Camilla Dell, MD of property consultants Black Brick Property Solutions, gives her advice for buyers dealing with sealed bids.
Despite recent excitement about price rises, the truth is that this seeming ‘improvement’ in the market is a symptom of a distinct lack of supply. On a day-to-day basis we are seeing the result of this unbalanced ratio between the number of buyers and the amount of housing stock available – one of which is the noted increase in sealed bid situations.
Sealed bids have certainly become commonplace again, particularly in prime areas of London and in the £850,000 to £2.5 million price range, where equity rich domestic and international buyers are battling against one another to secure the best properties in the capital. At Black Brick we are not only able to advise our clients on how best to deal with these situations, but also add credence and advantage to their bids just by being on board. A buyer who has employed a buying agent will always be considered a serious buyer, as they have already made an investment towards their property search.
However, for bidders with or without an advisor in tow, there are certain things they can do to increase the chance of their offer being accepted.
It’s important to remember that the winners of sealed bids are not always the highest bidders. Sellers will not only consider the price, but will look at a whole host of other factors that demonstrate the quality of the buyer – the ability to proceed with the transaction, the availability of and dependence on finance, for example.
Making the bid
It is up to the bidder to develop an attractive buyer profile and these are my top tips for bidders:
- A supporting letter from a respected conveyancy solicitor, written and submitted on your behalf, will present you as professional and serious. Details on your ability to proceed with the sale, for example whether you are a cash buyer or have finance in place, whether you have sold your current home or are bound by any rental contracts, should be included.
- Provide proof that bank finance is already in place if you need it to make the purchase. A supporting letter from the bank confirming this will help to show that you are a serious buyer, and are ready to proceed with the purchase.
- To show you are committed and able to proceed quickly, offer to put down an immediate non-refundable deposit if your bid is successful.
- Appeal carefully on a personal level. If possible find out about the vendor and add details in your bid that might appeal to them and suggest common ground. A succinct statement on why you want to buy the property will add a human element.
The matter of how much a buyer should bid is a tricky one and one that buyers can spend sleepless nights worrying about. The most important thing is to remember that there is only one chance to secure the property. Therefore, unless the bidder is a developer, the true value of the property as ‘bricks & mortar’ can be difficult to determine, and it becomes a matter of how much you are willing to pay for the property.
Bidders should therefore put their absolute best offer forward, offering the maximum price that they are willing to pay, feel comfortable with, and can afford.
A neat trick is to try to ascertain from the estate agent how many other people are involved in the bid, and what sorts of buyers they are. Developers, for instance, will only bid what they feel the property is worth and will rarely go beyond that in order to maintain their profit margins. First time buyers may be in good position to move, but may be very dependent on bank finance. Cash buyers will be at an advantage often despite the price they are offering, so those bidders reliant on finance might like to raise their offer if they can, to help counteract this advantage.
Sealed bids are a stressful process for buyers, and as they are not legally binding, there is still the chance that the winning bidder can be gazumped. The faster that contracts can be exchanged and completed the better.