How to win at sealed bids
As travel restrictions and quarantine measures ease, we are already seeing the return of international buyers increasing the demand and competition for London property and with that the use of a ‘sealed bids’ process to sell property. Earlier this year we spoke to Prime Portfolio about how to win at sealed bids.
What are sealed bids?
When there is significant interest in a property agents will often instigate a sealed bid process whereby the agents invite those interested to submit an offer letter containing the bid and other relevant information by a fixed date. After the deadline has passed, the seller will choose the best offer (which may not be the highest price) and the agents may contact them as the chosen buyer or to inform them of the highest bid and invite them to increase their offer. The bid is not legally binding and there is no obligation to go through with the purchase if, for example, the price becomes inflated.
- The sealed bid process benefits the seller as they may receive higher offers based on what the buyers are willing to spend rather than the market value; and
- As a bidder, the advantage can be the speed of the process.
- There is a high chance of being gazumped if another bidder realises that there have been higher offers and increases their own;
- One bidder may win, but there is no obligation for the seller to hurry up and get on with the process, especially if they think they might get a higher bid elsewhere; and
- The price may become inflated if there is more than one round of bidding. This may mean that a bidder pays more for the property than they will be able to sell it for in the future.
How to win at sealed bids
- Price – making a connection with the seller can be helpful here. Ask questions of the seller and their agents when you visit to understand their circumstances and the background to the decision to sell. If the seller has already found a property to purchase, ascertaining the price for this may help you understand how much the seller is expecting to sell for. Don’t be afraid to make an offer in ‘odd’ numbers. There is a natural tendency to round up and that little extra may make all the difference!
Consider employing a buying agent to support you with the sealed bid process. A good buying agent can help you with research on the property, support you with the decision of how much to bid based on your finances and comparable properties in the local market and use their network of contacts to ascertain the potential competition.
Ensure that your finances are in order so that you can proceed quickly. Sellers tend to prefer bidders with solid proof of funds and cash buyers or bidders with mortgage finance agreed in principle before the sealed bid deadline.
- Assemble your team of advisors – confirmation that you have instructed solicitors on the pre-contract due diligence and arranged for a surveyor to inspect as soon as possible after the bid deadline will stand you in good stead. Including these details in your bid demonstrates that you are serious and organised.
- Timing – it helps to suggest a clear and achievable timeline for exchange and completion with room for flexibility.
- Other factors – the best offer isn’t necessarily the highest offer. Consider what might make your bid more appealing to the seller. If you are a cash buyer who can move quickly or if you are chain-free then it will help to tell the seller this. Don’t be afraid to appeal to the seller’s emotions – if you are a young family looking for a ‘forever home’ or if you have other ties to the local area, this could be what makes the difference.