And they inevitably produce a feeling of despair in a buyer's heart.
The use of sealed bids in the housing market is growing, as sellers seek new ways to maximise the offers they receive for their properties.
The increase in buyer demand in recent months has allowed more adventurous sellers to market their properties on a sealed bid basis, meaning each bidder makes one offer that no other bidders can see. The person with the highest bid purchases the property at that value.
Sealed bids seem to allow sellers to get a more attractive selling price for their property than using conventional selling techniques.
For example, one London based estate agent told property reporter that they had sold a 2 bedroom apartment listed for £380k for £407k, by using sealed bidding.
"We were able to achieve a 7% mark-up, just by changing the way in which we sold the house," our source said.
They continued:
The plus for sellers using sealed bids is that it pushes buyers to reveal their true valuation of the property, reducing the scope for lengthy negotiations over the price. It can also attract buyers looking to make a quick purchase, avoiding situations where the agent has to wait for other potential buyers to decide whether they want to increase their offer."
Sellers should strongly consider using this process to maximise their property’s price potential, as current levels of demand in are certainly high enough to make it worthwhile."
For vendors who have a great deal of interest in their property, sealed bids may be a good way of allowing the property to reach its true value. However, for buyers it's hard to see many benefits.
Our source said:
"It's a daunting situation for a buyer, and it can be difficult to know how to progress. The first thing you need to know is that the highest bidder won't necessarily win the property; the vendor and agent will weigh up all the information and make a choice on the basis of the size of the offer AND the situation of the buyer. Bear in mind too that the agent/vendor are free to do anything at a later date - it's not a legally binding decision, so if someone else comes in with a higher or better offer, it may all change. It can be a good thing for a buyer - it allows you to see the property at something approaching leisure, then you can work out how much you're prepared to pay and what your bid should be."
How can you best approach a sealed bid situation?
- Read the 'rules' that will be issued by the estate agent carefully, and adhere to them
- Try and get the vendor to accept an offer before it goes to sealed bids
- Your bid needs to be the top price you would be comfortable paying. Base it on this, rather than on what you think you need to pay to secure the property.
- The bid itself is important, but equally important is the dressing of your offer, demonstrating your commitment, proceedability, ability to exchange quickly, flexibility of terms. Your bid won't only be judged on the amount; it will also be judged on how easy you're going to make it for the vendor. The more information you have about the vendor, their motivation and needs, the better, then tailor your presentation to fit.
- Get a survey done before the date for sealed bids, so your offer doesn't have to be subject to survey. Again, this will make your bid very attractive.
- Attach a list of advisors (solicitors, finance providers etc) which will further reassure the vendor;
- Quiz and badger the agent to get information. It helps to know how many other bidders there are, where they come from, what else they've been looking at. Agents cannot discuss bids — but they can reveal how many bidders there are, and what offers were made before the auction. All this may help you assess how the bids are likely to turn out
- Don't miss the deadline, but equally, don't get it in too early. We recommend driving your offer to the agents office just before the deadline, obtain a receipt and if possible sit there while they open it
- You will be at an advantage if you're using a buying agent. Buyers who use an agent to represent them will already have parted with a retainer, so vendors and estate agents know they are definitely serious. They also realise that the deal is more likely to reach completion, because the search agent will be overseeing everything for his client.
- Don't expect an immediate result - you may well not hear the outcome for three or four days, so spare yourself the pacing and stressing.
