Buying a new home can be stressful at the best of times, but sealed bids can be an added layer of tension you might have been able to do without.
If the property you want to buy has gone to sealed bids or you’re house-hunting in a market where this is the norm, read our guide to make sense of the process.
Sealed bids are not common practice in the UK housing market – the exception being if you live in Scotland. Here, sealed bids are part of the process, and you can find out more about buying a property in Scotland in our three-part guide, which you can read here, here and here.
South of the border, sealed bids tend to occur when the property market is enjoying a boom. This occurs when demand for properties in a certain area is so high it quickly drives up the value of homes in that postcode.
So, for example, your street may become so popular that when you put your home on the market you get five offers, all at the asking price. How do you choose between them? Well, that’s where sealed bids come in.
May the best offer win
You’ve found the home of your dreams; it’s in a popular area, close to public transport links, shops and a good school and it’s a complete steal. It’s so good you’re going to offer the full asking price to make it yours. But chances are if it’s that good, other house-hunters will do the same.
If this happens and the seller doesn’t choose a particular buyer over the others (perhaps because they made a good impression on the buyer), the estate agent could ask all the buyers who offered the asking price to make a best offer bid that’s higher than the asking price. These are sent in by a set date, and the estate agent then chooses the best.
By best offer, we don’t necessarily mean the highest. There may be a bidder who has offered to pay in cash, or one who is not part of a chain and so can move quickly to complete the sale.
Sealed bid auctions
When a market is really booming, an estate agent might advise from the off that a property is sold through a sealed bids auction, rather than making this decision just because there’s a lot of demand.
In this case, the estate agent – or buyer, if they’re selling their home themselves – will set a guide price. Once they’ve looked round, buyers will be asked to put their ‘best and final’ offer in writing and submit it by a certain date. Again, the best offer will win.
How to make your bid stand out
If you’ve really got your heart set on a place, there are a few things you can do to make your bid stand out from the rest – but, of course, there are no guarantees you’ll succeed. The first is to make sure your offer is attractive, but also reasonable. You might be tempted to offer the very top end of your budget – or more – but you should never over-stretch yourself financially. You should also think about how you’d feel if the next closest offer to yours was for substantially less – this may mean the property is not worth what you think it is, and could mean making your money back when you decide to sell is difficult.
As well as your bid, you should include any other information that makes you an attractive buyer. This could be whether or not you’re in a chain, if you’ve found a buyer for your home, and if you have a mortgage agreement in principle. Information like this can be just as important to a seller as the money you’re offering.
Don’t celebrate yet
If you make the winning bid, don’t crack out the champagne right away. There’s still a lot that can happen and having the winning bid is not the same as being the legal owner.
The buyer may change their mind and decide they don’t want to move, or you might reconsider. Until you have signed contracts, the sale is not guaranteed – so you should try to get contracts signed as soon as possible.
For more information on buying or selling your home, keep checking the blog for the latest hints and tips.
Disclaimer: All information and links are correct at the time of publishing.