If there is a lot of interest in a property and numerous offers are being made, you may choose to buy or sell your home through a sealed bid. But what are sealed bids and how do they work? Coming up, we’ll share everything you need to know about sealed bids.
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What is a sealed bid?
During a sealed bid, potential buyers simultaneously submit their offers in a sealed envelope by a specified date and time.
Nobody is aware of the other bidders' amounts, and it’s not always the highest bidder who is successful. So, it’s important to understand the rules if you are buying or selling.
How does the sealed bid process work?
Arrange your viewing just as you would with any other property, and if you are selling, find out how much your property is worth.
The property will be listed similarly to a conventional property listing, with the difference being that the agent will specify a date for buyers to make their sealed offers.
Potential buyers then write down an offer that they are prepared to pay in a sealed envelope, unaware of how much other buyers have offered.
When the deadline has been reached, the seller, being informed of all offers, will decide which offer to accept. This is not necessarily the highest price, as a cash buyer may be more favourable.
Can buyers change their minds after they have made a sealed bid?
In England and Wales, sealed bids are not legally binding, so buyers and sellers can pull out at any time.
What should your sealed bid offer envelope contain?
The price you are prepared to pay and details on how you will find the purchase - for instance, are you a cash buyer or will you be using a mortgage?. Anything you can provide as proof of your deposit or of funds if you are a cash buyer will help your chances.
You may decide to ask the seller, if your offer is accepted, to withdraw the property from further viewings. It’s also important to tell the seller why you love the house and would like to buy it. The seller may warm emotionally to your motives, and it shows how sincere you are about buying.
Top tip: Giving the seller your solicitor's details shows them that you are interested and ready to move may make you more attractive. After all, an organised and motivated buyer may reassure the seller that the sale will go through.
How do you decide how much to offer in your sealed bid?
Deciding on your offer price will take careful consideration, and you may only get one chance.
Familiarise yourself with the market and take a look at what other similar properties are selling for. Bear in mind that your agent can offer guidance before the sale but will not be able to reveal other offer amounts.
It’s important to plan your budget; you don't want to underbid or overbid and risk not being able to secure a mortgage on the property if the price becomes too high.
Can you make another offer after a sealed bid?
Final offers during a sealed bid often occur after all offers are considered and are conducted over the phone, so if another offer has been accepted, you may be given the chance to up your offer.
If your sealed bid is rejected, you may get a chance to increase your offer. Even if another offer is accepted, it may fall through, which is why it’s important to keep in touch with your agent.
Are there advantages to buying in a sealed bid?
Sealed bids can be a quick process, so if time is a factor, it may be a good move, and you may be able to buy with less negotiation.
Are there disadvantages to buying in a sealed bid?
Getting your sealed bid price right can be difficult; you may feel rushed. The risk of being gazumped also remains if the seller decides to accept a higher offer.
Selling in a sealed bid
If you have instructed your agent to sell your home through a sealed bid, it’s equally important to think carefully before accepting an offer.
You may want to move quickly and choose a chain-free buyer; it could be that you choose the highest bid or a buyer with a large deposit.
Remember, it’s best to agree on a time frame in which you will accept an offer and the other terms of your sealed bid sale in advance with your helpful agent.
Contact your local Ellis & Co agent today for all your moving needs.
