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Sealed Bids: A Tough Choice for Buyers

Wednesday, 3rd July 2013

Categories: Property Prices Sales

Author: Peter Barry

If you fell in love with a house, how much extra would you be prepared to pay in order to secure its purchase? It might sound like an after-dinner discussion point but in a seller’s market it is one that serious buyers increasingly have to ask in reality.
 
Although based on carefully considered research of current markets, local knowledge and the condition, specific location and desirability of the property, an asking price is only ever really a guide – a starting point to get potential interested purchasers through the front door. If interest is low, the sellers need to move quickly, or the property has ideas above its station then obviously the actual purchase price could be far less than the asking price. On the flipside, if demand is incredibly high and there is a shortage of similar properties in the surrounding area, there is nothing to state that the purchase price can’t exceed the asking price.
 
So, what happens when numerous buyers make an asking price offer on the same property over a short space of time? Well a vendor might decide to wrap up proceedings by simply going with the first offer on the table – a first-come, first-served approach. But if the assumption is that the scale of demand for the property means it is actually worth more to purchasers than the listed asking price, vendors will often be advised to invite sealed bids.
 
This basically means that all interested parties are invited to submit their best and final offer for the property to the acting estate agent by a specified time and date. The bid will often also require details of their current situation. For example, do they have a property to sell? Do they have a mortgage in place? How quickly could they proceed with a sale? All this information is relayed to the vendor, who will then make an informed choice based on offer price and accompanying information. They might feel that a lower offer from a purchaser, who is chain free and has a mortgage agreement in place, is more attractive than an offer from a purchaser in a long chain.
 
If you find yourself in a sealed bid situation, remember the following:
•    List the advantages of your offer – chain free, large deposit, mortgage agreed etc
•    It’s easy to get carried away in the moment so don’t offer more than you are comfortable paying
•    Don’t let your heart rule your head
•    If your bid doesn’t win, ask to be kept informed – not all purchases go through and a mortgage provider might not agree to fund an offer that values the property way above the ceiling price for the area