"My lucky number's One..........."

What happens if there is more than one interested party trying to buy a property?

In all likelihood the estate agent will call a Closing Date which will require each party to send their bids to the estate agent at a specific time - normally “High Noon” on a particular date for consideration. The result is normally known on the afternoon of the closing date but sometimes it can take a day or so for the seller to make a decision.

Long gone are the days when a solicitor was the only one who was privy to the tactics at play in the dark art of the closing date. TV programmes such as Location, Location, Location, Escape to the Country etc have opened the curtains and shed some light on the magic. Many clients have their own take on what to offer when faced with the crap shoot that is the Closing Date.

I have come across many clients with all sorts of theories and would break them down into the following categories:-

• “MY LUCKY NUMBER’S 1” – those that don’t want to put in a round figure and opt for mostly their birthday or other luck number

• NUCLEAR OPTION/SKIERS – downsizers usually with no mortgage and therefore happy to bid whatever is necessary – last purchase and not concerned about downturn in the market – putting money in their property is as good as leaving in the bank is their mantra - you want to be acting for a skier not up against one at a Closing Date

• HOME REPORT HEDGERS – those with a crystal ball who try and second guess the competition in the hope of getting the property at below valuation – a risky tactic that is more than likely to be met with failure

• WHAT’S FOR YOU WON’T GO BUY YOU – making up a large percentage of the market – they put in their best offer that they can afford and roll the dice

• YIELDERS – generally the remit of the Buy to Let investor who has a mathematical formula of the rent that is needed based on the purchase price – the closing date scenario is not kind to such an offer

Ultimately, it is all a bit of a lottery – they may not even take the highest offer!

There is no magic formula and as with all negotiation information is king but less relevant in a Closing Date scenario. What I like to do is gather as much information as I can and come up with a judgement of what it is likely to take to be successful.

The following all come into my deliberations:-

• Cashdown Kelly – an all cash offer likely to trump a conditional offer if it is a close call – a cash offer could then be worth more in such a situation.

• Sold already – again an offer not conditional on the sale of a property is going to trump a purchase conditional upon a sale – definitely a positive.

• How many other parties – the more interested parties then in all likelihood the higher the successful offer - watch out for the skier!

• Clients circumstances – how long is your client going to be staying in the property – if a client is successful and bids higher than the Home Report value then from day one they will be in negative equity – the longer they stay in the property then the more likely it is that they will show a return to positive equity – you need to be conservative if you are going to only be in the property for a couple of years – as my old man used to say “the property is only worth what the second person was prepared to pay for it!”

• Any information about the vendor – if the seller is motivated then they may accept a quick cash offer

• Prime against the Ripple – what the hell does that mean? A property is going to hold it’s value if it is in a prime residential area – good idea to bid as high as you can. A property on the outskirts of a prime residential area is more of a gamble as you are hoping that the increase in the price from the prime areas ripples out to the outlying areas thus giving you an uplift in a strong market. Unfortunately the opposite is true with prices contracting rapidly in Ripple Areas in a downturn. Those that bought in many of the Ripple Areas pre crash are only now seeing their values return to 2007 levels.

So what do you do?

One thing that I would not recommend is what I did when I bought in 2007. We saw a property that we liked. I came up with a figure that we could go to. I said to my wife that it was pointless making the offer as there was a lot of competition and I felt that our offer was way off the mark. We did not make the offer. My wife asked me to phone the estate agents after the bids had gone in to get an idea of whether buying a house like that was just a pipe dream or a possibility. I phoned the estate agents to be told that no offers were accepted. I then asked what the vendor was looking for to be told that they would accept £10K less than what I was going to offer. Now there is advice that you could not give to a client! What do they say “Act for yourself and you have a fool for a client!”

However, if you do want some solid advice on what to do then please do not hesitate to get in touch and I can take you through the dark art of the Closing Date