Are Sealed Bids Always the Best Option?

When there is a lot of competition between potential buyers for a desirable, and usually rarely available, residence, estate agents will often advise the seller to go to "sealed bids". This means that potential buyers are asked to make their highest bids for the property by a certain date, without knowing what any other potential buyer is offering. Many people believe sealed bids are weighed heavily in favour of the seller as they are likely to secure a high price for their property but there are also advantages for the buyer such as getting a definite answer on whether the property is theirs or not; often a better option that competing with another buyer to exchange contracts first where there is no certainty.

However, buying a property via sealed bids is not without its risks.

Let's say threedifferent people wanted to buy the same property and all were willing to offer the asking price. Many estate agents would think this was an obvious case of going to sealed bids but each situation should be viewed independently as there can be good reasons for not going to sealed bids.

All things being equal, a sealed bids situation should mean that the seller gets the highest possible price for their property and the deal can be completed quickly. But what if the seller is already interested in another property but has to move quickly to secure it. Would that seller rather get the new property but, maybe, accept slightly less for their existing property if the buyer could agree to move quickly to exchange and completion? Decisions about homes are not purely financial and this should always be taken into account by both seller and buyer.

If a property goes to sealed bids and the highest bid is from someone who cannot move quickly, or has yet to secure a mortgage in a difficult economic environment, then what would the seller have achieved? Ultimately, a sale was not based solely on money but there must also be an element of common sense and give-and-take.

Where there is competition from more than one buyer for a property both estate agent and seller should look at what other factors could contribute to a decision being made. This avoids the situation where a buyer feels they have paid more than the property was worth (a common scenario in sealed bids) and the seller gets the right "package" to allow their move to a new property to proceed quickly and without any hiccoughs.

More and more deals are falling through after they have gone to sealed bids so it is not always a situation that offers certainty as in England and Wales the agreement to slee ad buy is not binding until contracts are exchanged.

The best buyer does not always emerge from the sealed bids process and buyers do feel ‘ripped off’ by the process. Buyers can bid beyond their means in an attempt to beat off the competitors and then be unable to secure an adequately large mortgage to complete the purchase so many of these deals collapse. Or even if they can secure the the right mortgage they may simply feel they are paying too much.