Bidding process How to buy your dream home by bidding process

Nowadays, more and more people are buying their dream home via bidding process. Read on for tips and advice.

by UBS Insights 12 Sep 2019

Illustration: Pia Bubblies

Financing your own home has never been cheaper. Earlier this year, the interest rate for a five-year, fixed-rate mortgage fell to below 1.0 percent for the first time ever, making this a great time to consider buying your own home.

In Switzerland, a lot of real estate is changing hands via what is known as the “bidding process.” Ideally, this begins as follows: The seller advertises their real estate, specifying the minimum purchase price and all relevant information about the property, e.g., its location, size, year of construction and floor plan. They also specify a date by which interested parties can come and view the property.

Now it's the turn of potential buyers: after the viewing, they generally have two to three weeks to submit their initial bids. The seller then informs them of the highest bid. Assuming this price is not too high, a potential purchaser can then submit a new bid until the agreed number of bidder rounds – usually two to four – is reached. This is followed by subsequent negotiations, additional questions about construction guarantees or further viewings, as necessary. Unlike in a conventional auction, bids by interested parties are not binding.

A fair bidding process is transparent

In the bidding process, sellers are not obliged to specify a minimum purchase price for their property. In addition – and for investment properties this is generally the rule – a viewing before making your first bid may not be an option. For the bidding process to be fair, it must above all be transparent. Information about the process and the time frames must also be clear from the start. If this is not the case, you would be ill-advised to take part in the process.

Professional advice, speed, and keeping a cool head

Potential buyers in a bidding process should pay particular attention to the following three points:

  • Obtain expert advice. We will work with you to determine your financing strategy and budget, ideally before the viewing date. We’ll also clarify with you the second decisive point: what is a fair price for the property in question? This is often very difficult for the layman to judge. We will value the property you’re interested in and help you to decide on your bid.
  • Act quickly. If you really believe you’ve found your dream home, it’s important you come to us right away with all of the sales documentation. The most important thing will now be confirmation of finance, i.e., the mortgage decision or financing agreement that proves you can afford your bid. We can issue this confirmation within 24 hours so that the seller receives it as quickly as possible.
  • Keep your cool. Depending on the competition, bidding on a house is stressful and could cause you to make rash decisions. In your excitement, you could be tempted to put in an additional 20,000 francs from your reserve savings. That’s why it's best to stick to a budget that the bidders and our experts have agreed upon.

Important: the highest bid doesn’t always win

It’s not always just about the money: some sellers would much rather see their home go to a family with children than to a group of wealthy investors. Personal contact can also be key: a letter to the seller or a chat with them during the viewing can be worth its weight in gold. So there’s no need to despair if you don’t have an enormous budget. In a transparent process, the seller's goal and the length of the bidding process will both be clear from the beginning.

Specific advantages for buyers

Although the bidding process mainly favors the seller, there are also specific advantages for potential buyers. For example, it can be a much faster process than buying a home via a real estate agent, especially if the bidding is online. In addition, the fact that there are other bidders means there is not just competition but also security, because you are not the only person considering buying the property.

Bidding process?

UBS experts can provide the following

  • Comprehensive advice on financing: What type of financing is right for me? Together we’ll find the right strategy that strikes the perfect balance between your own equity contribution, mortgage products, repayment terms and tax impact. Our advice also takes into account your requirements concerning investments and retirement savings.
  • Professional real estate advice: Is the price fair and realistic? We’ll value your dream home.
  • Confirmation of finance: We can issue mortgage decisions within 24 hours.

To learn about the other ways we can help you purchase real estate, go to ubs.com/hypo.