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What are sealed bids?

Thu 03 Feb 2022

Bothams have recently sold a number of desirable properties, such as 386 Ashgate Road, which have attracted significant interest from potential buyers. With buyer demand at an all-time high and a limited supply of houses on the market, we are noticing more properties going to ‘sealed bids’.  Here’s our guide to dealing with properties that go to sealed bids to give yourself the best chance of success. 

What are sealed bids?

If you’re looking for a home in a property ‘hotspot’, you’re may find that you’re up against some competition when it comes to making an offer.

Often, when there are multiple offers on one property, the seller will choose to go to ‘best and final offers’ or ‘sealed bids’. This means that prospective buyers will be asked by the estate agent to submit their best offer in a sealed envelope on a set date.

All the bid amounts remain secret and the highest (or most attractive) bid is declared the winner.

Are sealed bids a good idea?

It depends on your point of view. Sellers often welcome the prospect as they think it will boost their final sale price. Buyers dread them as it can be a difficult process to navigate and you’re left with very little control.  

If you really want the property, it’s tempting to put in a very high offer with the hope of securing it, but this can lead spending more than you planned to, or even spending more than the property is actually worth.

Even from a seller’s perspective, it’s not ideal. Once you have a winning bid on the table, how do you know that the other participants wouldn’t have bettered it, if they’d been given the opportunity?

How to manage a sealed bid

-          Make sure you’ve done all your research on the property in advance, and viewed it at least twice. Your bid isn’t legally binding until further down the line, but you need to know you definitely want the property

-          Find out how many other buyers you’re up against

-          Understand how much the property is worth and the approximate cost of any required works on it

-          Know how much you can afford and want to spend

How much should I offer?

Your best and final offer will be determined by all the information you’ve gathered (see above), your knowledge of the local market – and of course – how much you want the property!

You don’t want to regret losing the property because you didn’t bid that little bit extra. That said, you should never bid more than you can borrow or more than you believe the property is worth. Your mortgage provider will have good reason to turn you down if their valuation doesn’t match up with the sale price.

Never use a round number for a sealed bid. If you’re offering in the region of £350,000 as your best and final amount, make sure your offer is something along the lines of £350,325. That way, you might just have the edge on the competition, even if it’s by a small margin.

How to submit a sealed bid

The selling estate agent will give you all the necessary instructions, but typically, you’ll be given a date and asked to submit your bid in writing, either by email or in a sealed envelope. Try to hand-deliver it if possible to avoid the risk of postal delays.

Remember to include any information that could swing the decision in your favour. For example:

-          Are you a first-time buyer with no chain?

-          Are you a cash buyer?

-          Do you already have a sale agreed on your property? If so, indicate how far along you are in the process and give an approximate timeframe for how long you think it would take to complete

-          Are you willing to rent while you wait for the sellers to complete their purchase?

-          State your commitment to the property

It’s also worth including copies of documents such as your mortgage agreement in principle, or proof of funds if you’re a cash buyer.

The outcome

You should find out fairly quickly whether you have been successful or not. If you don’t win, there are a couple of things you can try. It’s a remote possibility but it’s worth asking the agent if there’s an opportunity to increase your bid. And if not, make sure you let the agent know that you’d be interested if the winning bidder doesn’t end up proceeding.

If all that fails, don’t be too disheartened. There are lots of other properties out there, and you will have gained valuable experience from this process. You’ll get it next time!

For help with buying or selling a property, talk to Bothams on 01246 233121 or visit www.bothams.co.uk