Selling a home can be a complex process, and one method that is becoming increasingly popular is sealed bids. But how do they work, and how to consider sealed bids? This blog covers everything you need to know as a homeowner selling your home.
What are sealed bids?
When demand in the property market exceeds supply i.e. homes available for sale is often referred to as a ‘sellers’ market’. This means there are multiple buyers interested in individual properties. When this is the case it can be hard to know which buyer to proceed with so your estate agent might suggest you ask all interested buyers to put forward their ‘best-and-final offers’.
By introducing a ‘sealed bid system’, you can ask potential buyers to submit their offers confidentially by a specified date. Each bidder submits their best offer in a sealed envelope or through a secure digital platform outlining their financial offer and other points that might help secure the property. Other than the financial amount other factors might be how quickly they can move, if they are chain-free or if they can offer you an extended time if you haven’t yet found anywhere to move to.
All bids are then reviewed by you and your estate agent for you to then decide who to consider selling your property to.
Sealed bidding procedures
So, how to consider sealed bids exactly? A sealed bid offer should provide as much information as possible from prospective buyers.
Bids should be in writing or email, and you can stipulate what’s included. You need to be able to establish as far as possible how proceedable and committed the buyers are. You want to avoid any reason for your transaction falling through later down the line.
Things you might want to see in sealed bids:
- Do they have a mortgage offer in principle who from and how long has it been in place?
- How much of a deposit do they have?
- Do they have a property to sell and is it under offer?
- Are they in a chain? If so, what stage are they?
- Are they chain free i.e. a first-time buyer or currently renting?
- Have they engaged a solicitor? If so, ask them to provide details.
- When would they ideally like to complete and move into the property?
If you haven’t already, engage a reputable solicitor for your onward conveyancing.
The role of an estate agent in closed bids
Your estate agent will manage the process from start to finish and provide you with advice and guidance thereafter. Below is an example of some of the things they will do for you:
- Outline the submission deadlines and procedure with all interested buyers.
- Ensure that all bidders are treated equally and that the process adheres to legal and ethical standards.
- Collect and manage the bids.
- Review received bids with you and offer recommendations on local market conditions based on your priorities.
- Notify the successful buyer and the other participants.
- Negotiate any further terms or conditions if required.
- Coordinating with solicitors and lenders to ensure the sale proceeds smoothly.
What are the advantages of sealed bids?
Sealed bids are a way to avoid time wasters, as only those who have a high level of interest will make an offer. Asking potential buyers to submit sealed bids can create a competitive environment, which may drive up the final sale price.
What are the disadvantages of sealed bids?
Best and final offers can drive prices up – although this might sound like it’s not such a bad thing, it can have its downfalls:
- Irrespective of what’s been agreed the buyer’s lender might decide the price is over-inflated and withdraw their mortgage offer forcing the buyer to pull out; Or
- A buyer might get carried away with the bidding process and on reflection have second thoughts and withdraw their offer.
Closed bid tips for sellers
1. Look beyond the price – what are the circumstances of the buyers? Are they genuine, proceedable and can they back up their offer and position?
2. Lean into the expertise of your sales agent, they’ve managed these processes many times before and likely had contact with the buyers. Use the expertise and advice to help you decide on how to consider sealed bids and go with the most suitable buyer for your home.
3. Don’t get carried away with the thought of selling your property above its perceived value, as you run the risk of your sale falling through.
If you haven’t already, engage a reputable solicitor for your onward conveyancing.
Last Updated: June 21st, 2024
