# Bidding Process (fake bids)



## jim (13 Sep 2016)

Hi,

How does one validate a bid on a house, as communicated by an Estate Agent?

Whilst Estate Agents are required to operate within the law and their P&P's, is it not possible that an Estate Agent can invent a bid or take a bid from a phantom bidder? And is it not impossible to validate such potential phantom bids therefore leading to fake bidding wars.

What comfort can a potential buyer have that this is not happening?

Thanks,
Jim


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## Boyd (13 Sep 2016)

Offer what you think the house is worth and how much you want to pay for it. EA waffle is just noise IMO, it can't be validated.


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## Brendan Burgess (13 Sep 2016)

Hi jim 

So what if they make phantom bids? 

A seller wants €200k for a house. 

You have bid €180k. They lie to you and tell you that they have a bid of €190k. 

You can walk away or offer more. 

It's the same in many businesses - the buyer doesn't really know what the seller will accept, and the seller doesn't really know how much the buyer is prepared to pay. 

Is it any different from the auctioneer telling you that they will accept €200k and that your bid of €180k is not acceptable? 

Brendan


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## jim (13 Sep 2016)

Thanks Brendan and Username that - that is what I thought.

if you make an offer and subsequently think that it was too high, can you then reduce your offer or is this unacceptable? or is it just that you run the risk of the house been sold to another bidder?


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## Steven Barrett (13 Sep 2016)

Brendan Burgess said:


> Hi jim
> 
> So what if they make phantom bids?
> 
> ...




You're leaving out how emotions can lead to irrational behaviour when buying a house. With such a short supply of homes at present, people are looking at 50-60 houses and losing out on loads of bids for homes. An EA can exploit that to raise the price. 

I was talking to a client of mine who bought recently and he said the EA would never reply to his emails. He would always phone back. Nothing in writing...


Steven
www.bluewaterfp.ie


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## mf1 (13 Sep 2016)

"if you make an offer and subsequently think that it was too high, can you then reduce your offer or is this unacceptable? or is it just that you run the risk of the house been sold to another bidder?"

You can do whatever you like up to the day you sign contracts and pay your deposit!

You really are overthinking this. By all means put in bids and then withdraw bids and then up bids and the lower bids................and don't be a bit surprised when the Estate Agent stops returning your calls because they've sold the property to someone who is serious about buying.

mf


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## jpd (13 Sep 2016)

And, don't forget, the estate agent's main priority is to get the highest possible price for HIS client, the seller.


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## Gordon Gekko (13 Sep 2016)

Brendan Burgess said:


> Hi jim
> 
> So what if they make phantom bids?
> 
> ...



But what if the seller hoprd for €200k, you're best bid at €180k and there's a fake bid of €190k? It's a huge issue.


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## Brendan Burgess (13 Sep 2016)

It's not a huge issue at all. It's frustrating, but what is the difference between that and the auctioneer telling you that they won't accept anything less than €200k?


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## justo (21 Feb 2017)

Brendan Burgess said:


> It's not a huge issue at all. It's frustrating, but what is the difference between that and the auctioneer telling you that they won't accept anything less than €200k?



I disagree; I think it is a very big issue in the Irish property market. The price of a house should be driven by the market. An auctioneer would be wasting their time saying 'they won't accept anything less than €200k' if nobody is willing to spend that amount on a particular house. Estate agents are (again) contributing to the rapid increase in the price of houses by virtue of the fact that they are not audited or held to account on offers made on a house. 

When bidding on a house, you might be bidding against a phantom bidder (i.e. the estate agent) or someone without mortgage approval or someone in a long chain. This should be regulated more to level the playing field and only pit legitimate bids against each other. 

Surely it is fraudulent for estate agents to prop up the price of a house based on fake interest?


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## Leo (21 Feb 2017)

justo said:


> An auctioneer would be wasting their time saying 'they won't accept anything less than €200k' if nobody is willing to spend that amount on a particular house.



Exactly, they would indeed be wasting their time, and they know it. You can be pretty sure that any time there is am off the wall valuation attached to a property, it's the vendor setting it, not the EA.  EAs only get paid after the house is sold, it's actually in their interest to close quickly. Spending weeks and months advertising, answering queries, and doing multiple viewings costs them money, so the longer they sit on a house, the more their costs are eating into the margin. After all, every extra thousand added to the price only yields the EA ~€10-25. How much work are they going to put in for that?



justo said:


> Surely it is fraudulent for estate agents to prop up the price of a house based on fake interest?



They are being paid to get the maximum possible for each house. It is only the person who buys it who sets the final price.


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## justo (21 Feb 2017)

Leo - EAs should not be given the scope to falsely increase the amount of money a purchaser thinks they have to spend to buy a particular house. The person who buys the house sets the price because they think that the market is dictating that price. If EAs are making phantom bids on houses, the purchaser has been mislead. They don't have to sit on it for weeks - just a few phone calls back and forth for a few days. 

_EAs are being paid the get the maximum possible for each house._ This does not mean they should be permitted to act in an underhanded way. This is not the same as other business practices which seek to maximise profit; the way the property market is regulated has long-term knock on effects for the individual and society. Can you name another sector that single-handedly pushed the country into recession?

There are many factors that cause the market to overheat. This is one contributing factor. It should be better regulated.


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## Jim2007 (21 Feb 2017)

justo said:


> This should be regulated more to level the playing field and only pit legitimate bids against each other.



How would you even begin to do something like that and who do you expect will pay for it?  And in reality the EA has to be careful about what he says because it is not uncommon for:
- The vendor send in friends to enquire about the house to make sure the EA is getting the best deal for them
- The potential buyer does the same
- Nosy neighbours etc... do the same
- And then there just random chancers that turn up as well
EAs only win when the house is sold and most that have been around for a while realise that with so many players involved telling lies is not a great strategy.



justo said:


> Surely it is fraudulent for estate agents to prop up the price of a house based on fake interest?



We followed that logic then everyone that every tried to get a good price for what they are selling would be in the same boat!  EA's are there to get the best price for the vendor, it is up to you as an adult to make sure the deal is good for you.


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## Leo (21 Feb 2017)

justo said:


> Leo - EAs should not be given the scope to falsely increase the amount of money a purchaser thinks they have to spend to buy a particular house. The person who buys the house sets the price because they think that the market is dictating that price. If EAs are making phantom bids on houses, the purchaser has been mislead. They don't have to sit on it for weeks - just a few phone calls back and forth for a few days.



Purchasers need to do a better job at protecting their own interests in what is a very significant transaction, and doing the research required to ensure they're not paying more than they should for a property. They should have no expectation that an agent of the vendor will act in anyone's interest but the vendor.

How would you propose the regulation would work and how much would it cost? Who would vet that any bid received is 100% genuine without introducing masses of red tape and data protection issues?



justo said:


> Surely it is fraudulent for estate agents to prop up the price of a house based on fake interest?



It's a free market, those selling property can set the asking price at any point they want. To suggest restrictions on that would be a huge interference in the rights of property owners.


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## cremeegg (21 Feb 2017)

Leo said:


> It's a free market, those selling property can set the asking price at any point they want. To suggest restrictions on that would be a huge interference in the rights of property owners.



It could well happen.

I never thought that the law would get involved in stopping landlords changing the rent more than every 2 years.

I still find it hard to believe that rents cannot be increased more than 4% p.a.

Whats to stop a law restricting sellers from asking more than some arbitrary limit. Its a mad world.


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## justo (22 Feb 2017)

I didn't suggest price restrictions for vendors when putting their house on the market. They can ask what ever price they want. My concern is with EAs who can artificially inflate the amount spent by introducing fake bids. 

For example: 

A house goes on the market for 500k which is a reasonable price relative to other houses on the market. 
After a month, there are no offers on the house. 
As a purchaser, the upper limit on my budget is 550K
I view the house and offer 475k. 

The next day the EA tells me there is another bid in of 485k and asks if I want to increase my bid.
I do, and the EA tells me the other bidder increased their bid, and asks if I want to increase my bid again, etc. 

In the end I purchase the house for 525k. 

The EA is happy because they have a good result for the vendor and a better kick back from the transaction. 
The vendor is happy to get a good price but then goes to buy their next house and feel they are being duped by the EA when making bids. 
As an adult I am satisfied that I have spent an affordable amount of money of the house. 
I'm happy to have the house but feel very frustrated that while entering into the biggest financial commitment of my life, I was being duped by the EA because I sense that there was no other bidder involved. 

Ideally the EA should be saying to the vendor, 'there is only one offer of 475K. You were seeking 500k, I suggest you split the difference and sell for around 487K or take the house off the market'. 

I want EAs to be regulated, not vendors. Inflating prices has a short term benefit for vendors but a long term negative effect on the property market as it falsely increases the cost of purchasing. As mentioned, vendors become purchasers and so everyone ends up paying more in situations like this. 

There are many ways to introduce safeguards. Frankly, to ask questions like 'who would pay for this?' is just naysaying without thinking the problem through. One suggestion on how to facilitate this would be to use a Blockchain methodology where transactions are anonymously recorded based on a registration number given to purchasers and allocated at the time of mortgage approval. Then anyone can see what bids are being made and bid accordingly. This does not solve all the problems, but it is a good step in the right direction. It certainly beats the current model where EAs accept bids and inform other bidders that they have been outbid by text, voicemail etc as recently occurred with a friend bidding on a house. 

Another thought would be to introduce a code of conduct for EAs which requires them to record all bids made, for audit purposes. Admittedly, there is only so much that can be done to check the credentials of bids. What I am specifically talking about is the practice of EAs making up false bids from non-existent bidders. 

On a related note, EAs could become obsolete. In many markets, the 'middle man' has been pushed out - think Airbnb, eBay, Uber, etc.


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## Leo (22 Feb 2017)

cremeegg said:


> I never thought that the law would get involved in stopping landlords changing the rent more than every 2 years.



Very true, and I wouldn't be surprised if this ends up before the courts.


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## Leo (22 Feb 2017)

justo said:


> ...A house goes on the market for 500k...I view the house and offer 475k...In the end I purchase the house for 525k...
> 
> As an adult I am satisfied that I have spent an affordable amount of money of the house.
> I'm happy to have the house but feel very frustrated that while entering into the biggest financial commitment of my life, I was being duped by the EA because I sense that there was no other bidder involved.



If you felt you were being duped, I don't understand why you went along with it? Why didn't you say 500k or some other intermediate figure was your final offer? If the EA said fine and walked away, you know they're happy they'll get more. I did it myself when I purchased, and I know many others who have done the same. Not all got the property, but in a few cases the EA came back to them stating the higher bidder had withdrawn and they were now the highest bidder. So all were happy with the prices paid and the vendors were happy they were getting the best price on offer. If you start nannying buyers like this, where does it end? People get vastly different deals buying the same cars, and many other commodities. The onus is on the purchaser to ensure they're getting a good deal, expecting the state to deal with it just ends up in a very expensive mess where everyone loses.




justo said:


> Ideally the EA should be saying to the vendor, 'there is only one offer of 475K. You were seeking 500k, I suggest you split the difference and sell for around 487K or take the house off the market'.



Great result for the purchaser, but far from ideal for the vendor, who after all they are paying the EA's fees. The vendor employs the EA to get the best possible price for the property, and nothing less.




justo said:


> One suggestion on how to facilitate this would be to use a Blockchain methodology where transactions are anonymously recorded based on a registration number given to purchasers and allocated at the time of mortgage approval. Then anyone can see what bids are being made and bid accordingly.



Who pays the millions this would cost to implement and maintain? Add 5k a fee to each purchaser? And how do you stop EA's entering phantom bids? What about cash buyers and those who don't have approvals finalised yet?


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## cremeegg (22 Feb 2017)

Its not all one way for EAs. Here is my experience, not hypothetical my actual experience.

I saw a property advertised for €130k, there were some issues, but if those issues could be resolved, that was a great price. I offered €125k, EA came back I have another bid of €130k, I went €135k, and so on. I realised that what ever value there was in the property was all in the price even with the issues resolved at about €150. I kept going and the other bidder, wether real or not I don't know kept going. I decided that I would see this out to the end, finally my offer was accepted at €175k. That was a Monday, Tuesday morning I said to myself, well Cremeegg you won that bidding war, but is €175K a sensible price. I thought about it, talked to a few people and on Friday morning I rang the EA, spoke to his secretary and said that I was not going ahead with the purchase.

Its not all one way traffic


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## justo (22 Feb 2017)

Thanks Leo - I'm not really getting anything from our interaction. I've already responded to all of the issues you just raised.


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## Leo (22 Feb 2017)

No prob justo, I'm just cynical that regulation of that type could ever work here in everyone's benefit. Any time the government interfere, it just tends to cost everyone more.


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## justo (22 Feb 2017)

Fair enough Leo - Interesting to see if it ever gains traction.


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## gnf_ireland (22 Feb 2017)

justo said:


> For example:
> 
> A house goes on the market for 500k which is a reasonable price relative to other houses on the market.
> After a month, there are no offers on the house.
> ...



Ok but in this same scenario what happens if I say no, I don't want to increase the bid. The vendor loses out on a 475k sale and the EA must put in more effort to sell the house.

For every story one way, there are stories the other. My brother was bidding on a house a while back and was convinced the EA was creating phantom bids. In the end he walked away and say he would not go any higher. The house went sale agreed shortly afterwards as the other bids were actually real.

Every purchaser needs to educate themselves on how much money the house is worth and bid accordingly. They also need to have an upper limit on the house and not go above that without serious consideration.


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## gnf_ireland (22 Feb 2017)

justo said:


> I want EAs to be regulated, not vendors.


There is another alternative here also. We could move to the Scottish model where all bids are unopened until the close date and all bids must be submitted via a solicitor who confirms funds are available etc. Each and every bid is final best offer, and on the close date the seller decides who gets the house, if anyone.

This works in the favour of the seller (normally) as everyone has to put their final best offer on the table initially. There is no room for bids going back and forth, but if you are putting a bid on a house you believe will sell for 525k (another example), you need to pretty much put 525k on the table or realise its unlikely you will get the house. That said, if you believe the house is only worth 500k, you can still put 525k on the table, but you know you are probably paying 25k over the odds.

This would change the process dramatically, but there are downsides as well. Everyone needs to be careful for what they wish for.


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## gnf_ireland (22 Feb 2017)

Leo said:


> Why didn't you say 500k or some other intermediate figure was your final offer? If the EA said fine and walked away, you know they're happy they'll get more. I did it myself when I purchased, and I know many others who have done the same. Not all got the property, but in a few cases the EA came back to them stating the higher bidder had withdrawn and they were now the highest bidder.



Or drop the bid in this case to say 10k lower than the previous high bid and let the vendors then decide. If a bidding war has just occurred and you lost, and then suddenly you won again, I would definitely drop the offer. The worst they can say is no.
Simple answer is - I have an offer in on another property after I lost that bid so I need an answer from the vendor relatively quickly. Final offer is x and they can say yes or no. The other bidder has disappeared, so its accept or back to viewings again ! You may win or lose, but at least you might not feel duped by the EA.


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## comer911 (23 Feb 2017)

Interesting thread and one that sheds light on a process (buying and selling property) that is not well regulated and not well policed in Ireland. Is there not a strong case for EA's to only represent a single client in any transaction.  1 EA represents the seller and other EA's represent each individual prospective buyer, each paying their own EA fees. Would this not remove the likely hood of any conflict of interest or dishonest practices.


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## cremeegg (23 Feb 2017)

comer911 said:


> Is there not a strong case for EA's to only represent a single client in any transaction.



This is an excellent suggestion. There should be legislation to allow this brought in. It seems to me that it would resolve most of the problems.


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## Leo (23 Feb 2017)

cremeegg said:


> This is an excellent suggestion. There should be legislation to allow this brought in. It seems to me that it would resolve most of the problems.



No need for any more legislation, that already happens. Purchasers are free to hire an agent to advise them and negotiate on their behalf, some offer full service and will source property based on your criteria for your review and arrange surveys and inspections as required.

It happens a lot more in commercial property where purchasers are prepared to pay for this service. Most private purchasers would prefer to spend the money (€5k and up) elsewhere though, especially as this fee would have to come out of cash and that might impact on hitting the deposit criteria.


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## newtothis (24 Feb 2017)

comer911 said:


> Interesting thread and one that sheds light on a process (buying and selling property) that is not well regulated and not well policed in Ireland. Is there not a strong case for EA's to only represent a single client in any transaction.  1 EA represents the seller and other EA's represent each individual prospective buyer, each paying their own EA fees. Would this not remove the likely hood of any conflict of interest or dishonest practices.



What I'm about to say will be seen by some as a completely unfair generalisation, buy hey, it's just my observation.

I've spent quite a few years in business now, and most business relationships, whether with customers or suppliers are pretty straightforward. There may be some negotiation around price or other details, but generally things are straightforward, reasonably transparent and honest. However, whenever I've had any dealings with property I've gone into it with the feeling I was entering a nest of vipers, and have generally come out of it with the feeling confirmed. As an industry it just seems to be full of sharp practice and attempts to get one over on the poor mugs with cash and something to buy.

I know there are honourable  people in the property business (I've met a few), and it's completely unfair to castigate an entire industry, but it can't just be me with this view can it?


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## comer911 (27 Feb 2017)

Leo said:


> No need for any more legislation, that already happens. Purchasers are free to hire an agent to advise them and negotiate on their behalf, some offer full service and will source property based on your criteria for your review and arrange surveys and inspections as required.


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## comer911 (27 Feb 2017)

Agreed, purchasers are able to hire agents to assist in the process, but maybe it is necessary to legislate that EA's cannot represent both seller and buyer in any deal. As for the additional costs to the buyer, I suggest buyers would be happy to pay a fee to be better represented in any price negotiations, and to know that the agent they engage represents *them*, not the seller.[/QUOTE]


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## Leo (27 Feb 2017)

comer911 said:


> Agreed, purchasers are able to hire agents to assist in the process, but maybe it is necessary to legislate that EA's cannot represent both seller and buyer in any deal.



The existing legislation already rules that out. 



comer911 said:


> As for the additional costs to the buyer, I suggest buyers would be happy to pay a fee to be better represented in any price negotiations, and to know that the agent they engage represents *them*, not the seller.



It would be well worth while for many purchasers to do so, but very few do.


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## gnf_ireland (27 Feb 2017)

comer911 said:


> Agreed, purchasers are able to hire agents to assist in the process, but maybe it is necessary to legislate that EA's cannot represent both seller and buyer in any deal.


I am curious - do buyers really believe EA are representing them in a transaction? Surely everyone realises the EA is hired by the seller to sell the property and represents their interests only.

I am also curious to know what level of fake bids do people genuinely believe happens? Assuming the EA fees are around ~1.75% (recently involved in a sale of a rural property and assume an urban one would attract less fees), an extra 10k in the price would mean an extra 175 euro for the EA. 
I also assume that towards the end of the bidding process, most people would go up in 1k, 2k and max 5k increments. 
Is it really worth it for the EA? I am not convinced that it is to completely skew market forces, but maybe I am wrong !


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