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

awec · 08-05-2019 4:11pm

woodchuck wrote: »

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

But nobody is handing you 20 quid a month?

People list these things that you can do with 20 quid a month, as if the difference between having this 20 quid and not is a life of solitude indoors or a life of luxury.

Anyone who is able to pay 2 grand a month on a mortgage is not going to notice 20 quid. It is going to make absolutely zero difference to their lifestyle. They are not going to stop going to the pub, they are not going to stop going to the cinema, they are not going to stop buying stuff. For someone to be approved for that level of mortgage, their income would have to be such that 20 quid is an insignificant amount of money.

If 20 quid was enough to affect your lifestyle you would never be approved for a mortgage in the first place, so the whole discussion is moot.

The_Conductor · 08-05-2019 4:24pm

awec wrote: »

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?

Most people do not borrow to furnish their homes though- they do so from savings. If they are maxing out on their borrow potential- and eating into limited savings for furnishings etc- you can see how this happens.

Also- its never been normal for banks to lend towards furnishing your property- so its not really fair to try and use the analogy of a 30 year mortgage and how 5k doesn't really make a lot of difference one way or the other.

Simply- it may be a deal breaker for some people- while it may be comfortably manageable for others- there isn't a one size fits all.

Just because you can potentially borrow an extra 5k (or indeed multiples of 5k for subsequent bids)- doesn't necessarily mean it makes good financial sense to do so- it might work for you- it might not work for others.

Its not black and white- and its not fair that something that means little hardship to one person can be a deal breaker for someone else- but that's the way of the world.

terrydel · 08-05-2019 4:32pm

tigger123 wrote: »

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).

Fair points and totally agree re. government policy, which amounts to nothing more than massively enrich a small minority at the expense of the majority.
Sure theyve basically engineered a private rental sector owned by powerful, wealthy, profit driven entities that can lean on tenants and society far, far more than a disjointed collection of small landlords, whove been driven out of the market to let the super rich come in and hoover up.
Building homes (social or otherwise) at a fast rate doesnt suit their agenda. So it wont and isnt happening. But people vote for them in their droves. Its depressing.

awec · 08-05-2019 4:36pm

The_Conductor wrote: »

Most people do not borrow to furnish their homes though- they do so from savings. If they are maxing out on their borrow potential- and eating into limited savings for furnishings etc- you can see how this happens.

Also- its never been normal for banks to lend towards furnishing your property- so its not really fair to try and use the analogy of a 30 year mortgage and how 5k doesn't really make a lot of difference one way or the other.

Simply- it may be a deal breaker for some people- while it may be comfortably manageable for others- there isn't a one size fits all.

Just because you can potentially borrow an extra 5k (or indeed multiples of 5k for subsequent bids)- doesn't necessarily mean it makes good financial sense to do so- it might work for you- it might not work for others.

Its not black and white- and its not fair that something that means little hardship to one person can be a deal breaker for someone else- but that's the way of the world.

But I didn't say this. I have not argued for anyone to just throw more money at things whether they can afford it or now.

The current bid is 455. Let's say for example the poster knows the current bid is not going to be accepted, and that the house more than likely going to sell for at least 480, given other houses that have sold in the same area. Let's say the poster can afford to pay up to 490, and has decided this is the max they are willing to go to for this particular property.

My point all along has been to increase your bids by 1k (i.e. to come in with a bid of 456), when you know you can afford a lot more, and you know the price is going to go up a lot more anyway, is nothing but a waste of time.

So long as the bid is beneath what the seller will realistically accept, it doesn't matter if you go up in increments of 1k or 10k, the only difference is how long it takes to get there. The vendor hasn't accepted 455, a bid of 456 is not going to make them reconsider anything.

woodchuck · 08-05-2019 4:54pm

awec wrote: »

But nobody is handing you 20 quid a month?

People list these things that you can do with 20 quid a month, as if the difference between having this 20 quid and not is a life of solitude indoors or a life of luxury.

Anyone who is able to pay 2 grand a month on a mortgage is not going to notice 20 quid. It is going to make absolutely zero difference to their lifestyle. They are not going to stop going to the pub, they are not going to stop going to the cinema, they are not going to stop buying stuff. For someone to be approved for that level of mortgage, their income would have to be such that 20 quid is an insignificant amount of money.

If 20 quid was enough to affect your lifestyle you would never be approved for a mortgage in the first place, so the whole discussion is moot.

Whether you let the 20euro a month sit in your bank account completely unnoticed or spend it on a box of donuts doesn't really matter. The point is, I'd rather HAVE the extra 20euro than not! 20euro a month quickly becomes 240euro after a year; not a bad weekend away!

Is it going to make a big difference to your lifestyle? Of course not. But it's still nice to have. Plenty of people stretch themselves thin buying a house and then even thinner if kids come along. I don't know anyone who would turn down an extra 20euro a month if it was an option!

awec · 08-05-2019 5:30pm

woodchuck wrote: »

Whether you let the 20euro a month sit in your bank account completely unnoticed or spend it on a box of donuts doesn't really matter. The point is, I'd rather HAVE the extra 20euro than not! 20euro a month quickly becomes 240euro after a year; not a bad weekend away!

Is it going to make a big difference to your lifestyle? Of course not. But it's still nice to have. Plenty of people stretch themselves thin buying a house and then even thinner if kids come along. I don't know anyone who would turn down an extra 20euro a month if it was an option!

Of course not, but that's not really relevant here?

You're making it out like it's a choice between throwing 20 quid in the bin or having someone hand you 20 quid. It's 20 quid a month in exchange for securing a property. It's not 20 quid for nothing.

And I don't know why we are talking about people stretching themselves thin still. Again, 20 quid is an insignificant sum of money on a 2 grand a month mortgage. Going from 2000 a month to 2020 a month is not "stretching" by any imagination.

aloooof · 08-05-2019 6:08pm

One further point to add to this discussion is how long has it taken you to find a property that you've deemed suitable to bid on? If you think bidding 5k may get it over the line, then it could save you months of additional rent while waiting and looking for another suitable alternative.

Wexforllion · 08-05-2019 6:33pm

Has anyone got official figures of County wide property prices movement for the months of 2019?

airportgirl83 · 08-05-2019 7:31pm

awec wrote: »

The_Conductor wrote: »

Most people do not borrow to furnish their homes though- they do so from savings. If they are maxing out on their borrow potential- and eating into limited savings for furnishings etc- you can see how this happens.

Also- its never been normal for banks to lend towards furnishing your property- so its not really fair to try and use the analogy of a 30 year mortgage and how 5k doesn't really make a lot of difference one way or the other.

Simply- it may be a deal breaker for some people- while it may be comfortably manageable for others- there isn't a one size fits all.

Just because you can potentially borrow an extra 5k (or indeed multiples of 5k for subsequent bids)- doesn't necessarily mean it makes good financial sense to do so- it might work for you- it might not work for others.

Its not black and white- and its not fair that something that means little hardship to one person can be a deal breaker for someone else- but that's the way of the world.

But I didn't say this. I have not argued for anyone to just throw more money at things whether they can afford it or now.

The current bid is 455. Let's say for example the poster knows the current bid is not going to be accepted, and that the house more than likely going to sell for at least 480, given other houses that have sold in the same area. Let's say the poster can afford to pay up to 490, and has decided this is the max they are willing to go to for this particular property.

My point all along has been to increase your bids by 1k (i.e. to come in with a bid of 456), when you know you can afford a lot more, and you know the price is going to go up a lot more anyway, is nothing but a waste of time.

So long as the bid is beneath what the seller will realistically accept, it doesn't matter if you go up in increments of 1k or 10k, the only difference is how long it takes to get there. The vendor hasn't accepted 455, a bid of 456 is not going to make them reconsider anything.

You see in the area I'm looking at houses struggle to get asking price atm hence for that particular house I would bid by small amounts. Also, I'm not in a hurry so can wait how the seller's expectation of the price vs reality plays out.

Also, it's not just one €4k or €5k we're discussing here. If I decide to bid €5k other party might respond with €5k back so suddenly you're up €10k etc. both sides are driving the price up by a large combined amount.

airportgirl83 · 08-05-2019 7:36pm

aloooof wrote: »

One further point to add to this discussion is how long has it taken you to find a property that you've deemed suitable to bid on? If you think bidding 5k may get it over the line, then it could save you months of additional rent while waiting and looking for another suitable alternative.

That is a valid point imo but you will never know if it will bring you over the line or not so your original €5k might end up being €10, 20k extra, not sure if I explain this well.

Sheeps · 08-05-2019 7:37pm

airportgirl83 wrote: »

You see in the area I'm looking at houses struggle to get asking price atm hence for that particular house I would bid by small amounts. Also, I'm not in a hurry so can wait how the seller's expectation of the price vs reality plays out.

Also, it's not just one €4k or €5k we're discussing here. If I decide to bid €5k other party might respond with €5k back so suddenly you're up €10k etc. both sides are driving the price up by a large combined amount.

My strategy is always to get in early on a house with a bid, and bid about 15-20% under the asking price. That way when other bidders come in they double guess themselves and might also be persuaded to bid under, which in turn sends a message back to the estate agent that says "fuck you" and another message to the property owners that says "maybe you've overestimated how much your house is worth". I've been in 3 bidding wars now where the increments were by a grand each time before i eventually pulled out.

airportgirl83 · 08-05-2019 7:41pm

Sheeps wrote: »

airportgirl83 wrote: »

You see in the area I'm looking at houses struggle to get asking price atm hence for that particular house I would bid by small amounts. Also, I'm not in a hurry so can wait how the seller's expectation of the price vs reality plays out.

Also, it's not just one €4k or €5k we're discussing here. If I decide to bid €5k other party might respond with €5k back so suddenly you're up €10k etc. both sides are driving the price up by a large combined amount.

My strategy is always to get in early on a house with a bid, and bid about 15-20% under the asking price. That way when other bidders come in they double guess themselves and might also be persuaded to bid under, which in turn sends a message back to the estate agent that says "fuck you" and another message to the property owners that says "maybe you've overestimated how much your house is worth". I've been in 3 bidding wars now where the increments were by a grand each time before i eventually pulled out.

Interesting point, thanks for sharing

VonLuck · 08-05-2019 7:46pm

I can understand someone bidding in 5k increments. You're more likely to scare off potential bidders if they see it jump by 5k. If you go in 1k increments, the rival bidder may see it as "just €1000 more" almost indefinitely, even though you could end up bidding the same amount in both scenarios.

airportgirl83 · 08-05-2019 7:47pm

Actually when I went to see the house, I asked a lot of questions, always do. I showed a clear interest I guess. Estate agent said to me: would you like to register a bid? I asked him what does he mean exactly - I understood the words he was saying but wasn't sure if he actually once me to place a bid, it was my first viewing after all. He said you can register a bid of e.g. €450k to keep you updated on the price. What would an estate agent do that? As a seller myself in the past, I would never accept a bid from someone who viewed a house once. Is it to show that there is an interest?

Bigmac1euro · 08-05-2019 7:58pm

airportgirl83 wrote: »

Actually when I went to see the house, I asked a lot of questions, always do. I showed a clear interest I guess. Estate agent said to me: would you like to register a bid? I asked him what does he mean exactly - I understood the words he was saying but wasn't sure if he actually once me to place a bid, it was my first viewing after all. He said you can register a bid of e.g. €450k to keep you updated on the price. What would an estate agent do that? As a seller myself in the past, I would never accept a bid from someone who viewed a house once. Is it to show that there is an interest?

Get the ball rolling I assume. And also the more “bidders” the better I suppose even if they aren’t serious. Remember 90% of properties your looking at are probably over valued and asking price is out there. If he reaches the asking quickly the sellers are going to love it as is his commission. I’ll always start at 30k or more below asking.

awec · 08-05-2019 8:08pm

airportgirl83 wrote: »

You see in the area I'm looking at houses struggle to get asking price atm hence for that particular house I would bid by small amounts. Also, I'm not in a hurry so can wait how the seller's expectation of the price vs reality plays out.

Also, it's not just one €4k or €5k we're discussing here. If I decide to bid €5k other party might respond with €5k back so suddenly you're up €10k etc. both sides are driving the price up by a large combined amount.

If you think the current bid is very close to what you feel it will go for then I agree with small increases.

awec · 08-05-2019 8:14pm

airportgirl83 wrote: »

Actually when I went to see the house, I asked a lot of questions, always do. I showed a clear interest I guess. Estate agent said to me: would you like to register a bid? I asked him what does he mean exactly - I understood the words he was saying but wasn't sure if he actually once me to place a bid, it was my first viewing after all. He said you can register a bid of e.g. €450k to keep you updated on the price. What would an estate agent do that? As a seller myself in the past, I would never accept a bid from someone who viewed a house once. Is it to show that there is an interest?

A bid is non-binding. EA is just trying to get the back rolling.

Your bid wouldn’t be accepted. They’ll just know you’re interested.

kippy · 08-05-2019 8:18pm

Sheeps wrote: »

My strategy is always to get in early on a house with a bid, and bid about 15-20% under the asking price. That way when other bidders come in they double guess themselves and might also be persuaded to bid under, which in turn sends a message back to the estate agent that says "fuck you" and another message to the property owners that says "maybe you've overestimated how much your house is worth". I've been in 3 bidding wars now where the increments were by a grand each time before i eventually pulled out.

Its always hard to know the best strategy as you rarely have any idea of the situation of the other bidders and/or seller.

Of course the figures mentioned are pretty large but at the end of the day once you can afford the repayments and have set a max price in your head you should bid to that amount particularly if the house ticks all the boxes.
Trying to annoy the estate agent and or seller is never a good tactic though. Ultimately you wanted the three houses and got none. Maybe that will work out for you in the long run. Maybe it won't.

airportgirl83 · 08-05-2019 8:21pm

awec wrote: »

airportgirl83 wrote: »

Actually when I went to see the house, I asked a lot of questions, always do. I showed a clear interest I guess. Estate agent said to me: would you like to register a bid? I asked him what does he mean exactly - I understood the words he was saying but wasn't sure if he actually once me to place a bid, it was my first viewing after all. He said you can register a bid of e.g. €450k to keep you updated on the price. What would an estate agent do that? As a seller myself in the past, I would never accept a bid from someone who viewed a house once. Is it to show that there is an interest?

A bid is non-binding. EA is just trying to get the back rolling.

Your bid wouldn’t be accepted. They’ll just know you’re interested.[/quoted
I know bid is non-binding but no point making it if you're not serious about purchasing a property. I just thought it was an odd thing to ask someone when they are viewing a house for the 1st time but maybe that's what estate agents do these days.

Sheeps · 08-05-2019 8:24pm

kippy wrote: »

Its always hard to know the best strategy as you rarely have any idea of the situation of the other bidders and/or seller.

Of course the figures mentioned are pretty large but at the end of the day once you can afford the repayments and have set a max price in your head you should bid to that amount particularly if the house ticks all the boxes.
Trying to annoy the estate agent and or seller is never a good tactic though. Ultimately you wanted the three houses and got none. Maybe that will work out for you in the long run. Maybe it won't.

That was last year, and i set my own price limits on those houses because I wasn't happy with them. All of them sold for under the asking price, but you're right. I've never bought a house this way.

Zenify · 08-05-2019 9:33pm

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.

I have a budget of 500k and 4k is a significant sum of money to me. I'm thinking how much I'd have to work for that.

awec · 08-05-2019 9:55pm

Zenify wrote: »

I have a budget of 500k and 4k is a significant sum of money to me. I'm thinking how much I'd have to work for that.

How much you’d have to work for 20 euro a month?

Again, we’re not talking about a 4K cash lump sum here...

Jaster Rogue · 08-05-2019 9:55pm

I think the point being made is, relevant to your average mortgage term say 30 years - inflation would render such differences meaningless in the long term.
5k is 1% of 500k
30 years ago you could buy a house in Dublin for £20k punts. , the impact now to someone who paid £20,200 vs. £20,000 of a winning bid in 1989 for the right property in the right location is trivial now.
The economic landscape will be very different again in 2049. Some analysts estimate Ireland's population will hit 10 million by 2050 for example.

rosmoke · 08-05-2019 10:41pm

awec wrote: »

How much you’d have to work for 20 euro a month?

Again, we’re not talking about a 4K cash lump sum here...

4k can mean 5k or 7k depending on the length of the mortgage, it's a lot of money as others have said!
No point splitting 4k in months or days just to make the amount less.

If you pay the house in 10 years it can mean 5k with interest, that's almost 2 years of college paid for a child.
As others have said it 4k is 5k or more and I would 100% prefer to send a few extra emails or phone calls for >5k.

However I agree with this being a bidding tactic and I can't say it's good or bad, but it could scare off other bidders.
Personally I am against bidding, I consider it gambling and I would try to offer a price only once.

Zenify · 09-05-2019 6:58am

awec wrote: »

How much you’d have to work for 20 euro a month?

Again, we’re not talking about a 4K cash lump sum here...

4k on a 30 year mortgage is going to cost me nearly 7k in the long run. I work very very hard and that's a few weeks work. The reason I have a big budget is because I have a big deposit. I dont think about monthly cost, I think about the long term cost. I have never taken out a loan in my life and I dont have a credit card. I had to comment about this "only 20 a month" because its the worst frame of mind to be in financially.

The_Conductor · 09-05-2019 7:09am

Posts debating the relative merits of bidding increments moved into their own thread.

kippy · 09-05-2019 8:04am

Zenify wrote: »

4k on a 30 year mortgage is going to cost me nearly 7k in the long run. I work very very hard and that's a few weeks work. The reason I have a big budget is because I have a big deposit. I dont think about monthly cost, I think about the long term cost. I have never taken out a loan in my life and I dont have a credit card. I had to comment about this "only 20 a month" because its the worst frame of mind to be in financially.

Well, it depends on whether it's the difference in you getting the property or not.
(All other things I've mentioned earlier taken into account)

whampiri · 09-05-2019 8:27am

Bidding in large increments also puts off other bidders from competing. If you bid in 1k increments it's likely that a bidder will stay in the process for quite a while as it's "only" an extra 1k each time and they may be able to tap various sources. Large bids show strength and tapping a source of finance for 5x1k is easier than looking immediately for 5k.
When I was bidding I increased the bid to 399k from 395 in the hope that the counter bidder wouldn't want to hit the 400k mark. Plan worked. It's psychological warfare.

awec · 09-05-2019 8:50am

rosmoke wrote: »

4k can mean 5k or 7k depending on the length of the mortgage, it's a lot of money as others have said!
No point splitting 4k in months or days just to make the amount less.

If you pay the house in 10 years it can mean 5k with interest, that's almost 2 years of college paid for a child.
As others have said it 4k is 5k or more and I would 100% prefer to send a few extra emails or phone calls for >5k.

However I agree with this being a bidding tactic and I can't say it's good or bad, but it could scare off other bidders.
Personally I am against bidding, I consider it gambling and I would try to offer a price only once.

It makes no sense whatsover to do anything other than split it into months since that's what we're talking about here.

We are not talking about a cash lump sum. We're talking about the effect of a sub-1% increase in your mortgage payment.

awec · 09-05-2019 8:52am

Zenify wrote: »

4k on a 30 year mortgage is going to cost me nearly 7k in the long run. I work very very hard and that's a few weeks work. The reason I have a big budget is because I have a big deposit. I dont think about monthly cost, I think about the long term cost. I have never taken out a loan in my life and I dont have a credit card. I had to comment about this "only 20 a month" because its the worst frame of mind to be in financially.

You are trying to tell us all you would give up on a property you wanted, that you could easily afford, because of 20 quid a month? Because you don't care about the monthly cost, but rather the fact that in 30 years time this absolutely insignificant sum of money, that is a minute fraction of what you are paying, is going to bother you?

Sorry, but I don't believe this.

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

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