Do you join a bidding war or fix a price in your head? Deciding on a strategy can be a tricky process

It’s not for the faint-hearted, bidding on a house. Having backed out of our first favoured property, we are now steeling ourselves to bid on another. But it’s a tricky process that is guaranteed to lead to many sleepless nights.

Do you listen closely to what the estate agent says about the vendor? Do you take on board what you’re told about other bids? Do you immediately counter with an offer when someone else raises the stakes? Or do you just fix a price in your head that you think the house is worth, and be prepared to walk away if the vendor doesn’t accept?

While the Property Price Register has brought greater transparency to sale prices, the bidding process remains opaque. Given the information asymmetry which is stacked in favour of the vendor, it can be a stressful time for buyers.

Still, it could be worse. At least in Ireland you can work your way up to your best offer and may never get there if other bidders drop out. We could live in Scotland where sealed bids are common. When bidding on a house there, you have to submit your best and final offer to the agent and wait to see who comes out on top.

This puts pressure on you to offer as much as you can afford – even though it might be far in excess of what the other bidders end up offering.

I remember watching an episode of Location, Location, Location where the buyers – aided and abetted by Phil and Kirsty – bid on a house using this process. Their offer turned out to be several hundred thousand pounds more than the closest bidder.

Ouch.

But it could also be better. Last year Trinity College Dublin professor Brian Lucey put forward an argument that Nama should sell all its properties on online auction site eBay. Could the same work in the private treaty market?

Maybe it’s a bit fanciful, but bringing an element of the auction room to the process, and being able to watch the bidding process for a property in real time, is definitely attractive for buyers like us.

If there are multiple bidders for a property – as is often the case now – then the price will still shoot up, but at least the eventual winner can take comfort from the veracity of the other bidders.

In the absence of this transparency, however, the best approach might be to hone our negotiation skills. So I asked some buyers’ agents, who act on behalf of property buyers and assume the burden of negotiation for them, for some advice on how to get the best deal.

For Jamie Moran, it’s an Irish characteristic to listen to the agent that is marketing the property. But it can be a mistake.

“We do believe the estate agent more than we should,” he says, urging people to remember that estate agents act solely on behalf of the vendor.

Nonetheless, he advises building up a rapport with the agent to try and get a feel for why the house is on the market.

“It’s about understanding as much as possible about the seller. Is it a forced sale, is it an executor sale, is it going to auction?”

In this volatile market, Karen Mulvaney of The Buyers’ Agent says some people can be inclined to sit on the fence, and wait to see what happens with a house, rather than putting in a bid.

“There can be lots of interest but no-one is brave enough to put the first bid on,” she says, adding that she disagrees with such an approach.

“You need to put an offer forward,” she advises, noting that while the bid may not buy you the property, you will be kept in the loop and the vendor may come back with an acceptable counter-offer. Otherwise, the house might go sale agreed before you even realise.

Put your bid in writing is another piece of advice, while in this market, asserting that you are a cash buyer or have financing in place, can distinguish you from other bidders, even if they bid more than you.

And what of that old trick of a house always having a bid on it?

It sometimes seems like a house never comes on the market without having a bid on it and the cynical could suggest that a fake bid marginally below the asking price puts a nice floor on the bidding process.

However, in our experience at least, that isn’t always the case and we have come across a number of properties that are languishing on the market with no offers.

When there’s no bid on, the advice from Mulvaney is to “bid early and bid low”.

“You’ve nothing to lose by testing the market at below asking price,” agrees Moran, although both agents say that it’s more likely you will come up against other bidders, given the dearth of supply in popular areas.

In this regard, if you do find yourself in a bidding war, Mulvaney’s advice is to keep a check on any increase in your offer, as the days of €5,000-€10,000 hikes are gone.

“You need to make sure that you don’t jump up in giant bids,” she says, adding that other bidders will likely take your lead and follow suit in small increments.

Indeed, if you check the property price register you will see houses sold for awkward figures such as €403,000 or €522,600.