Sealed Bids

With competition for houses becoming more and more frenzied in popular areas, there has been an increasing tend for vendors to use the sealed bids system, where interested buyers must put their offer in writing by a certain date. The bids are then opened and the highest one (usually) wins. The sealed bid system is more common in Scotland, but the numbers of homes sold this way in the UK as a whole rose by 30% in 2006, with approximately 25% of houses in some areas of London, the South-west and East Anglia going to sealed bids.

The sealed bid system poses a problem for the buyer; you cannot be certain where to pitch your offer as you are unaware of your competitors' bids. There are no rules as to how much above the guide price you should offer, so you will have to judge what you think the house is worth, and what you are willing to pay, and bid accordingly. However, this often means that buyers can end up having to put bids in far excess of the asking price in order to secure their home.

There are two kinds of sealed bids, a formal or an informal tender:

Formal Tender
The sale is complete and binding on both parties once the bids are opened and a bid is accepted.

Informal Tender
A sealed bid is subject to a survey and contract, and either party can withdraw until contracts are exchanged.

Sealed Bidding Tips

Bidding blind requires nerves of steel and a cool head. The following tips can help you to win the property of your dreams without breaking the bank.
Make sure that you have your finances in place before making an offer.
If possible, find out how many people are bidding against you; this can help you to decide how much to bid.
In your bid, you should explain your buying position fully, emphasising any positive points: for example, that you are not in a chain or that you are a cash buyer. It's worth noting that it's not always the highest offer that is successful as other factors such as speed and ability to proceed and complete can be more important to the vendor.
Include details of you financial situation, such as information about your lender or a letter from your bank or building society if you are a cash buyer.
Don't overbid - only offer what you believe the property to be worth and what you can afford.
If you offer more than the asking price, make sure you can cover the difference, as your lender may not cover the amount you have bid.
Always offer an odd number of pounds and pence rather than a round sum, as this will help to prevent a tie with other bidders. For example £200,201 will be more effective than a rounded £200,000.
Make sure that you put "Subject to contract and without prejudice" at the top of your written bid.
Remember, even if your bid fails, you can still often negotiate with the vendor.

Bids with reference to another bid level (for example, "£1,000 above the highest offer") are normally forbidden. However, if the agent has failed to say they will not accept referential bids, then you are free to make such a bid and the agent is legally required to pass it on to the vendor, who will usually accept.