What is the current practice for bidders to show that they can afford to buy?

Brendan Burgess

Brendan Burgess

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If, for example, a person wants to bid €400k and has AIP for €300k but has €200k cash, is it reasonable for the estate agent to say that the AIP does not cover the amount you have bid and that you should show you have the cash to make it up?

I have a friend who is bidding and most estate agents are happy with the AIP but one has asked to show that he can afford the full amount.

I have seen in other threads where posters have suggested deleting the amount from the AIP letter, but if I were a seller, I would ignore such bids and go for a cash buyer or a buyer with AIP + cash amounting to the full bid.
 
As a current seller, I know that our auctioneer insists on seeing full proof of funds - AIP + cash - before any serious offer is considered. He did the same with us when we were purchasers, however another auctioneer did not. The former is young, the latter near retirement, so I wonder if that is significant.
 
It would make sense to ask to see all parts of funding ? Otherwise you can't be sure that they will close, even AIP can change though in practise it probably rarely does. If a gift from parents etc that probably also requires paperwork so it would need to be drafted too?
 
Last time we bought we used the solicitor's letter approach also. Saves revealing your limits to an agent.

That said I remember viewing a house 7/8 years ago where the selling agent was letting off a bit of steam complaining that they had several sales fall through when it turned out the prospective purchaser didn't in fact have the necessary funds to complete. They said they'd never trust a solicitor's letter again.

In reality though, it's likely reliable enough for most agents, someone sufficiently motivated to have their solicitor write a letter is likely to be genuine. Even with AIP for an appropriate amount, circumstances can change or the bank valuer might have concerns rendering it void.
 
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I discussed this with a few other people offline and the main concern was with showing the estate agent your hand.

In cases where there is competitive bidding and the house has reached an acceptable price to the vendor, then showing your hand does not matter. In fact, it shows them that you are not a messer and that you will be able to complete. So if my friend shows capacity to bid €450k , the auctioneer will be reassured that he can close at €400k. Of course, he could pretend he has another bidder at €420k but I think that is unlikely.

In cases where the person is the only bidder and the price is well below what the vendor wants, it would be different. If they want €450k and you are the only bidder at €400k then showing them your hand might discourage them from accepting the €400k offer.
 
Brendan Burgess said:
So if my friend shows capacity to bid €450k , the auctioneer will be reassured that he can close at €400k. Of course, he could pretend he has another bidder at €420k but I think that is unlikely.
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The issue then is that if that sale falls through and your friend is bidding on a house with the same auctioneer sitting at 385, trying to offer 395, the auctioneer knows they can push them higher.
 
circle said:
The issue then is that if that sale falls through and your friend is bidding on a house with the same auctioneer sitting at 385, trying to offer 395, the auctioneer knows they can push them higher.
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Yes, but that is a lot of contingencies.

It's better to deal with the current house and they want it and are bidding competitively and want to show the estate agent that they are not a messer and that they can comfortably afford it.
 
There is no way I would share my AIP or how much funds I have with an estate agent. We used a solicitors letter stating we had the funds. A local solicitor is not going to damage their reputation support someone who doesn't have the funds. Obviously if the agent has put an artificially low asking price there might be an issue if it goes way above but thats the agents fault.
 
I recently submitted a bank statement showing a lower figure than my bid and it showed account closed to one of our leading auctioneering firms.
Within minutes I got a reply accepting my bid and allowing me to continue bidding.
Could this be AI gone crazy?
 
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