Demand for property is at its highest for years; the latest RICS Residential Market Survey reports that demand has not outstripped supply to this level since November 2013. With new listings in short supply many buyers are willing to stretch their budgets to secure their dream home.
At SDL Property Auctions we speak to estate agents all the time and many tell us that some properties attract so much interest that they feel the need to limit viewings and request sealed bids or best and final offers. Demand is particularly high for rural family homes, as the pandemic has motivated many people to reassess their priorities, crave more green space and add a home office to their list of must-haves.
Buyers at this end of the market are generally in a stronger position to offer more than the asking price and sellers know this. They also know that sealed bids can send offers soaring. Rightmove’s June House Price Index reports that prices of properties in this sector have risen by an average of £67,394 since March 2020, an increase of 12.3 per cent compared to 7.5 per cent for all properties.
What are sealed bids?
Sealed bids are effectively a blind auction; nobody knows how much anyone else has offered, so buyers could end up spending more than they need to. While this seems like great news for agents and sellers, equally it could represent a missed opportunity if a potential buyer plays it safe because they didn’t realise an extra £1,000 or £2,000 would have done the job.
Plus, as in any private treaty sale, there’s no real commitment from the buyer – and if they pull out of the purchase, that best and final offer may not actually be the best one after all.
At SDL Property Auctions we are strong advocates for transparency and believe the fairest and most effective solution is to open up the bidding. We currently work with more than 1,500 estate agents around the country to do this through auctions, helping to generate income for their branches and secure great results for their customers.
Buyers and sellers enjoy all the benefits of competitive bidding but it is fully transparent, with bids clearly displayed on the property listing. This transparency draws in more bidders, and more bidders means a greater chance of the price being driven up.
Our auction bidding process can also reduce the fear factor for sellers. Buying or selling a house by private treaty is fraught with uncertainty, with longer chains increasing the risks of a fall-through as all estate agents are only too aware. No seller wants to ride the emotional rollercoaster of accepting a generous offer, only to have it fall through months down the line because the chain has broken somewhere along the way.
Reducing fall-through risk
In an auction the risk of the sale falling through is reduced to less than 1 per cent because bidders are fully committed to the purchase. And buyers cannot be gazumped as the seller is legally committed to their offer and nobody else’s. This is achieved by the buyer paying a reservation fee, which grants them a period of exclusivity, during which the buyer may not sell to anyone else. This also gives the buyer the option of paying no selling fees – a big incentive for many.
To everyone’s relief, there’s no long drawn-out process either; completion is within a fixed time frame; usually 40 working days, giving the buyer the flexibility to arrange their finance. It’s a myth that you can’t buy an auction property with a mortgage – plenty of people do.
Estate agents enjoy all the benefits of transparency, speed and certainty, too… with one huge extra plus. They get paid just seven days after the sale is agreed. Auctions generate a higher fee for their branch and they receive personal benefits, too, in the form of shopping vouchers for every referral that results in a sale.
By working closely with estate agents we are helping to dispel the many myths about auctions. Auctions often conjure up images of cheap, run-down properties snapped up by cash buyers but this is a view which has become very outdated. These days an auction property could just as easily be a modern family home or a beautifully styled country cottage.
Auction properties are as diverse as the buyers and sellers themselves; what they all have in common is that they are all sold securely within a fixed timeframe, with fully transparent bidding – and no hassle for anyone.