Sealed bids submissions have increased by 56%

Ocean Finance consults with property expert to reveal an increase of 56% in the number of people using sealed bids strategy to buy.

This week, The Office for National Statistics (ONS) announced that the average price of a house has risen by £39,000 in the last year. Now costing an average of £292,000 – this is the fastest rate of acceleration since 2003.

Along with low mortgage interest rates and the emergence of remote work – one of the main reasons for rising house prices is due to the implementation of sealed bids.

Ocean Finance have delved deeper into this house-buying strategy and consulted with industry experts to reveal:

- What a sealed bid is, and why it works
- How many more Brits are carrying out sealed bids
- Six tips for making your sealed bid a success
- The process of a sealed bid

Ocean Finance spoke to James Elcalfe from Lennon James Property:

“During the property boom around the pandemic, we saw sealed bids increase significantly. It tends to be the case that sealed bids become more commonplace in a rising market, as they’re useful for making a quick sale.

“They’ve generally remained common since the summer of 2020. From the data I have, it seems to be up around 56% compared to 2019 [pre-pandemic]. We expected sealed bids to drop off after a few months, yet the market just continued to become more feverish and property sales continued to boom.

“I would say the peak was around April 2021, carrying on throughout the summer of 2022.”

What is a sealed bid, and how does it work?

A sealed bid is a process used for buying and selling properties. It’s used when there are numerous people interested in a particular home or even a commercial space. Bidders submit their best offer to the estate agent without knowing what anyone else has offered. Bids are all opened at the same time, on a set date.

The seller will then decide which offer they want to accept. Usually, this will be based on the highest price; however, other aspects may be considered, including deposits, property chains, cash or mortgages, and even personal circumstances.

Six tips for making a successful sealed bid:

Although it’s often the case that the highest bid wins, there are tips and tricks you can use to improve your chances of putting in the winning bid, while avoiding paying too much.

1. Ask questions about your competition

James Elcalfe advised:

“I would strongly recommend speaking to the estate agents and asking how many people have placed a bid. If you know how many people you’re competing against, it can help to clarify how intense the competition is for the house and in turn hopefully help you to place the best bid.”

2. When bidding, use a non-rounded number

James said:

“I’d recommend bidding a more unusual number, just above a rounded figure. You might want to bid £100 or £1,000 over a traditional price, such as £401k rather than £400k, as many sellers will simply take the highest bidder and this would then be you by a fractional margin.”

If you go over a number rather than below, even if it’s only by £100, you are likely to increase your chances of submitting the winning bid.

3. Research the maximum price of the street before bidding

Sealed bids tend to push up the price, but there are several ways you can avoid this when putting in your bid.

Dave Sayce, the Managing Director of Compare My Move suggested:

“The best piece of advice is to research the current property market. This can give you an idea of what to offer, ensuring you don’t under or overbid.

“Buyers can also consult with the seller’s estate agent to get an idea of how much the seller ideally wants for the home. Keep in mind, however, that the estate agent will want to achieve the highest price possible.”

Check the amount the property has previously sold for, the maximum price or ‘ceiling price’ of properties on the same street, and what has sold recently in the area to get a better idea.

4. Take a step back and think logically before bidding

As tempting as it can be to overbid to win, avoid bidding outside your budget. If you do win, then you may not be given a mortgage for the amount you need if the lender determines that it would be unaffordable for you, and this may waste the time of the sellers, the estate agents and, of course, yourself. You could also lose money if the property prices decrease and leave you in negative equity.

James said:

“The fact that you’ll only get one chance makes many people nervous and overbid, but I’d recommend taking a step back, not allowing emotion or your love for the house to take over, and look at it rationally: what is it genuinely worth and can you afford that bid?”

So, before you bid, you should work out the exact deposit and mortgage you can afford, and ideally have a decision in principle from your mortgage lender. This will help you to make sure any offers you put in are accurate, and you’re less likely to come unstuck later.

5. Write an emotive letter to include with your bid

Adding a personal story when submitting a sealed bid can be helpful and may sway the decision in your favour. But how much difference can they make?

Dave advised: “In your bid letter, it may be helpful to include details such as what drew you to the home. For example, if you feel it is the perfect place for starting a family. This shows you have put serious consideration into purchasing the property.

“They’re not always taken into consideration and many sellers will just want to see the highest offer, but some will be interested in the situation of the buyer. I know many sellers that would rather sell to a family than a developer, knowing the home they put so much effort into will make someone truly happy.”

Additionally, letting the buyer know about anything else that could give you an advantage, such as if you’re a cash buyer, you’re not in a chain, you have a mortgage in principle or proof of deposit, and so on, can help to improve your chances during bidding.

6. Submit your offer early

As soon as you decide on the value you’d like to offer, put it in. This can give the impression that you’re organised, something that’s pretty important to prevent delays during the process of buying and selling a home. Committing to your bid as soon as you’ve made a decision can also help to stop you from second-guessing yourself and talking yourself into a higher bid that may be outside of your budget.

What’s the sealed bid process?

The process for sealed bids in England, Wales, and Northern Ireland differs from the traditional process for making an offer on a home. Bids are collected by the estate agent and are opened at the same time on a fixed date, rather than put forward to the seller immediately once they’re made. Also, bidders don’t know how much other parties have put forward.

This is how the sealed bids process typically works:

The property is marketed as normal, but if there’s a lot of interest and the seller agrees, the estate agent will ask for sealed bids to be submitted by a set date and time.
The bidder writes down their offer and puts it in a sealed envelope and gives it to the estate agent. Sometimes this may be done by email.
After the deadline, the bids are opened by the estate agent and passed to the seller who will decide which, if any, offer they’d like to accept.
If two bids are the same, or the seller isn’t sure which offer to choose, it may go to the second round of bids, or the estate agent may ask bidders to submit their best and final offers.
The estate agent will contact the winning bidder.
The usual process for buying a property will resume after the bidding process has ended.

Sealed bids in Scotland follow a different process and are used whenever a property has more than one offer. It’s known as ‘blind bidding’ and is thought to increase prices by over 20% in sought-after areas.

Sellers ask for offers over or around a minimum price. The potential buyer will submit an offer through their solicitor along with a moving timescale, and the winning offer is announced on the same day.

The full guide can be found here.

Kindly shared by Ocean Finance

Main photo courtesy of Pixabay