City Living: Bidding on a private treaty sale is a game of bluff and bluster. So what can be done to make the process easier for the buyer? Edel Morgan reports

In an auction situation you can at least see your adversaries but bidding "to the wall" on a property that is for sale by private treaty can be a bit like blind man's buff - a stressful game of second guessing and outmanoeuvring in the dark. Its lack of transparency makes for a myriad of conspiracy theories.

When bidding on a property in Stoneybatter before Christmas, a friend was convinced the estate agent invented a bid to push up the price of a property. She bid at just under the asking price of €300,000. The estate agent told her a second bid was placed for €310,00, which she thought was suspicious. Why would anyone bid that much when they don't have to? she reasoned. She bid €313,000 and another bid came in at €317,000. Not wanting to cross the stamp duty threshold of €317,500, she decided to call their bluff. "What do you bet the other bidder will mysteriously disappear," she said.

But she was wrong. There really was another bidder and she lost her dream three-bedroom house in Stoneybatter.

I also know of a couple who were the lone bidders on a three-bed house in need of some work near Dublin's north inner city. They bid the asking price of €320,000 but were told by the estate agent that the owners, who live in England, were hoping to get €330,000 and wouldn't sell for less than €325,000. So why didn't they set the asking price at €325,000 from the start?

The owners held out despite all the evidence that the house wasn't worth more than the asking price. A house across the road was on sale for only €310,000 - and was bigger but didn't have many period features left. The house next door sold six months beforehand in superb walk-in condition for €340,000 which was an exceptional price at the time for the area. It appears that the owners weren't aware that a bit of realism has crept into the market. They probably agreed to pitch the asking price at €320,000 to generate interest. But isn't that a bit dishonest when they weren't prepared to accept a bid at that level?

There are also theories about properties going to underbidders who have arranged their mortgage through an estate agent over those who have arranged an independent financial package. It is impossible to gauge how often these theories actually have substance and how much is speculation and paranoia borne out of the process that renders the bidder powerless.

Is there a way of making the bidding process more accountable so that there is no room for confusion or mistrust?

This may form part of the pending Government review of the profession but it appears there are no easy answers.

Patrick Dorgan, chairman of the Conveyancing Committee of the Incorporated Law Society, says that estate agents are obliged to act in the interests of the vendor.

"The market has cooled and the bidder is now in a stronger position than the vendor. Reputable auctioneers would not countenance bidding against a phantom bidder because they may lose the sale if the genuine bidder drops out. In my experience every purchaser believes there is some skulduggery afoot and, if they really believe they are right, they can refuse to bid any further."

Alan Cooke, chief executive of the Irish Auctioneers and Valuers Institute, says that while agents should never invent bids and should always represent the true picture to other bidders, "no bidder wants their own business disclosed to strangers and that includes those who would like to know whom they are up against in the bidding process. Unless all parties are willing to go public, a highly unlikely event, an agent would be placing some bidders at a disadvantage by disclosing the names of those bidders happy to be identified, but not others."

Regarding whether agents should quote an asking price if the vendor is not willing to accept a bid at that level, he says agents must follow the instructions of the seller.

"While, for a couple of years, it was true to say that the eventual selling price would have outstripped expectations, the residual effect of those market conditions is that sellers and, as a consequence, their agents are not overly concerned at an asking price, recognising that a property will find its own level in the market. In most cases, buyers will have comparable properties to gauge against and should be guided by the market."

With regard to sealed bids in a best and final offer situation, some would argue that the bidder or their representatives should be present when bids are opened, to ensure transparency.

"The big problem with that suggestion," says Mr Cooke, "is that, at that time, no one is bound by their offer. If everyone were present and the top bidder finds they are €10,000 ahead of the posse, they may well withdraw their offer and could do so without penalty called gazundering. Equally, an underbidder beaten by a thousand or so euro could offer higher than the top bid, thus encouraging the seller to gazump.

"I'm sure those who argue for transparency would accept that it is at least as important to prevent the opportunity to gazump or gazunder.

"That said, the IAVI is not against some method of formally recording all bids and of their being capable of verification by an official third party - providing the data protection requirements can be met and providing actual disclosure of confidential information to third parties does not occur."