1

I've recently inquired about a 2nd hand house with an estate agent. I was told there is currently an offer of €455k on it. I was asked if I want to bid in €5k steps? I was really surprised by his question as it's my understanding that you can bid any amount up whether it's €5k or €500. Obviously he wants to reach the asking price asap but suggesting €5k bids seems odd and puts me off from dealing with him tbh even though I have a healthy budget to bid. Any thoughts anyone?

awec · 08-05-2019 1:12pm

airportgirl83 wrote: »

I've recently inquired about a 2nd hand house with an estate agent. I was told there is currently an offer of €455k on it. I was asked if I want to bid in €5k steps? I was really surprised by his question as it's my understanding that you can bid any amount up whether it's €5k or €500. Obviously he wants to reach the asking price asap but suggesting €5k bids seems odd and puts me off from dealing with him tbh even though I have a healthy budget to bid. Any thoughts anyone?

Bid any amount you want but it's going to be a very long, tedious process if people increment by 500 quid at a time.

It's not just about reaching the asking price, but also about getting the bidding over and done with relatively efficiently. The estate agent is most concerned with getting the house sold as quick as possible, that's when they get their cut.

If I was a seller and there was one bidder that kept just increasing by 1k every time I'd think they were a time waster.

Bigmac1euro · 08-05-2019 1:26pm

Not sure how different it is down here but a friend of mine up north was bidding in 1k increments even though he had the money to go up 5 or 10k jumps, the other person eventually couldn't go any further, this was only 3 weeks ago. He may have just save himself 4k. Why would you bid in 5k increments ?

airportgirl83 · 08-05-2019 1:26pm

I just think it's wrong suggesting €5k steps as you can bid any amount. Going by €5k might unnecessarily drive up the price, in the heat of the moment.

The_Conductor · 08-05-2019 1:30pm

airportgirl83 wrote: »

I just think it's wrong suggesting €5k steps as you can bid any amount. Going by €5k might unnecessarily drive up the price, in the heat of the moment.

+1
Bid in whatever manner you're comfortable with- and walk away when you decide that the property is no longer worth the price that is currently associated with it.

awec · 08-05-2019 1:35pm

airportgirl83 wrote: »

I just think it's wrong suggesting €5k steps as you can bid any amount. Going by €5k might unnecessarily drive up the price, in the heat of the moment.

He's only suggesting it to save your time and his.

You can bid any amount you want.

airportgirl83 · 08-05-2019 1:36pm

awec wrote: »

airportgirl83 wrote: »

I've recently inquired about a 2nd hand house with an estate agent. I was told there is currently an offer of €455k on it. I was asked if I want to bid in €5k steps? I was really surprised by his question as it's my understanding that you can bid any amount up whether it's €5k or €500. Obviously he wants to reach the asking price asap but suggesting €5k bids seems odd and puts me off from dealing with him tbh even though I have a healthy budget to bid. Any thoughts anyone?

Bid any amount you want but it's going to be a very long, tedious process if people increment by 500 quid at a time.

It's not just about reaching the asking price, but also about getting the bidding over and done with relatively efficiently. The estate agent is most concerned with getting the house sold as quick as possible, that's when they get their cut.

If I was a seller and there was one bidder that kept just increasing by 1k every time I'd think they were a time waster.

I was a seller myself and I didn't think someone was a time waster by bidding in small amounts. Just because someone puts a high bid quickly, doesn't mean they'll end up with the house. The +1k bidder should not be underestimated.

awec · 08-05-2019 1:37pm

Bigmac1euro wrote: »

Not sure how different it is down here but a friend of mine up north was bidding in 1k increments even though he had the money to go up 5 or 10k jumps, the other person eventually couldn't go any further, this was only 3 weeks ago. He may have just save himself 4k. Why would you bid in 5k increments ?

Well if you are willing to go 30k over the current asking price that is potentially 30 back-and-forth bids before you're done. That's a huge waste of time for all concerned.

5k over the course of a mortgage is nothing.

I would imagine most people, when involved in bidding, want to either win the bidding or lose the bidding as quickly as possible, so they can either start to close or move on to the next house. Nobody wants to be stuck in endless back and forth because someone wants to save a whole 4k when they're already dropping nearly half a million.

awec · 08-05-2019 1:41pm

airportgirl83 wrote: »

I was a seller myself and I didn't think someone was a time waster by bidding in small amounts. Just because someone puts a high bid quickly, doesn't mean they'll end up with the house. The +1k bidder should not be underestimated.

No, but it means someone will end up winning the bidding faster.

I mean, if it were me, I'd have the max I'm willing to pay, and go up in bigger increments to start with and then slow down as I approach my max. I would see this as a good compromise between getting a price I'm happy with versus not taking forever on bidding.

Bigmac1euro · 08-05-2019 1:47pm

awec wrote: »

Well if you are willing to go 30k over the current asking price that is potentially 30 back-and-forth bids before you're done. That's a huge waste of time for all concerned.

5k over the course of a mortgage is nothing.

I would imagine most people, when involved in bidding, want to either win the bidding or lose the bidding as quickly as possible, so they can either start to close or move on to the next house. Nobody wants to be stuck in endless back and forth because someone wants to save a whole 4k when they're already dropping nearly half a million.

Closer to 200,000 for the guy i was talking about, if your willing to go 30k over, bidding 10k at a time is just ridiculous, its the biggest purchase of most peoples lives. No wonder everything is over priced if bidding in this way is most popular. I couldn't care who I'm annoying or how long it takes. When I cant bid any more then I wont. Just my opinion on it everyone is different. If I bid on a house and someone goes 10k above me, if I can afford it ill go another 2k. I wont throw an extra 8k for the sake of getting things wrapped up fast.

airportgirl83 · 08-05-2019 1:47pm

awec wrote: »

Bigmac1euro wrote: »

Not sure how different it is down here but a friend of mine up north was bidding in 1k increments even though he had the money to go up 5 or 10k jumps, the other person eventually couldn't go any further, this was only 3 weeks ago. He may have just save himself 4k. Why would you bid in 5k increments ?

Well if you are willing to go 30k over the current asking price that is potentially 30 back-and-forth bids before you're done. That's a huge waste of time for all concerned.

5k over the course of a mortgage is nothing.

I would imagine most people, when involved in bidding, want to either win the bidding or lose the bidding as quickly as possible, so they can either start to close or move on to the next house. Nobody wants to be stuck in endless back and forth because someone wants to save a whole 4k when they're already dropping nearly half a million.

I guess everyone's circumstances are different. I'm ok waiting to see how things play out as there is always another house out there but someone who is a hurry might want to as you suggested move on to another property as quickly as possible.

airportgirl83 · 08-05-2019 1:52pm

Bigmac1euro wrote: »

awec wrote: »

Well if you are willing to go 30k over the current asking price that is potentially 30 back-and-forth bids before you're done. That's a huge waste of time for all concerned.

5k over the course of a mortgage is nothing.

I would imagine most people, when involved in bidding, want to either win the bidding or lose the bidding as quickly as possible, so they can either start to close or move on to the next house. Nobody wants to be stuck in endless back and forth because someone wants to save a whole 4k when they're already dropping nearly half a million.

Closer to 200,000 for the guy i was talking about, if your willing to go 30k over, bidding 10k at a time is just ridiculous, its the biggest purchase of most peoples lives. No wonder everything is over priced if bidding in this way is most popular. I couldn't care who I'm annoying or how long it takes. When I cant bid any more then I wont. Just my opinion on it everyone is different. If I bid on a house and someone goes 10k above me, if I can afford it ill go another 2k. I wont throw an extra 8k for the sake of getting things wrapped up fast.

That's my view anyway. Well I asked the agent why he wants me to bid in 5k steps. I don't think I'll hear back from him...

JayWasTaken · 08-05-2019 1:53pm

awec wrote: »

That's a huge waste of time for all concerned.

5k over the course of a mortgage is nothing.

No its still 5K. For what amounts to maybe an hour or two on the phone to an estate agent over the course of a few weeks. Saving 5K by spending a few extra minutes on the phone, you'd have to be mental not to.

awec · 08-05-2019 1:59pm

JayWasTaken wrote: »

No its still 5K. For what amounts to maybe an hour or two on the phone to an estate agent over the course of a few weeks. Saving 5K by spending a few extra minutes on the phone, you'd have to be mental not to.

It's 5k over the course of 25/30 years.

Have you calculated the difference the mortgage payment would be on paying 455 vs paying 460? It must be like 20 quid a month or something? Less than 1% increase on your monthly payment.

Like if I was willing to go 30k over, I'd probably bid first 5k. Absolute worst case, I have overpaid by 4k, which is absolutely feck all when I'm already paying 460,000. If the counter bid comes back at 465,000, then I'll go 470,000, again worst case is 4k overpaid. I'd slow down when I come nearer to my limit, maybe reduce to 3k, then 2k, then 1k.

If you are so uptight about getting the absolute minimum possible you will drive yourself insane. There will always be someone who got a bit of a better deal than you. Pay a price you're happy to pay and move on with your life.

awec · 08-05-2019 2:05pm

airportgirl83 wrote: »

That's my view anyway. Well I asked the agent why he wants me to bid in 5k steps. I don't think I'll hear back from him...

I don't even understand why you're asking him.

Bid whatever you want, you don't need his permission. He's just suggesting 5k to get the ball rolling, if you're happy to go slower then just go slower, it's your decision, not his.

airportgirl83 · 08-05-2019 2:05pm

awec wrote: »

JayWasTaken wrote: »

No its still 5K. For what amounts to maybe an hour or two on the phone to an estate agent over the course of a few weeks. Saving 5K by spending a few extra minutes on the phone, you'd have to be mental not to.

It's 5k over the course of 25/30 years.

Have you calculated the difference the mortgage payment would be on paying 455 vs paying 460? It must be like 20 quid a month or something? Less than 1% increase on your monthly payment.

Like if I was willing to go 30k over, I'd probably bid first 5k. Absolute worst case, I have overpaid by 4k, which is absolutely feck all when I'm already paying 460,000. If the counter bid comes back at 465,000, then I'll go 470,000, again worst case is 4k overpaid. I'd slow down when I come nearer to my limit, maybe reduce to 3k, then 2k, then 1k.

If you are so uptight about getting the absolute minimum possible you will drive yourself insane. There will always be someone who got a bit of a better deal than you. Pay a price you're happy to pay and move on with your life.

In the course of 25/30 years €5k would not matter hugely. But it does when you have Solicitor and other fees to pay or make improvements to the property. It might matter more in the short term rather than ling term imo anyway.

awec · 08-05-2019 2:08pm

The other thing to consider, how close do you think the current bid is to what the end result will be?

I can see a lot of merit in small increases if you are coming in late to the bidding and the price is near the realistic final price.

If you know for sure that it's going to go up another 30 or 40 grand then I don't see why you'd bother increasing 1k.

airportgirl83 · 08-05-2019 2:14pm

awec wrote: »

airportgirl83 wrote: »

That's my view anyway. Well I asked the agent why he wants me to bid in 5k steps. I don't think I'll hear back from him...

I don't even understand why you're asking him.

Bid whatever you want, you don't need his permission. He's just suggesting 5k to get the ball rolling, if you're happy to go slower then just go slower, it's your decision, not his.

I'm asking him as I don't like what he's suggesting, just to be ackward. Someone who is bidding for a very first time, not experienced, might actually think that this is the way to bid going by the way he phrased it in his email. His exact wording was: do you want to bid in €5k steps.

grogi · 08-05-2019 2:21pm

awec wrote: »

It's 5k over the course of 25/30 years.

Have you calculated the difference the mortgage payment would be on paying 455 vs paying 460? It must be like 20 quid a month or something? Less than 1% increase on your monthly payment.

Like if I was willing to go 30k over, I'd probably bid first 5k. Absolute worst case, I have overpaid by 4k, which is absolutely feck all when I'm already paying 460,000. If the counter bid comes back at 465,000, then I'll go 470,000, again worst case is 4k overpaid. I'd slow down when I come nearer to my limit, maybe reduce to 3k, then 2k, then 1k.

If you are so uptight about getting the absolute minimum possible you will drive yourself insane. There will always be someone who got a bit of a better deal than you. Pay a price you're happy to pay and move on with your life.

Classic penny wise, pound stupid.

€4k is €4k - it won't remember where you save that €4k - on a car or on a house.

awec · 08-05-2019 2:29pm

grogi wrote: »

Classic penny wise, pound stupid.

€4k is €4k - it won't remember where you save that €4k - on a car or on a house.

€4k is €4k but you have to take into account how much it is relative to what you are paying.

Saving €4k on a house that costs €460 is like saving €180 on a €20k car. Relatively it is peanuts, less than a single percent.

So while nobody is advocating that you should just throw your money at the bids, if someone said to me I could finish the bidding today and save myself further back and forth, and potentially "overpay" by less than a single percentage point, which again affects the morgage payment by less than 1% per month, I'd be quite happy to.

Mickiemcfist · 08-05-2019 2:39pm

awec wrote: »

€4k is €4k but you have to take into account how much it is relative to what you are paying.

Saving €4k on a house that costs €460 is like saving €180 on a €20k car. Relatively it is peanuts, less than a single percent.

How much time does it take you to earn 4k? That stays the same whether you're buying houses or hoovers. Additionally, 4k over 30 years is closer to 8k. It's actually cheaper to overpay by 4k on a car than it is to overpay by 4k on a house.

awec · 08-05-2019 2:43pm

Mickiemcfist wrote: »

How much time does it take you to earn 4k? That stays the same whether you're buying houses or hoovers. Additionally, 4k over 30 years is closer to 8k. It's actually cheaper to overpay by 4k on a car than it is to overpay by 4k on a house.

Well, that is a good point. 4k is different to different people.

But for someone who is capable of paying ~500k on a house, 4k is not an enormous sum of money. It's 2 months mortgage payment.

The_Conductor · 08-05-2019 2:47pm

awec wrote: »

Well, that is a good point. 4k is different to different people.

But for someone who is capable of paying ~500k on a house, 4k is not an enormous sum of money. It's 2 months mortgage payment.

It may be the difference between furnishing your living room/bedroom and buying kitchen appliances- or not.

Most people over-stretch themselves financially when buying property- to the extent they have to severely curtail expenditure even on things like furnishing their new property. Its part of human nature.......

awec · 08-05-2019 2:53pm

The_Conductor wrote: »

It may be the difference between furnishing your living room/bedroom and buying kitchen appliances- or not.

Most people over-stretch themselves financially when buying property- to the extent they have to severely curtail expenditure even on things like furnishing their new property. Its part of human nature.......

If you're talking about paying an extra 4k in cash up front, sure. That would be worth saving for sure, especially since kitting out a new house is more expensive than pretty much everyone thinks.

But 4k extra on the mortgage? As I said, the difference is like 20 quid a month. If that is the difference between you furnishing or not furnishing your new gaff then you have bigger financial issues at play.

tigger123 · 08-05-2019 3:31pm

The_Conductor wrote: »

It may be the difference between furnishing your living room/bedroom and buying kitchen appliances- or not.

Most people over-stretch themselves financially when buying property- to the extent they have to severely curtail expenditure even on things like furnishing their new property. Its part of human nature.......

Would it really be though? It's not 4k in your hand right now, it's 4k that you borrow over the course of 30 years. You don't have access to that money unless you pay for it as part of the house purchase.

Likewise, no institution is going to lend you 4k over the course of 30 years for a suite of furniture.

terrydel · 08-05-2019 3:45pm

awec wrote: »

Well, that is a good point. 4k is different to different people.

But for someone who is capable of paying ~500k on a house, 4k is not an enormous sum of money. It's 2 months mortgage payment.

Thats half the problem in this country tho, loads of people are technically capable of paying these prices and do so largely becuase theyve no choice as thats the market and if you need a home you have to pay it, but this attitude of 'ah sure its just another 4k on top of 400k' just exacerbates the whole madness we live in.
And in any case, 4k is a nice sum whether you are poor or well off, in terms of what you could do to a house to make it nicer once youve bought it. That flippant attitude towards significant sums of money really annoys me and is so Celtic Tiger for me, sorry.

Edit - points above apply more specifically if the money is coming from savings and not added to the mortgage, but it still stands that being so blase about adding to borrowings that over 30 years can cost a lot of money, is symptomatic of the culture that has us in this mess.

beauf · 08-05-2019 3:57pm

I don't get the 4k. Its 4k plus interest. Then most of what you buy won't last the length of the mortgage. So you'll have to replace it.
You won't furnish a house with 4k anyway. Not with quality stuff that will last. or survive kids.

tigger123 · 08-05-2019 3:58pm

terrydel wrote: »

Thats half the problem in this country tho, loads of people are technically capable of paying these prices and do so largely becuase theyve no choice as thats the market and if you need a home you have to pay it, but this attitude of 'ah sure its just another 4k on top of 400k' just exacerbates the whole madness we live in.
And in any case, 4k is a nice some whether you are poor or well of, in terms of what you could do to a house to make it nicer once youve bought it. That flippant attitude towards significant sums of money really annoys me and is so Celtic Tiger for me, sorry.

Edit - points above apply more specifically if the money is coming from savings and not added to the mortgage, but it still stands that being so blase about adding to borrowings that over 30 years can cost a lot of money, is symptomatic of the culture that has us in this mess.

I'd disagree. It's symptomatic of a serious lack of supply in this country of housing stock. People are being driven to this because its so difficult to purchase a home.

People don't want to be doing it, it's market forces (and ineffectual/non-existent Government policy).

grogi · 08-05-2019 3:59pm

awec wrote: »

If you're talking about paying an extra 4k in cash up front, sure. That would be worth saving for sure, especially since kitting out a new house is more expensive than pretty much everyone thinks.

But 4k extra on the mortgage? As I said, the difference is like 20 quid a month. If that is the difference between you furnishing or not furnishing your new gaff then you have bigger financial issues at play.

For the 4k so easily forgettable, will cost you €20 every month. For 30 years. That's a free pub visit a month for effectively the rest of your life...

woodchuck · 08-05-2019 4:00pm

4k is 4k. Even if it's spread out over a number of decades and amounts to 20 quid a month, I'd much rather have someone hand me 20euro a month than not! Especially after spending a crazy amount on bricks and mortar, I'd take whatever little I could get.

20euro a month would cover any of the following for me:
- An early bird meal deal
- 2 cinema tickets
- 20 1euro kindle books on amazon
- Take away
- A couple of cocktails
- Tickets to many small theatre productions

The things I would do with an extra 20euro a month :P

awec · 08-05-2019 4:08pm

terrydel wrote: »

Thats half the problem in this country tho, loads of people are technically capable of paying these prices and do so largely becuase theyve no choice as thats the market and if you need a home you have to pay it, but this attitude of 'ah sure its just another 4k on top of 400k' just exacerbates the whole madness we live in.
And in any case, 4k is a nice some whether you are poor or well of, in terms of what you could do to a house to make it nicer once youve bought it. That flippant attitude towards significant sums of money really annoys me and is so Celtic Tiger for me, sorry.

Edit - points above apply more specifically if the money is coming from savings and not added to the mortgage, but it still stands that being so blase about adding to borrowings that over 30 years can cost a lot of money, is symptomatic of the culture that has us in this mess.

I think these are lazy, generalising statements that make no sense at all.

Do you really think Irish people are any different to anyone else when it comes to buying things?

The psychology of bidding in 5k (or other) increments

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