Buying a property can be a complex process, particularly when the market is competitive, and several other people want to buy the same property. In these situations, estate agents often decide to employ the sealed bids process, to avoid a protracted bidding war and to provide a level playing field for all interested parties.
This article aims to provide clarity on the sealed bid process and guide potential buyers through the steps and strategies required for a successful property purchase using this method.
What Is a Sealed Bid When Purchasing a Property
Offering via sealed bids is a process where multiple potential buyers confidentially submit their best and final offers, traditionally in sealed envelopes, without knowing the details of the competing bids.
This method of bidding is usually selected when a property is highly sought after by several interested parties. It allows each prospective buyer an equal opportunity to present their buying position and best offer to the seller.
Outline of the Sealed Bid Process
When participating in a sealed bid process, buyers must research the property and the local market thoroughly to help determine an appropriate bid amount. Additionally, they should consult with a solicitor and mortgage lender to ensure they have all the necessary documents and finances in place.
The seller, usually through their estate agent, will set a deadline for the sealed bids to be submitted. Buyers should prepare their offers well in advance, ensuring they include any special conditions or terms. Once the deadline has passed there is no opportunity to amend the bid. It’s important to include all the information the estate agent has asked for in the bid and confirm how they wish it to be submitted: email is becoming more popular.
Once all bids have been received, the seller will review them and select the most suitable offer. Although the highest bid is typically accepted, other factors such as the buyer’s financial position, ability to be flexible, and likelihood of completing the purchase may influence the decision. The winning bidder will be informed, and the transaction will move forward to the conveyancing process.
How Sealed Bids Differ for Properties in Scotland
In England and Wales, sealed bids are mostly used when multiple buyers are interested in a property. However, Scotland’s property market mostly operates under the ‘offers over’ system, which is very similar to sealed bids.
Sellers list their property at a minimum price and invite offers over that amount. All potential purchasers must engage a solicitor to submit their offer or sealed bid. Once the property has been marketed long enough to ensure a fair chance for all interested parties to participate, a deadline is set after which the seller will consider all the offers.
Sealed Bid Letter Template
When submitting a sealed bid for a property in England or Wales, it is essential to provide a professional and well-structured letter. The estate agent will usually inform all interested parties what information is required to be included for the bid to be considered, this includes:
The property address
The offer amount in numbers and words to avoid confusion
Your solicitor’s details
Proof of funds or finance
Whether you have a property to sell and any related chain details
Any conditions and timescales
Your name and contact details
If appropriate, it may be beneficial to add a personal paragraph describing how you feel about the property and what it would mean to be successful in securing it as your next home. This can be very effective if the seller has similar offers to choose from and it may just make yours the most appealing.
How to Decide How Much to Offer with Sealed Bids
When deciding how much to offer for a property it is essential to research the local market. Find out what similar properties in the area have sold for recently, consider the property’s condition and whether similar properties are easily available to buy or if there is a rarity value. A property in need of renovation may warrant a lower offer, while limited availability may require a higher bid to secure your dream home.
Most importantly, obtain professional advice to assess your financial position. It’s crucial not to allow emotion or the competitive nature of the process to affect your decision-making. Be realistic about how much you can afford and don’t stretch your finances too thinly.
What Should You Do If Your Sealed Bid Is Rejected
If your sealed bid is rejected, try not to be too disheartened. Obtain feedback from the estate agent to understand why your bid wasn’t successful; it may be that you can make yourself a more attractive prospect for the next suitable property. Maintain contact with the estate agent in case the chosen buyer is unable to proceed.
Advantages of Sealed Bids
Sealed bids ensure fairness in the bidding process, as the details of the bidder and the offer are kept confidential from all parties until after the deadline, so no unfair advantage can be gained.
Each prospective buyer has an equal opportunity to submit their best offer without the influence of other parties or offers already made.
Disadvantages of Sealed Bids
The sealed bid process can be time-consuming for both the seller and bidders, as prospective buyers need sufficient time to research and prepare their offers before the deadline. The seller may need time to evaluate the offers, especially if they are similar.
Sealed bids are inflexible because they are a prospective buyer’s one chance to present their best offer. There’s rarely further negotiation.
From a buyer’s perspective, offering via a sealed bid may mean paying significantly more than the next nearest offer. This is why researching the property’s value is important; your offer may be higher, but if the figures stack up you can be confident you’re not over-paying.
Garrington Property Finders
Garrington’s consultants are professional property finders experienced in dealing with all methods of property buying including the sealed bid process.
Please contact us if you would like any help or advice to find your next home.