Sealed bids, when they are related to a residential property transaction, do not generally, come with a loving kiss, however, they are, in fact, a very useful device to be used at times when demand significantly exceeds supply, especially when it comes to that ‘special’ property, whether it is unusual or quirky, stunning or strange, in town or in the most remote spot in the country.
When there are three or more parties seriously interested in a particular property, purchasers are often invited to submit their best and final offer by a certain time and date.
Despite the current, rather low key property market climate and the correspondingly low property transaction levels, we are seeing a surprisingly significant number of properties going to sealed bids.
Estate agents don’t only use sealed bids for the top dollar property; it’s a method of sale used across all price brackets. But it’s a badly outdated system. In our view, they should be restructured, formalised and made more transparent.
The bid itself is important, but equally important is the dressing of your offer, demonstrating, at least, your ability to proceed.
Buyers should have to prove – in advance of making their bid – that they can immediately proceed, and, as when buying a property at an auction, a winning bid should be financially binding.
The current system of implementing a sealed bid process is, sadly, virtually impossible for the property buyer. Submitting the highest bid won’t necessarily secure the property for the keen purchaser; so, what happens is that the vendor and agent will weigh up all the information and make a choice on the basis of the size of the offer and the situation of the buyer.
You will note that at this stage, because it’s not a legally binding decision on either party, seller or buyer, if another eager buyer comes along, views the property an then sweeps in with a higher or better offer, it may all change.
PREPARING THE POTENTIAL BUYERS FOR THE PROCESS
If you should find yourself with a property that has several potential buyers, before leaping straight in with a sealed bid process, your hopeful buyers may better understand the system and each have a fair crack at preparing the winning bid.
You, as the vendor’s agent, will have to issue a set of ‘rules’ of the process.
It seems fair that the rules are read carefully, understood and adhered to, by all the bidders. Something along these lines sets out the stall:
- It’s probably better to try and get the vendor to accept an offer before it goes to sealed bids
- Your bid needs to be the top price that you would be comfortable paying. You should base it on this, rather than on what you think you need to pay to secure the property.
- The bid itself is important, but equally important is the dressing of your offer, demonstrating your commitment, ability to proceed and to exchange quickly, flexibility of terms.
- Be prepared to enter a beauty parade as well as a bidding competition. Vendors can choose their buyer; cash is king, but failing that, a buyer who has documented proof that they have immediate access to funds will move up the pecking order.
- Your bid won’t only be judged on the amount; it will also be judged on how easy you’re going to make it for the vendor.
- The more information you have about the vendor, their motivation and needs, the better, then tailor your presentation to fit.
- Get a survey done before the date for sealed bids, so your offer doesn’t have to be subject to survey. Again, this will make your bid very attractive.
- Attach a list of your advisors (solicitors, finance providers etc.) which will further reassure the vendor;
- Quiz and badger the agent to get information. It helps to know how many other bidders there are, where they come from, what else they’ve been looking at.
Agents cannot discuss bids — but they can reveal how many bidders there are, and what offers were made before the auction.
All this may help you assess how the bids are likely to turn out
- Don’t expect an immediate result – you may well not hear the outcome for three or four days, so spare yourself the pacing and stressing.
George Barkes is Regional Director of Stacks Property Search & Acquisitio, Cotswolds Office. Stacks Property Search & Acquisition. 01594 842880 / www.stacks.co.uk