The recent property boom has rocked the housing market. Demand for homes has rocketed and property prices have increased to an all-time high, thanks to years of low mortgage interest rates, the emergence of remote work (largely triggered by the COVID-19 pandemic), faltering housing supply issues, and general property price inflation.
Although price rises have started to slow down compared to recent months, the effect it has had on the property market may be here to stay.
One perhaps surprising consequence of the rising demand for homes that may be contributing to high prices has been the advent of sealed bids, a tactic that has become increasingly popular among sellers.
We spoke to industry experts and those who have bought their home using sealed bids to uncover the ins and outs of this approach to buying and selling property. Combined with our own tips on how to make the most of this strategy, you’ll hopefully be set up for success should you buy a home using sealed bids, without over-extending your budget.
Looking to sell a property using sealed bids? We’ve provided some tips for you, too!
What is a sealed bid and how does it work?
A sealed bid is a process used for buying and selling properties. It’s used when there are numerous people interested in a particular home or even a commercial space. Bidders submit their best offer to the estate agent without knowing what anyone else has offered. Bids are all opened at the same time, on a set date.
The seller will then decide which offer they want to accept. Usually, this will be based on the highest price; however, other aspects may be considered, including deposits, property chains, cash or mortgages, and even personal circumstances.
In Scotland, it is standard practice to initiate sealed bids when there’s more than one person interested in a property. Now, this process is increasing in popularity across the rest of the UK.
What’s the sealed bids process?
The process for sealed bids in England, Wales, and Northern Ireland differs from the traditional process for making an offer on a home. Bids are collected by the estate agent and are opened at the same time on a fixed date, rather than put forward to the seller immediately once they’re made. Also, bidders don’t know how much other parties have put forward.
This is how the sealed bids process typically works:
- The property is marketed as normal, but if there’s a lot of interest and the seller agrees, the estate agent will ask for sealed bids to be submitted by a set date and time.
- The bidder writes down their offer and puts it in a sealed envelope and gives it to the estate agent. Sometimes this may be done by email.
- After the deadline, the bids are opened by the estate agent and passed to the seller who will decide which, if any, offer they’d like to accept.
- If two bids are the same, or the seller isn’t sure which offer to choose, it may go to a second round of bids, or the estate agent may ask bidders to submit their best and final offers.
- The estate agent will contact the winning bidder.
- The usual process for buying a property will resume after the bidding process has ended.
Sealed bids in Scotland follow a different process and are used whenever a property has more than one offer. It’s known as ‘blind bidding’ and is thought to increase prices by over 20% in sought-after areas.
Sellers ask for offers over or around a minimum price. The potential buyer will submit an offer through their solicitor along with a moving timescale, and the winning offer is announced on the same day.
Expert reveals sealed bidding has increased by 50%
Dave advised: “Sealed bidding has gained popularity in recent years, with estate agent Knight Frank reporting an increase of 50% in sealed bids, particularly in London.”
James added: “During the property boom around the pandemic, we saw sealed bids increase significantly. It tends to be the case that sealed bids become more commonplace in a rising market, as they’re useful for making a quick sale.”
“They’ve generally remained common since the summer of 2020. From the data I have, it seems to be up around 56% compared to 2019.”
“We expected sealed bids to drop off after a few months, yet the market just continued to become more feverish and property sales continued to boom. I would say the peak was around April 2021, carrying on throughout the summer of 2022.”
Six tips to make a successful sealed bid
Although it’s often the case that the highest bid wins, there are tips and tricks you can use to improve your chances of putting in the winning bid, whileavoiding paying too much.
1. Ask questions about your competition
James Elcalfe advised: “I would strongly recommend speaking to the estate agents and asking how many people have placed a bid. If you know how many people you’re competing against, it can help to clarify how intense the competition is for the house and in turn hopefully help you to place the best bid.”
More often than not, the greater the number of bidders, the higher you’ll have to go over the asking price to win, but be careful to stick to your budget.
2. When bidding, use a non-rounded number
James said: “I’d recommend bidding a more unusual number, just above a rounded figure. You might want to bid £100 or £1,000 over a traditional price, such as £401k rather than £400k, as many sellers will simply take the highest bidder and this would then be you by a fractional margin.”
If you go over a number rather than below, even if it’s only by £100, you are likely to increase your chances of submitting the winning bid.
3. Research the maximum price of the street before bidding
Sealed bids tend to push up the , but there are several ways you can avoid this when putting in your bid.
Dave suggested: “The best piece of advice is to research the current property market. This can give you an idea of what to offer, ensuring you don’t under or overbid.”
“Buyers can also consult with the seller’s estate agent to get an idea of how much the seller ideally wants for the home. Keep in mind, however, that the estate agent will want to achieve the highest price possible.”
Check the amount the property has previously sold for, the maximum price or ‘ceiling price’ of properties on the same street, and what has sold recently in the area to get a better idea.
4. Take a step back and think logically before bidding
As tempting as it can be to overbid to win, avoid bidding outside your budget. If you do win, then you may not be given a mortgage for the amount you need if the lender determines that it would be unaffordable for you, and this may waste the time of the sellers, the estate agents and, of course, yourself. You could also lose money if the property prices decrease and leave you in negative equity.
James said: “The fact that you’ll only get one chance makes many people nervous and overbid, but I’d recommend taking a step back, not allowing emotion or your love for the house to take over, and look at it rationally: what is it genuinely worth and can you afford that bid?”
"Never bid beyond your means. Make sure it is an amount that the bank will agree upon and an amount you won’t cancel later on.”
So, before you bid, you should work out the exact deposit and mortgage you can afford, and ideally have a decision in principle from your mortgage lender. This will help you to make sure any offers you put in are accurate, and you’re less likely to come unstuck later.
5. Write an emotive letter to include with your bid
Adding a personal story when submitting a sealed bid can be helpful and may sway the decision in your favour. But how much difference can they really make?
Dave advised: “In your bid letter, it may be helpful to include details such as what drew you to the home. For example, if you feel it is the perfect place for starting a family. This shows you have put serious consideration into purchasing the property.
“They’re not always taken into consideration and many sellers will just want to see the highest offer, but some will be interested in the situation of the buyer. I know many sellers that would rather sell to a family than a developer, knowing the home they put so much effort into will make someone truly happy.”
James added: “You don’t need to write an essay, but a couple of lines explaining your personal situation and your reason for moving can make a little difference, enough to push you ahead of an equal bid buyer.”
Additionally, letting the buyer know about anything else that could give you an advantage, such as if you’re a cash buyer, you’re not in a chain, you have a mortgage in principle or proof of deposit, and so on, can help to improve your chances during bidding.
6. Submit your offer early
As soon as you decide on the value you’d like to offer, put it in. This can give the impression that you’re organised, something that’s pretty important to prevent delays during the process of buying and selling a home. Committing to your bid as soon as you’ve made a decision can also help to stop you from second-guessing yourself and talking yourself into a higher bid that may be outside of your budget.
Sealed bid buyer’s story
We spoke to Beth, 27, a first-time buyer from Newcastle upon Tyne who recently bought her first property with her partner using a sealed bid:
“The sealed bid process was pretty nerve-wracking, to say the least. Normally, if a house purchase went to sealed bids, we would have the benefit of being first-time buyers with no chain to weigh in our favour. Unfortunately, in this market, it felt like being first-time buyers didn't weigh that much in our favour just because of how competitive the market is.”
“We emailed to put in an initial offer after viewing the property, a three-bedroom end terrace in a gorgeous estate just outside of Newcastle, but were told that it was going to go to sealed bids and they weren't looking at normal offers. In this case, each party bidding on the property emails the estate agent their offer and how much deposit they’ll be putting down with no further information about your position, onward chains, etc.”
“We put in an offer to go over the asking price by 3% in the hopes that it would sway in our favour. We even went over our ideal deposit budget by £500 just so we could add more but we loved the property so much that we were conscious that even the smallest amount could make a difference.”
What’s the property market like in 2022?
Beth said: “On the properties we viewed, about 90% of them went to sealed bids, so we were going from 3-5% over the asking price every single time. Because the market is so frantic at the moment, it appears that sales are going straight to sealed bids without sellers even taking a look at a buyer's position and it can be super disheartening.”
Sealed bid buyer’s top tips
Beth advised: “My advice for others making a house purchase is to not be disheartened and not go over your budget just for fear of not getting a property. It's easy to just throw an additional figure in there but this may come back to bite you if a mortgage lender doesn't think the house is worth that much over the asking price.”
“Even if it's not required, throw in a sentence about your buying position when emailing your sealed bid. If you're first-time buyers with no onward chain, include it. If you're paying a large deposit, mention it. We've no way to know if this had an impact, but if the estate agent is looking at two offers that have the same deposit and offer, it could make all the difference.”
Sealed bid advice for sellers
Selling a house using sealed bids is much easier than buying, but there are a few things you should consider.
Should I opt for sealed bids when selling my property?
If your property is likely to have a lot of interest, sealed bids may be the best option for you. Rather than receiving offers at any time, they’ll all come together, giving you a greater level of control over the sale.
If you don’t choose to use sealed bids at the start, don’t worry. You can request your estate agents to switch to sealed bids at any time. So, if there’s more interest than you thought, you can easily use them.
Sealed bids can help to push up the price of your property, as buyers will usually bid the maximum they’re willing to pay. This is unlike the standard process which can involve negotiating over price. Chances are, with sealed bids, the offers you receive will be over the asking price.
They can also speed up the process of selling your property. All offers have to be in by a set deadline, which prompts people to make a quicker decision; this is ideal if you’re looking for a quick sale.
If you think sealed bids are right for you, simply speak to your estate agent to start the process.
How can I get the maximum offer?
As the seller, there’s not a great deal you can do to influence the offers you receive on your property outside the usual property selling tips:
- Declutter but don’t take away the feeling of home
- A coat of paint can refresh your home
- Kerb appeal is key - make the right first impression
- Choose the right estate agent who has the best property photos and descriptions
- Keep it clean for viewings
How to choose the right bid
Although the property price is a key point, some additional factors may come into play when choosing a bid that’s right for you.
If you’re looking for a quick sale, you may opt for the most organised buyer with everything in place to go ahead with the purchase. This could be proof of deposit, a mortgage in principle or perhaps most important, a short chain or no chain at all.
Property chains are common but can occasionally cause delays or even fall apart. Choosing a buyer with a short or no chain minimises this risk.
Also, keep in mind that high doesn’t always mean better. A high bidder may not be able to get a mortgage if their bid is more than they can afford, or if their mortgage provider doesn’t agree that your property is worth what they’ve offered to pay for it (this isn’t a consideration if they are a cash buyer with proof of funds, though). Try to work out yourself how much your property is worth, so you can avoid excessively high bids.
If you’re not sure, you can speak to your estate agent for advice. They work for you and should be able to offer support and advice to help you make a decision.
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