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PROPERTY

How do you beat the stress of the Swedish property bidding war?

In Sweden, the process of buying a home often takes place over text. The bidding wars that result can be a huge cause of stress for would-be buyers, all the more so if you're relatively new to the country.

How do you beat the stress of the Swedish property bidding war?
Property buyers often only have around an hour to look round their prospective home before entering a high stakes bidding war via text. Photo: Henrik Montgomery/TT

As in most countries, a lot depends on where in Sweden you’re buying your property. In smaller towns, or when dealing with a property that’s less in-demand for whatever reason, buyers are more likely to be able to get it for the starting price or even less. 

But when there’s more than one interested buyer, it’s likely to go to bidding. This is very often the case in Sweden’s larger cities, where a well-documented housing shortage keeps the market competitive.

And things move fast.

Typically, there are two viewings of each apartment (usually one on a Sunday afternoon and one on a weekday evening). They’ll often last for just half an hour, which means you may well end up committing to one of the biggest financial decisions of your life after only spending a total of one hour there. During that time, you need to take a careful look around – after the sale is complete, the seller is only responsible for flaws which you could not be expected to have discovered during your inspection.

Preparing to buy:

Interested buyers give their details to the estate agent, who rings round after the viewings to ask buyers to place their bids. Once the first bid is made, everyone who’s expressed interest is notified of each following bid via a group text message, and they can raise the price by responding to the text with their own offer.

Buying property is never exactly a smooth process, and the different systems in different countries have their own pros and cons. In Sweden, the fast-moving nature of the housing market is considered a plus for buyers and makes annoying delays less likely. 

But there are several downsides, not least for Sweden’s foreign residents who navigate the whole process in a language that’s not their own. Many estate agents will speak English, but translation of technical terms and concepts related to property can be tricky even for professionals, and the contracts may well only be available in Swedish.

Bids aren’t legally binding, which means that you have a small window of time to change your mind or look into anything that’s worrying you without any liability. You may also agree with the seller that you will only buy the property if it passes a final and more thorough inspection for any damages to the property.

On the flipside, this has raised fears that prices may be artificially inflated by “fake” bids which could be submitted by the estate agent, friends of the seller, or speculators who aren’t totally serious. In neighbouring Denmark and Norway, bids on property are binding, and Sweden’s largest real estate agency Fastighetsbyrån has previously called for a similar system here.

What makes the process even more opaque is the anonymity of the bidding.

The Swedish Consumer Agency (Konsumentverket) has called for requirements that bidders confirm their ID before their bids are registered, and some estate agents now ask bidders to identify themselves, for example using mobile banking ID. When you sign your contract, it may be possible to get information showing the name and contact details of all bidders, along with the time and amount of each bid.

Even removing the risk of fake or fraudulent bids, the hot property market makes for a stressful bidding experience competing against other serious buyers.

The bidding war might be concluded within just a few days, or even hours, especially if the seller wants a quick deal. 

But even when you’ve ‘won’ the bidding war – you haven’t actually. Once all bidders but one have dropped out, the winner is invited to sign contracts, and this often takes place the very same day.

This isn’t when you buy the apartment, but you will commit to buying it (and potentially be liable to pay quite a lot of money if the sale then falls through). Until you’ve signed on the dotted line, it’s possible for one of the other bidders, or even someone new, to put in a higher offer. Any hold-up on your way to the estate agent could end up costing you a lot.

So is there anything you can do to mitigate the stress of the Swedish bidding war?

Ultimately, the only option is plenty of research.

Different people will have their own pet theories about the best way to ensure your offer is the winning one. Bid aggressively, outbidding every other person within minutes and by large amounts! Raise the stakes by going significantly over the starting price at the very beginning! Be petty, only raising the price by small amounts until you’ve annoyed the other bidders into dropping out! 

People don’t always act rationally so some of these tactics may have an effect, but realistically if another bidder has a higher budget than you, you’re unlikely to deter them just because you placed a bid ending in an odd number, or submitted your bid at a certain time.

And you never know what extra factors are at play; an apartment that’s only OK to you might be worth a much higher price to them, if it means an easy commute, living next door to their grandma, or so on.

It does pay to know the market, so you can act and react fast when that great apartment comes along – and walk away if the prices spiral beyond what’s right for you. 

You can at least slightly reduce the stress of the bidding by starting to look into the market at least six months before you plan to buy. Track how prices have changed over recent months and years and work out what a reasonable price per square metre is in your desired neighbourhood.

Analysing the financial situations of different housing associations isn’t a fun way to spend your weekends, but it could help you sleep at night rather than lying awake in anguish over whether you paid a fair price. Or if you’re buying a villa, learn how housing surveys work and the key things to look out for, since with detached houses you have more responsibilities than in an apartment or a house that’s part of an association.

Look carefully through the ads, go to several viewings, read up on the housing associations, and follow the bidding process.

Ideally, you want to get to a point where you’re confident that you can estimate not only the market value, but what each property is worth to you.

That way, you can try to bypass the entire bidding process by asking estate agents for an early viewing. Some estate agents start to advertise properties before they are officially on the market, and sellers are sometimes happy to skip the whole bidding process for the right price (if you see ads on Hemnet that are borttagen före visning or “removed before viewing”, this is likely what happened).

Even if that’s not possible, the bidding should be less stressful if you have a clear idea beforehand of the maximum price you’re willing to pay before you walk away.

Swedish vocabulary

starting price – (ett) utgångspris

estate agent – (en) mäklare

viewing – (en) visning

bidding process – (en) budgivning

housing market – (en) bostadsmarknad

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PROPERTY

Can I get a Swedish mortgage without permanent residency?

The Swedish rental market is notoriously difficult for immigrants to break into, so many consider buying a property instead. But can you get a Swedish mortgage without a permanent residence permit?

Can I get a Swedish mortgage without permanent residency?

The answer, as with many of these questions, is ‘it depends’.

Do I need permanent residency?

There is no legal requirement that mortgage holders in Sweden must be permanent residents, citizens, or even registered in the country. On the other hand, there is no legal requirement for banks to accept mortgage applications from just anyone either, which leaves them perfectly within their rights to deny applications to temporary residence permit holders if they deem them to be too big of a risk.

Why might a bank say I need permanent residency to take out a mortgage?

One reason your bank could require you to have permanent residency is that they deem it too risky to lend to someone who they think might not be staying in Sweden for long enough to pay off their mortgage.

Banks want to be reassured that they will get their money back if they lend to you, and if you don’t have permanent residency in Sweden, there’s always a chance your temporary residence permit will run out and a renewal might not be approved, leaving you forced to leave Sweden before you’ve had time to pay off your loan.

Similarly, banks which may once have been more willing to approve mortgage applications to more ‘risky’ applicants may be more wary in the current climate, where house prices are dropping and interest rates are going up.

Ultimately, a temporary residence permit is one of many risk factors for a bank – if you’re forced to (or choose to) leave Sweden after a short while and your property has lost value, that could leave you in a position of negative equity – where you owe the bank money after you sell your property.

Is there anything I can do to make sure I don’t get my mortgage application rejected?

First off, mortgage applications are often stressful – you’ve successfully bid on a property and you’ve set a date for signing the contract, so you want to get your paperwork in order and make sure you can finance the property quickly.

Additionally, banks are slow, so the last thing you want is to wait days just for your bank to turn you down for a mortgage.

The best way to ensure you get a mortgage approved in time is to keep your options open and apply to multiple banks, as different banks weigh different risk factors more highly than others.

Danske Bank, for example, appear to reject mortgage applications for people without permanent residency, as I was told when my mortgage application with them was rejected.

Be aware though, that every time a bank takes out a credit check on you, this affects your credit rating. A good way to get around this is to apply for a mortgage via services like Ordna Bolån and Lånekoll, who take out a single credit check for you and use that to apply to multiple banks on your behalf.

Another way to increase the chance of your application being approved is to borrow less money, if you can. Just because your bank has given you a maximum budget you can buy for in your lånelöfte or lender’s note, doesn’t mean you have to buy for that much, and the less money you apply to borrow, the more likely the bank is to approve your application.

There’s another benefit to this, too – it lowers your belåningsgrad, or the percentage of the property’s value you’re financing with your mortgage. If you loan more than 70 percent of a property’s value, you have to amortise (pay back) 2 percent of the value of your mortgage per year. If you loan between 50 and 69 percent, you must amortise 1 percent of your mortgage per year, and if you loan under 50 percent of the property’s value, you don’t have to amortise anything (although it could still be a good idea to do so, if you can).

Additionally, in Sweden there is something called a skuldkvot or “debt quota”, meaning if the amount you’re loaning is more than 4.5 times your yearly salary (or the yearly salary of you and your co-applicant, if you’re applying with someone else), you need to amortise an additional 1 percent per year, on top of anything you have to amortise based on the percentage of the property’s value you’re borrowing from the bank.

This means, if you can put in enough cash to reduce your belåningsgrad from above 70 percent to under 50 percent, as well as loaning less than 4.5 times your yearly salary, you can cut down your amortising from 3 percent to nothing.

This will all be factored in by the bank when deciding if you can afford to pay your mortgage, too, so cutting down your monthly costs will make it more likely for them to approve you.

Finally, have a look at the driftkostnad (running costs) for a house, or the avgift (monthly fee) if buying an apartment or terraced house in a bostadsrättsförening (BRF) housing co-operative. The lower this is, the lower your monthly cost, and the more likely your bank is to determine that your monthly costs aren’t too high in relation to your income.

Are there any other reasons foreigners might be rejected from buying property in Sweden?

Many – but not all – banks require mortgage applicants to be registered in the Swedish population register (this means you need to have a personnummer) and have your salary paid out in Swedish kronor.

If you earn money in another currency, this doesn’t necessarily mean you can’t get a mortgage, but it could mean that you can’t loan as much as you could if you were paid in Swedish kronor.

This is due to the fact that banks will always be conservative in their calculations when deciding if you can afford to pay back a loan (especially so in the current climate), and will calculate your budget based on how much your income would be worth if the currency you are paid in became much weaker than the krona, despite the fact it could be much stronger at the time you apply.

Some may require that you have BankID in order to apply for a mortgage, which in practice also means you need to have a personnummer and a Swedish bank account.

These criteria aren’t usually published on the banks’ websites and could change now that the market is becoming less stable as lenders seek to reduce their risk, so call your bank in advance to ask if you want to be sure. 

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