How do sealed bids work?

by Readers Question

9:44 AM, 2nd October 2014
About 4 years ago

How do sealed bids work?

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How do sealed bids work?

A property I like is under offer by sealed bids, my question is; is there just the one chance to submit your offer and the agent takes the highest or do the agents come back to ask for further higher offers e.g. if there are several offers round about the same amount? In other words, are they allowed to weed out lower offers?

Also, if a bid under the asking price is agreed does this remove the property completely from the market, viewings, offers etc, (subject to completion of course) or is it still on the market after the offer has been accepted even if not yet completed? How do sealed bids work?

Many thanks

Tessa



Comments

John Daley

12:33 PM, 2nd October 2014
About 4 years ago

Sealed bids are a form of auction but unlike an auction when the bids are opened the deal is not binding on either party until exchange.

They used to be a way of getting the best price for odd or unusual properties, in that the market would tend to undervalue what it couldn't understand. Is some cases one particular buyer would want the property for a particular reason and therefore bid higher than the average.

Recently it has become a way for agents to exploit desperate buyers by making them overbid for the property. This is particularly hard on cash or high deposit buyers as the mortgage valuation provides some sort of reality check and this doesn't really work where there is limited borrowing for a property.

If you like the property bid what you think it's worth. If your bid is accepted you are not really any further ahead than in a normal sale with an agent.

Paul Baker

16:18 PM, 2nd October 2014
About 4 years ago

Hi, I recently experienced this when I, along with four other parties (according to the Estate Agent) were interested in a small holiday let property in Norfolk. It was up for sale at £155k.
The agent said we would all have to go to sealed bids, I went to £161k.
Two days later the agent said we would need another round of sealed bids for' best and final offers'. I could see where this was headed and so 'only' offered £162k.
I was unsuccessful and the agent wouldn't tell me what the highest bird was other than it was in the £170k's (for a £155k house remember!).
So in answer to your question, in my recent experience, a sealed bid may not necessarily be the end, it may just be the first round of doing all over again so as to extract the highest possible price from desperate buyers.
My advice would be to keep your head and only bid what you think it's worth.

Graeme Boddy

11:09 AM, 3rd October 2014
About 4 years ago

Sealed bids are an auction with the bidder flying blind - and puts the Agent in total control of the sale. Having experienced this form of sale from both sides - it is a system to ignore and I believe this is generally accepted by the experienced market.
If a buyer participates in this form of auction - you have already made yourself vunerable by declareing yourself to be a highly motivated purchaser [ or maybe having a below market punt ] and thus Agents simply treat you as a stalking horse. Your bid then gets hawked around by the Agent in 2nd and 3rd verbal auctions - with no-one but the Agent being in control of bid information.
You may get the property but you will have paid full value + for it.


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