Sealed bids can often be a daunting process! In a market where buyers currently outnumber sellers, and each property is viewed many times by different buyers, we have seen a growing trend in sealed bids. The once popular auction style selling technique is making a comeback and our sales branch in Southfields is selling over 50% of family homes in this way. We find however that many buyers faced with the prospect of a sealed bid don’t have the proper ‘know-how’ and to most, it seems like a minefield. With the right advice, knowledge and guidance, it really doesn't have to be that tough.
In most cases, the process of sealed bids follows a very simple path – buyers are given the chance to view the property, they are then asked to submit their ‘best and final’ bid in writing, following which, all offers are considered by the vendor and agent, and the winning buyer is chosen. Many assume that in a sealed bids scenario, you need to offer the highest amount, but often this just isn't the case.
Sellers are primarily concerned with how ‘proceedable’ a buyer is – ie: the likelihood of the sale going through to completion. When you are asked to make a sealed bid, there are a few things to bear in mind that will ensure your offer is taken seriously and with such a lack of properties available, it is extremely important to make sure you have all of the necessary information at the ready. Here are my top tips to prepare yourself to ensure that you have a fighting chance against the other buyers.
Top tips for buyers to keep in keep in mind when preparing for best and final bids:
1. Provide details of how you are purchasing the property - if you require a mortgage provide a copy of your ‘agreement in principle’, if you have a property to sell - provide the status of that sale and contact details of the agent you are selling through, or if you are a cash purchaser then proof of cleared funds helps greatly.
2. Attempt to find out from the agent as much as possible about the seller - developers will be looking for the person who can conduct the purchase the quickest while offering the highest price. If the property is being sold by individuals, it is helpful to know who they are and what their circumstances are; for instance if you are prepared to wait for the seller to find somewhere to buy, rather than being in a hurry, this can often be a huge benefit.
3. Offer an unusual number - this ensures you won’t be offering the same price as someone else and also shows that you have given a lot of thought to what the property is worth and what you are prepared to pay. My best advice is to offer the highest you feel comfortable with. It is a competitive market and therefore you have to offer as high as you can. You have one chance to secure the property, but not so high that you have regrets.
4. Differentiate yourself – when it comes to sealed bids, more often than not you become a number on a piece of paper, among many others vying for attention. On some occasions I have seen buyers provide personal details about the future use of the property (eg. a family home) especially if the vendors are a family themselves. I’ve even seen sellers accept lower offers because they liked the letter or a photo accompanying a sealed bid from the family who wanted to live there. In these situations, where competition is tight, the whole family gets involved. A buyer once offered £730,000.01 (£730,000 and 1p from their 6 month olds piggy bank whose picture was attached as well).
5. Finally, deliver your bid just before the deadline and always call to check that it has been received.
Guidelines for vendors:
1. Consider all your offers individually, while the aim is to get the best price possible, you also need to find the best buyers for your position.
2. What deposit are your buyers offering? Keep in mind the higher, the better chance they have of getting their mortgage approved.
3. Are they chain free? This is always better as the more links in the chain, the longer the process takes and the more risk there is. If they are selling, how far progressed is their sale?
4. How soon can they move? – Do their timings fit with yours? Are they willing to stretch it out a little if you still haven’t found somewhere?
5. Have they appointed solicitors yet?