Explainer: One big reason why Ireland’s home-buying process is so fraught

DCM Editorial Summary: This story has been independently rewritten and summarised for DCM readers to highlight key developments relevant to the region. Original reporting by Irish Times, click this post to read the original article.

The process of buying a home in Ireland is fraught with difficulty not least because prices are so high relative to wages and because there are many legal and bureaucratic hoops for would-be buyers and sellers to jump through.

A new report by the Economic and Social Research Institute (ESRI) suggests, however, that the open-auction bidding process typically used by estate agents to sell homes may be – in itself – driving these high prices.

The report also highlighted “significant gaps in people’s knowledge” about the process and of their rights and responsibilities.

So what did the report find?

To assess how bidder behaviour changed under different auction processes, the ESRI conducted a controlled auction experiment involving some 800 participants.

It found participants’ bids were pushed higher in open auctions managed by estate agents or online platforms than in sealed bid auctions.

“Auction fever and loss aversion” can drive individuals to outbid each other and exceed “their pre-stated ideal budgets”, the report found.

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In sealed bid auctions, which are common in Scotland, all bids are submitted simultaneously and kept secret until an agreed deadline with no incremental bidding. This encourages people to submit their best offers at the outset.

Is our bidding system leading to higher prices?

There’s good evidence that it is. A recent report by property website MyHome found that 40 per cent of properties sold in the Republic in 2024 were settled at 10 per cent or more above the original asking price. One in seven transactions was settled at 20 per cent above the asking price.

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What about ghost bidding?

The ESRI report also conducted a survey of people’s experience and expectations around conveyancy here which highlighted that many had a lack of trust in the process.

More than 14 per cent of all buyers said they suspected ghost bidding. “Ghost bidding is not legal and there is no way to verify if this is accurate or not, but it is an indication of a lack of trust,” it said. One Irish Times reader contacted us, claiming that he had “twice been the victim of a mystery bidder when it seemed that I was the only one making an offer.”

The report also noted that a significant number of second-hand buyers (11 per cent) discovered problems with the property after the sale that they believed the seller should have known about.

What else?

Despite experience with property transactions, participants demonstrated poor understanding of rights and responsibilities, the ESRI said. While more than two-thirds knew it was illegal for a seller to accept multiple deposits for the same property, only one in five knew that agents can legally continue to market a property after it goes “sale agreed”. Additionally, most people did not know that a buyer can pull out of a sale without penalty before contracts are signed.

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Buying and selling stresses

The survey also found that almost two-thirds (63 per cent) of people who previously bought a property in the Republic experienced at least one “transactional stressor” during the process, rising to 84 per cent among those who bought in the last three years.

The most common issues were delays, with one-third of second-hand home buyers experiencing a delay in conveyancing and more than a quarter of new-build buyers experiencing “a delay moving in”. Other problems experienced included sellers pulling out and buyers having to spend more than expected on additional costs.

The sunk cost fallacy

The report concluded that it wasn’t just financial pressures that were apparent in the Irish market but procedural challenges such as delays in conveyancing.

It claimed that such delays were leading to suboptimal decisions on the part of both buyers and sellers.

“Behavioural biases like the sunk cost fallacy may cause buyers to proceed with problematic purchases simply to avoid losing what they perceive as already theirs,” it said.