Why overbidding is built into the Netherlands’ house buying system
In many countries, the asking price is a starting point for negotiation. Buyers often end up paying less, sometimes a little more, but usually something close to the listed price. Sellers often price their properties optimistically high, and therefore most are happy to accept an offer a little under the asking price.
In the Netherlands, it’s very different. Properties are deliberately priced below market value, so sellers expect to get offers above the asking price.
Why? A lower price attracts more people to view, which means more offers, and often, a higher final price as buyers end up in a bidding war.
The Netherlands’ acute housing shortage adds fuel to the fire, causing buyers to stretch themselves to their financial limits in order to secure a home.
How much over the asking price should you pay?
Unfortunately, there’s no simple formula to work out the likely selling price. 5% over the asking price is a rough average, but on its own, this figure doesn’t tell you much. In popular areas of big cities, bids often go to 10% or more over the asking price.
You’ll probably start looking at sold prices for similar homes in the area you’re looking in. That will help you get a good feel for prices, but it’s far from the whole story.
In fact, it could just make you more confused, because you end up thinking things like:
“This one went for €520k, but it’s bigger than the one that went for €490k…and I can’t work out why”
Or “Why did this apartment go for €350k even though it needs work, when a newly renovated one in the same building sold for €340k?”
There could be many reasons: hidden maintenance issues you’re not aware of, the energy label, or simply that there was a bidding war that upped the final price.
Basically, you’re guessing.
What happens when you guess your bid:
No-one really wants to guess how much to pay for the biggest purchase of their life. But you end up doing exactly that.
You’ll add an extra €10k, €20k or €50k to your bid ‘to be on the safe side’, even though you’re not sure you need to. Which often means you waste money and wipe out your savings.
Or you’ll offer just over the asking price because you’re scared of overpaying, and end up losing out to higher bidders, even though you could have afforded to pay more.
5 things you need to know to avoid guesswork when bidding for a home:
1. Comparable recent sales
You can find sold prices on Funda, although these can take a few months to update. Which means that in a fast-moving market, they might not be as relevant as you’d like.
You can usually get access to sold prices quicker by checking the Land Registry, but you’ll have to pay (and they’re still not instant).
2. The property’s condition
Two seemingly identical homes on the same street can vary massively in value, depending on:
- Overall condition including the decor, kitchen and bathroom, and whether things like the windows and heating system need replacing.
- Layout. If the property has bedrooms on different floors, for example, that might make it less appealing to families and so reduce the price.
- The energy label. A house with an A energy label will sell for an average of 17% more than one with a G energy label. Which means a G-rated €500k property would be €585k if it were A-rated.
3. The property’s attractiveness
Older homes with original features and lots of character (inside and out) are generally in high demand. So too are well-constructed newbuilds with luxury fixtures.
4. Location: right down to the street
Everyone expects to pay more for a property in a big city, close to amenities and transport links. But the impact of location goes much further than just the neighbourhood.
People will pay more for homes with a nice view, for example. But they’ll avoid one next to a noisy bar or near a busy road. And it’s not always easy to tell what impact these things have just by looking at maps and listings.
5. Market conditions
Timing is important when you’re buying a house.
Prices generally increase year-on-year, but factors like political or economic instability and changes in interest rates can have a significant impact (even if only temporarily). All this needs to be factored into your bid.
6. Pricing strategy
Sellers (and their agents) don’t set prices purely on the basis of the house itself. They’ll also factor in their personal needs.
A buyer who needs to sell fast might underprice to try and sell fast. Or if they’re looking to stretch their budget for their own purchase, they might test out a higher asking price initially to see what happens.
It’s pretty much impossible to know what their decision-making is based on unless you’re inside their heads, of course.
How do you know what to bid for a home without overpaying?
The reality is, it’s hard.
There are so many factors to take into account, and it’s pretty much impossible for anyone to work out an accurate bid without help.
Even highly experienced buyer’s agents often get this wrong, and their clients end up paying much more than they need to for their homes.
At Roofmatch, our agents are supported by a smart AI system that takes into account 12,000 data points to help produce accurate bids.
This means that our clients save up to €50k on their homes.
To see exactly how this works, check out this blog