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Old 31.10.2012, 10:11
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Bidding on a house. What is the trend?

Hello all,

Can anyone of you help us about giving an idea if you are a professional house seller or already had an experience with buying/selling a house by bidding.

We are interested in a house to buy it, and as there are other 10 people interested as well, it will be sold by bidding.

Let me tell the procedure:
There has been already 1st round last week that everybody sent to the selling company their prices.

7 of the 11 sent the advertised price,
4 of the 11 sent 10.000 more than the advertised price.

Now the 2nd round will be applied next week. We all have to send our new prices to the selling company and whoever gives the highest price will buy the house..

So, the question in our minds are:

What will be the prices that people will send?
What is the trend in such a situation?
Do people increase their first price by 100s, 1000s, 10.000s or 100.000s?

Thanks in advance for helping. It will be very appreciated!

Regards..
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Old 31.10.2012, 10:13
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Re: Bidding on a house. What is the trend?

When I sold my last house, there were 4 parties bidding on the property.

One bid below the asking price, one bid the asking price and two bid over the asking price.

The offer we accepted was 100k over the asking price.
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Old 31.10.2012, 10:21
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Re: Bidding on a house. What is the trend?

I would check with your bank, esp. if you are planning on getting a mortgage. They have tightened up lending a bit, esp. in hot property market areas, and may not finance the purchase if they think it is too overvalued. The bank can also give you an appraisal of what they think it is worth, if you are planning to bid over the asking price.
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Old 31.10.2012, 10:26
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Re: Bidding on a house. What is the trend?

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I would check with your bank, esp. if you are planning on getting a mortgage. They have tightened up lending a bit, esp. in hot property market areas, and may not finance the purchase if they think it is too overvalued. The bank can also give you an appraisal of what they think it is worth, if you are planning to bid over the asking price.
Yes, we will go for mortgage, and will have a 2nd talk with the bank soon. This is our plan also asking them the same qustion. We thought they may have some experince on the bidding prices.. And they were valueing the house 300k less then the advertised price.. I dont know if this is the trick that all the banks apply.. ???
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Old 31.10.2012, 10:28
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Re: Bidding on a house. What is the trend?

You'll probably only find out from the bank what they value the property at. Going beyond that unless you bring a large amount yourself will result in a No from them.

The amount loaned must be less than their value of the house. And bear in mind that they may go to auction to shift the house rather than the open market (should there be a need to foreclose).
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Old 31.10.2012, 10:30
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Re: Bidding on a house. What is the trend?

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You'll probably only find out from the bank what they value the property at. Going beyond that unless you bring a large amount yourself will result in a No from them.

The amount loaned must be less than their value of the house. And bear in mind that they may go to auction to shift the house rather than the open market (should there be a need to foreclose).
I think I could not get what you mean in your last sentence..
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Old 31.10.2012, 10:34
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Re: Bidding on a house. What is the trend?

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I think I could not get what you mean in your last sentence..
You will have one view of the market value of the property.

The bank has another one. They have little interest to go through a period trying to sell a house, showing people around, etc - should it be repossessed. So their valuation to cover the risk of the loan will be lower than the price of the house (that's my expectation).
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Old 31.10.2012, 10:40
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Re: Bidding on a house. What is the trend?

If you can predict what other people will do, you are better off betting on the stock exchange or play large stakes "Poker" than buying property. You can predict what a population will do, but never an individual. With just 4 of you in the race, you would need to know precisely who the other 3 people to anticipate their next move.

The First four pieces of advice I could offer would be:

a) Seperate yourself from the emotion
b) Know your mortgage limits
c) Understand the true value potential of the property
d) Prepare yourself to walk away

By this, I mean step back from this for a second and imagine you were giving someone else the advice. If you feel pressured to 'need' to get the house you are going to bid more than you need to.
Unfortunately, there is always the real possibility that someone IS emotional and will outbid you anyway.

However a fool and his money are soon parted.

As far as drawing an 'emotional' line goes, try to imagine what the place maybe worth in a few years and keep that price in mind.
Consequently you will not make any money, but you satisfied the emotion which only you can justify.

Knowing your limits is important if you intend to pay more than it's worth emotionally. If you borrow more than you can handle then you are in a critical situation if you are ever forced to sell.

So my advice is to simply ask yourself how much you really want this place, what you think it's worth (now and in the long run), and the maximum value you can sustainably pay.
Give that number, sit back and read the newspaper with a cup of tea and hope for the best knowing you gave it your best shot.
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Old 31.10.2012, 10:41
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Re: Bidding on a house. What is the trend?

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You will have one view of the market value of the property.

The bank has another one. They have little interest to go through a period trying to sell a house, showing people around, etc - should it be repossessed. So their valuation to cover the risk of the loan will be lower than the price of the house (that's my expectation).
Ok, yes, somehow understandable that the banks are valuing the house less the the advertised price.

And what is it about auction you mentioned? Do you mean the owner can change his mind and go for an auction??
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Old 31.10.2012, 10:47
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Re: Bidding on a house. What is the trend?

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Ok, yes, somehow understandable that the banks are valuing the house less the the advertised price.

And what is it about auction you mentioned? Do you mean the owner can change his mind and go for an auction??
You can buy repossessed properties from auctions in Switzerland, yes. My neighbour did this when the previous owner went bankrupt.

This is completely different from what you're seeing which is the open market functioning normally.

House auctions are not the norm here.
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Old 31.10.2012, 10:48
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Re: Bidding on a house. What is the trend?

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Yes, we will go for mortgage, and will have a 2nd talk with the bank soon. This is our plan also asking them the same qustion. We thought they may have some experince on the bidding prices.. And they were valueing the house 300k less then the advertised price.. I dont know if this is the trick that all the banks apply.. ???
You are prepared to pay CHF300k over what the bank is valueing the house at? That's 8 years of rent at CHF3200 or so!

Bid what you think the property is worth, and if you haven't got CHF300k to spare then bid what the bank is willing to lend you or lower!

I don't know the second round rules, but I think it would be smart to bid less in the second round than in the first round! Cos people are more likely to bid their fair value on the second round.

These multiple round sealed-bid auctions are stupid and are just used to extract more money from fools than anything else!
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Old 31.10.2012, 10:49
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Re: Bidding on a house. What is the trend?

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If you can predict what other people will do, you are better off betting on the stock exchange or play large stakes "Poker" than buying property. You can predict what a population will do, but never an individual. With just 4 of you in the race, you would need to know precisely who the other 3 people to anticipate their next move.

The First four pieces of advice I could offer would be:

a) Seperate yourself from the emotion
b) Know your mortgage limits
c) Understand the true value potential of the property
d) Prepare yourself to walk away

By this, I mean step back from this for a second and imagine you were giving someone else the advice. If you feel pressured to 'need' to get the house you are going to bid more than you need to.
Unfortunately, there is always the real possibility that someone IS emotional and will outbid you anyway.

However a fool and his money are soon parted.

As far as drawing an 'emotional' line goes, try to imagine what the place maybe worth in a few years and keep that price in mind.
Consequently you will not make any money, but you satisfied the emotion which only you can justify.

Knowing your limits is important if you intend to pay more than it's worth emotionally. If you borrow more than you can handle then you are in a critical situation if you are ever forced to sell.

So my advice is to simply ask yourself how much you really want this place, what you think it's worth (now and in the long run), and the maximum value you can sustainably pay.
Give that number, sit back and read the newspaper with a cup of tea and hope for the best knowing you gave it your best shot.
Thanks, that's very true what you wrote.

However, we really would like to learn the trend how much people increase their first price. If it is only 100s, it would be a pitty one increases by 100k and gets the house..

But, as you say, nobody can guess the final offers, but maybe one can tell the real life experience, how much people were increasing over the advertised price. Or even better all the individuals' offers trend.

Thanks..
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Old 31.10.2012, 11:00
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Re: Bidding on a house. What is the trend?

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However, we really would like to learn the trend how much people increase their first price. If it is only 100s, it would be a pitty one increases by 100k and gets the house..
Why do you want to know this exactly? So you can outbid them??
If you have money to throw away I can understand. But if you want to pay a fair price then you shouldn't even think about what the others will do. Simply bid what you think the property is worth, or in fact bid lower than you think the property is worth! This is called Bid Shading in game theory!

Winning at all costs is a BAD strategy that has a negative expected value. It doesn't matter if your bid doesn't win the house, because the winner if they overpay will eventually sell for less than what they bought it for or carry forward a known negative equity as they realise what the real market value is.

Last edited by The_Love_Doctor; 31.10.2012 at 12:15. Reason: worth not worse. doh!
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Old 31.10.2012, 11:01
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Re: Bidding on a house. What is the trend?

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You are prepared to pay CHF300k over what the bank is valueing the house at? That's 8 years of rent at CHF3200 or so!

Bid what you think the property is worth, and if you haven't got CHF300k to spare then bid what the bank is willing to lend you or lower!

I don't know the second round rules, but I think it would be smart to bid less in the second round than in the first round! Cos people are more likely to bid their fair value on the second round.

These multiple round sealed-bid auctions are stupid and are just used to extract more money from fools than anything else!
As we talked above, I guess this is the banks' behaviour that they value the house less then the advertised price because they calculate everything accordingly when they give mortgage. If one wants to sell the house after a while, he will advertise the house with at least the same price as the first one (or even more, of course if the area is not decreasing the value in general or something else bad happens).

What I understand is the whole thing is like playing poker, you have to take risks, and close your eyes at some point and go for it.. Which is something new and strange to me as the house buying process is completely different in my country..
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Old 31.10.2012, 11:04
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Re: Bidding on a house. What is the trend?

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Why do you want to know this exactly? So you can outbid them??
If you have money to throw away I can understand. But if you want to pay a fair price then you shouldn't even think about what the others will do. Simply bid what you think the property is worth, or in fact bid lower than you think the property is worse! This is called Bid Shading in game theory!

Winning at all costs is a BAD strategy that has a negative expected value. It doesn't matter if your bid doesn't win the house, because the winner if they overpay will eventually sell for less than what they bought it for or carry forward a known negative equity as they realise what the real market value is.
No, we don't have money to throw away, that's why we want to learn the trend!..
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Old 31.10.2012, 11:06
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Re: Bidding on a house. What is the trend?

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However, we really would like to learn the trend how much people increase their first price. If it is only 100s, it would be a pitty one increases by 100k and gets the house..
To be honest with you, I've only been in a similar situation to this once before.... and I lost.... but I was happy.

The problem in Switzerland is people seem to have a limitless amount of money, so to me it's not worth worrying about the increments the final bid will be. My point before was exactly that. Don't worry about the limit, just give it your best shot.

As the buyer will be decided on this round, I think you can safely assume that people will be putting the best offer forward.

People quarral over 100's at an open auction where the bid remains open.
1000's is more realistic.
If anyone is offering in the 100,000's....... let the idiot have the place.

Again. Keep your focus on your perception of value.
Disregard what 'others think'.
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Old 31.10.2012, 11:07
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Re: Bidding on a house. What is the trend?

When I bought a concept/newbuild, the bank valued it at "around what it was being sold at" - this was back in 2005 when I worked for the lender so

a) things have changed
b) they might have been more relaxed with direct access to my salary!

In the end, a house is worth what someone will pay for it. The bank will simply transfer part of the risk to you and need more of your capital when entering the contract with you.

And of course you get the paper to the bank afterwards which states that their risk is covered (Schuldbrief, carta ipotecaria, etc)
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Old 31.10.2012, 11:08
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Re: Bidding on a house. What is the trend?

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As we talked above, I guess this is the banks' behaviour that they value the house less then the advertised price because they calculate everything accordingly when they give mortgage. If one want to sell the house after a while, he will advertise the house with at least the same price as the first one (or even more, of course if the area is not decreasing the value in general or something else bad happens).

What I understand is the whole thing is like playing poker, you have to take risks, and close your eyes at some point and go for it.. Which is something new and strange to me as the house buying process is completely different in my country..
This is ludicrous! It's not banks behaviour, it's the banks strategy to limit downside risk and transfer the majority of the risk to you!!! Why on earth would you want to take on more risk than even the bank is prepared to pass on to you!

The whole thing is absolutely not like playing poker! It's a sealed-bid auction where the highest bidder wins. You don't close your eyes and just go for it! And you certainly should not do that if it's something new and strange to you!
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Old 31.10.2012, 11:22
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Re: Bidding on a house. What is the trend?

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The whole thing is absolutely not like playing poker! It's a sealed-bid auction where the highest bidder wins. You don't close your eyes and just go for it! And you certainly should not do that if it's something new and strange to you!
The Love Doctor is right.

It's not like you get to collect the money from the other bidders.

The bank will only lend you what they know they can recover in a 'fire sale' should you default on the loan

Which leaves you carrying the risk.


You are however right that this is the opportunity to sit down, do the math, close your eyes, and put your best offer forward.

But what everyone is trying to say is....... use your head, not your heart.



Fortunately you are in the top 4. You know that everyone has probably pushed over the value to get the house in the first place.

If you want my thoughts on this, everyone pushed their limits already, so the jump to win will be in the few thousands to 10 thousand....... more than this, and the winner is a fool and I hope he's paying cash.



If it makes you feel better, I'm in a similar situation to you. One place I lost on a hidden bid like you are in now, but I'm happy to know that the final offer was just foolish.
The other place I just lost because I was too slow.

........ but there is always the next one. So don't get too hung up on 'one' place. Keep your head screwed on and you won't lose.
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Old 31.10.2012, 11:25
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Re: Bidding on a house. What is the trend?

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This is ludicrous! It's not banks behaviour, it's the banks strategy to limit downside risk and transfer the majority of the risk to you!!! Why on earth would you want to take on more risk than even the bank is prepared to pass on to you!

The whole thing is absolutely not like playing poker! It's a sealed-bid auction where the highest bidder wins. You don't close your eyes and just go for it! And you certainly should not do that if it's something new and strange to you!
Well, you call it strategy, I call it behaviour! And I have to go to bank because I have to take mortgage if this is answering your question!

And I will certainly do that even if it is new and strange to me.. I'm an open person to changes and taking risks!
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