A new study by the Economic and Social Research Institute (ESRI) has found that the process of buying a home in Ireland often leads to overbidding and delays, causing significant stress for purchasers.
The research showed that while half of buyers believed a visible online bidding system would be fairer, it actually resulted in more inflated prices than any other method. Participants in open auctions were also more likely to exceed their original budget and bid higher than they thought the property was worth.
The ESRI conducted the study using a nationally representative survey of 800 adults who took part in a controlled auction experiment. It also gathered detailed data on buyers’ and sellers’ experiences and expectations. The research, carried out by the ESRI’s Behavioural Economics Unit, was funded by the State’s Competition and Consumer Protection Commission (CCPC).
The findings revealed “significant gaps in people’s knowledge of rights and responsibilities.” While over two-thirds of respondents knew it was illegal for a seller to accept multiple deposits on the same property, only one in five were aware that agents could legally continue to market a property after it goes “sale agreed.” The study also found that most people did not know a buyer can pull out of a sale without penalty before contracts are signed.
The research showed that 63% of people who had previously bought a property experienced at least “one stressful hurdle,” a figure that rose to 80% among those who purchased in the last three years. Delays were the most common issue, with one-third of second-hand buyers reporting conveyancing delays and over a quarter of new-build buyers facing hold-ups when moving in. Other problems included discovering issues after the sale, sellers pulling out, and spending more on additional costs than expected. Conveyancing delays were also the most frequent source of stress for sellers.
“People are navigating a system they may not fully understand and increasingly experiencing stress, especially delays to conveyancing,” said Dr Deirdre Robertson, Senior Research Officer at the ESRI. “Our findings also suggest that the most commonly used bidding systems encourage people to overbid, inflating prices.”
Speaking on RTÉ’s Morning Ireland, Dr Robertson explained: “We think from behavioural science there’s something called auction fever, which is where when people are in an auction, it’s like a competition and people have a drive to essentially win it. Part of that might be linked to, for example, something called loss aversion, which is where losses hit much harder than gains do.
“So, it’s possible that every time somebody reaches the top and they’re the top bidder, and then they’re constantly being outbid, it’s like a mini loss every time, which then drives them to bid more. So that’s the theory behind it that we think why these auctions drive prices.”
