With a lack of housing stock more properties are being sold by way of sealed bids. In most cases a buyer's bid is to be given in a sealed envelope to the selling agent by a particular time setting out the prospective buyer's best and final offer.
The bids once opened are considered by the selling agents and seller, who then decide who has won the property. It is a misnomer to believe that it is purely a matter of offering the highest bid.
If you are asked to make a sealed bid, find out from the selling agents precisely what is required by the seller in the bid. This may include whether you will require a mortgage, have another property to sell, or if you are a cash purchaser. Also, attempt to find out from the selling agents as much as possible about the seller. If the seller is a developer it is likely that they will be looking for the person who can perform most quickly and offer the highest price. However, if the property is being sold by individuals it is helpful to know who they are and you can then provide as much information that may help sway them to accept your bid.
The personal touch sometimes comes into play and details regarding the future use of the property, for instance as a family home, may appeal to certain sellers who may like the idea of their home continuing to function in this way after they have left. I have seen a seller accept a lower offer because they liked the detailed letter accompanying a sealed bid about a family who wanted to live there with their children, who were already enrolled in the local school.
From a purely practical point of view, whilst all reputable agents will adhere to the timings given as to when the bids are to be opened, so that you have no doubt that your sealed bid remains so until the allotted time, you should consider hand-delivering the bid to the agents just before the allotted time.
If you do require a mortgage to purchase the property you should make sure that you have an offer in principle for the sum that you require. You can then advise the seller in your sealed bid that your mortgage arrangements are in place and that you have an offer in principle. You should have in mind that your mortgage lender will have a valuation done, but if you choose to offer substantially over the asking price and your mortgage lender’s valuation is lower than the offer price you have made, then the lender may not be prepared to offer the full amount of the loan. You would then need other financing or would have to try to re-negotiate the purchase price.
As to the amount that you should offer, you should consider speaking to a local surveyor/valuer (other than the selling agents). Surveyors can check prices that have been achieved within the locality and can give independent advice on how much to offer for the property in its current condition.
It is also important to ensure that you can advise the seller in your bid that you will be ready to proceed quickly. You should consider having a surveyor ready to carry out a survey of the property.
It is also worthwhile having your solicitor look at the documentation in the Home Information Pack. Your solicitor can also undertake any additional searches and advise you of any potential issues before you make your sealed bid. You can then include in your sealed bid that you have already instructed your solicitor, who has looked through the papers currently available and hopefully advise that they have no major issues and that you, therefore, anticipate being able to exchange contracts quickly.
As with any offer for the purchase of a property in England, just because you may then win the sealed bids until you have actually exchanged contracts the seller can withdraw from the sale at any time or can try to increase the price. Whilst the conclusion of the sealed bids should be the end of the bidding process, in a market with a lack of properties it may in practice still not secure the property. As a buyer, you should consider asking for exclusivity for a period to allow you to exchange contracts.
Exclusivity agreements detail the period that you are to be allowed to exchange contracts, during which time the seller agrees not to deal with another party. Preferably these agreements should allow for the seller to repay the buyers costs, if the seller withdraws, or does not exchange when the buyers are ready within the exclusivity period. However, most sellers in a buoyant market will not agree to reimburse costs. You should also be warned that your solicitor may spend some time setting such an agreement and this may be time better spent by your solicitor doing the conveyancing. Even if there is an exclusivity agreement in place, the seller may simply wait until the end of the exclusivity period set out in the agreement and then proceed to sell the property to another party, particularly if a new offer is substantially higher.
The best advice is therefore to be as prepared as you possibly can be before you make your sealed bid. You are then in a position to outline this to the seller with the inclusion of any personal information that may sway them to your particular bid, making your bid as strong as is possible.
This article by Saskia Arthur first appeared in Coutts Woman.