False bidding is a practice that is still prevalent in the industry and buyers have a real fear of this; however, there are measures that buyers can take to ensure that they are not bidding against themselves.
For instance, when the buyer is advised that there is an offer in place, usually at the viewing stage, it is sensible for the buyer to ask the estate agent the following questions and request a response, in writing:
1. When was that purported offer made?
If it was not made within the last two to three weeks, disregard it. The seller may or may not realise it but the other bidder may well have moved on to another property by now.
2. How much is the offer for?
This is important but the buyer should only be influenced by it if it can be verified.
3. Whether in fact the other offer is unconditional?
If the other offer is conditional upon any event i.e. sale of existing home or obtaining finance, the buyer is advised to disregard it.
4. What is the status of that offer?
If a genuine offer was made, the owner’s response will be very telling. If the offer was accepted, the estate agent should not be accepting further bids at this time. If the offer was rejected, buyers should ask why. It might not necessarily have been due to the amount, perhaps the bidders could not complete in time or perhaps the other bidders attached onerous terms and conditions to any future purchase that were unacceptable to the seller. If, on the other hand the offer is under consideration, the buyer knows that the offer figure falls within the likely price range at which the owner is willing to sell.
5. Ask the estate agent to confirm all his response to the above questions in writing.
If there is a genuine, unconditional offer, the estate agent should have no difficulty in confirming all of these facts in an email. If that email is not forthcoming for any reason, the buyer can simply commit all the information to an email and send it to the estate agent. Confirmation from the estate agent merely requires a simple one word email ‘confirmed’. Once the buyer has this confirmation, they can take it that the other offer is genuinely as presented. Of course, if the buyer finds that they are deal with an particularly obtuse agent who refuses to give confirmation of the facts above, the buyer can take it that they are not confirmed and the choice at that stage is either to walk away from the property (and that estate agent) or disregard the competing bid and act as if there was no offer on the property, which is most likely the case.
What is generally happen here is a bit of blustering, maybe some backtracking and an explanation from the estate agent that at the other offer is, in fact, conditional upon that party selling their existing home in Tipperary or securing finance or some other obscure event in the future that may never happen. What this effectively means is that there is no valid offer in place (it may take a while to get to this point!).
The power of committing this type of information to paper (or electronic form) is very real. Estate agents are licensed and in most cases (self) regulated professionals. They are engaged by the seller and must represent the sellers at all times. Their only duty towards the buyer is to act in an ethical manner and answer any questions truthfully. This makes it essential for buyers to know the right questions to ask. While this is difficult to enforce if the communication is verbal, it is very straight forward to enforce when the communication is written. For this reason, no professional will compromise the truth in written form.
If there is a valid or verifiable competing offer that is conditional, buyers can made a lower, unconditional bid for the property but should make it subject to a strict time limit. Where buyers are faced with an unconditional, competing bid, they must objectively decide whether the property is worth pursuing or competing for. If it is worth pursuing, buyers should determine up to what price level they are prepared to compete (a cut off price); if not, the best advice is to walk away and look for another property. This is a buyers market after all!
Carol Tallon, author of the recently published Irish Property Buyers Handbook 2011 and Managing Director of Buyers Broker Ltd.