"The current system is virtually impossible for a buyer. Submitting the highest bid won't necessarily secure the property"
According to a new report from Stacks Property Search & Acquisition, despite low property transaction levels, there is still a significant number of properties going to sealed bids.
George Barkes of Stacks Property Search & Acquisition's Cotswolds office, has this to say: “Sealed bids are a device used when demand significantly exceeds supply, especially for a 'special' property.
Agents don't only use sealed bids for the top dollar property; it's a method of sale used across all price brackets. But it's a badly outdated system. In our view, they should be restructured, formalised and made more transparent. Buyers should have to prove they can proceed in advance, and like an auction, a winning bid should be financially binding.
The current system is virtually impossible for a buyer. Submitting the highest bid won't necessarily secure 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. And because it's not a legally binding decision, if another buyer appears with a higher or better offer, it may all change.
If you do find yourself in a sealed bid situation, the following advice may help:
1: Read the 'rules' that will be issued by the estate agent carefully, and adhere to them
2: Try and get the vendor to accept an offer before it goes to sealed bids
3: 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.
4: 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. Be prepared to enter a beauty parade as well as a bidding competition. Vendors can choose their buyer; cash is king, but failing that, a buyer who has documented proof that they have immediate access to funds will move up the pecking order.
5: 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.
6: 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.
7: Attach a list of advisors (solicitors, finance providers etc) which will further reassure the vendor;
8: 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
9: 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.