Many people think you should overbid by 10%, but the truth is there are no maxims here!
How much you should bid on a property depends on a lot of factors. I will cover the most important ones:
The asking price does not exist
This is something I usually say to new seekers at my place in Haarlem. The asking price says absolutely nothing about what that property is worth and what we should be bidding. I see homes listed for sale at €325,000 that I know in advance are worth at least €350,000. The broker then prices this property extremely attractively to attract lots of people and hopes to get big outliers in the bids by doing so.
A buying agent can see and determine for you how much the asking price differs from the market value. This is because he has access to a database of all recently sold homes in the immediate area.
The location
Is it a rural property in Zeeland where you have almost no competition, or is it a property in Haarlem, where the broker has 70 viewings after 2 days? The bidding strategy and the required bidding budget varies greatly from region to region.
How long has the property been for sale
When a property comes up for sale, the first 2 weeks are crucial. That’s when most people come to look and if the interest is high enough, people start bidding against each other. If a property has been for sale longer, the number of viewers is often very down. You then often do not have to pay the asking price anymore or can even pay less than the vague price.
The competition
How busy is it, how many seekers are interested and want to bid, how many bids are already there, how many viewings are still scheduled, etc. These are crucial factors from which I am going to estimate how much we should bid extra on top of the asking price.
The ceiling
What would be the maximum value of this property in the eyes of some appraisers? So what is the maximum assessed value of this property. Again, this is a question your buying agent can answer. If a property really cannot be valued higher than €410,000, then you should not pay this for it either. Anything above this amount, you’re not going to get a loan from a bank.
‘OK help, so….what do I need to do now to bid successfully?’
Successful bidding with FlorisVK:
- Rule #1: Invest in a good buying agent. This one ALWAYS pays for itself.
- Rule 2: Don’t look at the asking price, but look at what amount similar homes have recently sold for.
- Rule 3: Make sure you know how much competition you have and how many bids are now and/or expected. Is there 1 more person who will bid, or are there 10? Put yourself in the minds of your competitors and think about how much more you have to put down to stay ahead of them.
- Rule 4: Ask the selling broker what he thinks the maximum appraisal value is. This is a very handy trick, because it also tells you the maximum of the bidding range.
- Rule 5: When strongly preferred, do not do it yourself! So again: get that buying agent!