Sealed, or blind bids, are typically skewed in favour of the vendor. For the buyers, however, the experience can prove stressful as the highest bid is no guarantee that you'll secure the property. Vendors and agents will collate all the relevant information and make their choice on the size of the offer as well as the individual situation of the buyer.
Taking this into consideration and with the volume of sealed bids clearly on the rise, newly released research from Ocean Finance looks into the sealed bids strategy and consulted property experts to help give buyers the best chance in the currently frenetic property market, adding insight from James Elcalfe of Lennon James Property who highlighted that sealed bids have remained common since the summer of 2020 - up around 56% compared to 2019.
What is a sealed bid and how does it affect buyers?
When numerous people are interested in a particular home estate agents often employ a sealed bids strategy. Sealed bids are where 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.
Sealed bids are a great strategy for sellers however it can be challenging for buyers as prices can become inflated due to people bidding over the asking price to secure the house.
Six tips to make 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 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, 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.
