What you need to know about sealed bids
With estimates of more than 100 buyers for every property on the market in London property agents are increasingly turning to sealed bids as the fairest way of distinguishing between multiple buyers putting in offers on the same property.
Ludlowthompson.com, the leading online and high street residential property agency, have produced a short guide to explain how sealed bids work and how buyers can overcome some of the frustrations of the home buying process.
The shortage of stock coming onto the market, combined with high demand and internet based marketing that can target hundreds of potential buyers means that there is now an unprecedented level of interest in almost all properties as soon as they hit the market.
Ludlowthompson.com explains that sealed bids, where all potential purchasers are invited to give their "best and final offers", ensure that property is sold for the right value and that all serious potential purchasers are given the chance to make an offer on the property.
Suzanne Gray, Director of Sales at Ludlowthompson.com, explains that selling a property on a ?first come first served basis? might allow an estate agent to complete a sale quickly but might not achieve the proper market value and would keep many potential buyers locked out.
How sealed bids work:
- Bids are made confidentially in writing within a specified deadline.
- Buyers do not incur any costs by entering a bid. To ensure that only serious potential buyers are involved the seller sometimes asks that bidders submit details of their solicitor, mortgage provider and other financing details.
- The bids are opened at the same time and presented to the vendor to ensure that all buyers are given an equal chance to have their best offer reviewed.
- There are occasionally reports that unscrupulous agents have passed inside information on other bids to a favoured buyer. Ludlowthompson.com says that this problem is exceedingly rare and that the chances of this happening can be reduced by using an agency that is a member of an ombudsman redress scheme.
- Bidders who can pay cash, are not involved in a chain or have a mortgage offer in place can be favoured by the buyer so make sure you mention this in your bid.
- As with the traditional method of home buying there is no legal obligation on the winning bidder to complete until they have completed their due diligence on the property and gone through the usual stages of "exchange" and "completion".
- There have also been reports that some buyers are offering vendors deposits of up to \'ef\'bf\'bd10,000 as part of their bid in order to secure the property before a survey or search takes place. Again, Ludlowthompson.com says that in reality this rarely happens and that bidders should be warned off from doing this. The agency says that this is a legal minefield and puts the bidder in a very risky financial situation, particularly if major structural problems are subsequently found.
- Where two or more bidders have offered the same price the result of the auction is sometimes decided by which potential buyer arranges a survey first. Try and find out from the agent what the buyer has told them will be the deciding factor so that you can be ready to move quickly.
Suzanne Gray explains that the criticism sealed bids occasionally receives from under-bidding buyers is unfair and based on a misunderstanding of the process.
Says Suzanne Grey: "Sealed bids give potential buyers the chance to view a property and the time to consider what value they would personally put on a property and what price they can comfortably afford."
"Without sealed bids I suspect buyers would become quite frustrated by this market."
"Advances in digital technology mean that you can market a property on the same day as the initial inspection by the property agent. Theoretically you could sell a property long before a "For Sale" sign has gone up or an advert has gone in the press."
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