London has gone sealed bids crazy: it's now almost the norm. In other hotspots it's increasingly common. But few of us understand how the process works. Sheila Prophet lifts the lid
With demand for property outstripping supply, and some agents reporting up to a dozen customers chasing every home on the market, sealed bidding has made a major comeback.
Once reserved for the stratospheric end of the property market, the practice is now becoming common even on sales of modest family homes.
The National Association of Estate Agents says that, when there are high levels of interest in a property, sealed bidding can sift out time-wasters and find committed buyers who are willing to exchange quickly.
NAEA president Jan Hÿtch says: “The confidential nature of the process can also mean that homes can go for more than the seller anticipated.
“However, for those that are unfamiliar with sealed bids, the whole situation may be daunting because of its semi-secretive nature.”
The process itself appears simple. After viewing the property, buyers submit their ‘best and final’ bid in writing. All the offers are then considered by the vendor and estate agent, and the winning buyer is chosen.
However, while the advantages for vendors are obvious, for buyers it means entering a nerve-racking ‘blind’ contest, without knowing who they are competing against or what moves their competitors are making.
In every competition, there will be disappointed losers, so buyers need to be pragmatic if they are entering this process and prepared for the prospect of missing out and starting again.
Jennifer Young-Thompson, sales manager with agents Kinleigh Folkard and Hayward, says that in her branch in Southfields in south-west London, more than 50 per cent of family homes are now being sold through sealed bids.
But she acknowledges: “We find 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.
“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, i.e. the likelihood of the sale going through to completion.”
If you are considering making a sealed bid, Jennifer offers these tips to ensure you have a fighting chance against other buyers:
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.
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.
Find out who the sellers are and their circumstances (if the property is being sold by individuals). 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.
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
“This also means that the seller will have a lot of offers to review and consider so be patient as this may take several days.”