Property sales have many moving parts.
This causes difficult situations to arise.
One is when multiple potential buyers make offers on the same house simultaneously.
Fortunately, there’s a tried and tested solution for this: Sealed bids.
Sealed bids: A definition
In property, sealed bids are offers from competing potential buyers made at a seller’s deadline.
These offers include a figure the buyer is willing to pay. They might also include other information, such as:
- Whether this offer is cash
- Their time-frame for completion
- Whether or not they want furniture included in a sale
- Evidence of the buyer’s ability to pay.
Sealed bids are made in the knowledge of all involved that competing bids are being made at the same time.
However, bidders won’t know what the other bids are – only that they will have been given the same guide price.
Sealed bids vs. regular offers
Sealed bids contain the same information as regular offers.
However, regular offers, by contrast, can be made at any given time and they can be negotiated more freely.
So, there is usually urgency for buyers to increase their offers. And they can be told if others have made offers (and what those offers are).
Deciding on accepting offers
As with regular offers, the sealed bid process ends with sellers deciding which bid to accept.
This will often be based on what the highest bid is. But sometimes it comes down to other factors.
For example, one bid might be from a cash buyer (which is stated in the bid). This would speed up the sales process and add certainty to completion.
(By contrast, buyers have to wait for mortgage approvals, which they might be unsuccessful in getting.)
Or a bid might be from someone the seller had a good rapport with and simply trusts more than other bidders.
Are sealed bid processes legally binding?
Unless a specific contract has been set up (which is rare), sealed bids are not legally binding.
In other words, bidders could still pull out after winning a sealed bid process. Or buyers could change their mind and decide not to sell to any bidders.
There’s rarely any benefit from any party involved to not seeing through the process though. So, it rarely happens.
Channels for making bids
Sealed bids were originally submitted in sealed (enclosed) envelopes. They could then be opened together to ensure an impartial deciding of the winning bid.
Today, this method is sometimes used. But many also use emails or online portals, instead.
Bids are often handled by estate agents. Though the final decision is still with the seller.
Advantages of sealed bids
Sealed bids suggest a sense of urgency to buyers. It shows them that other buyers are interested, and that the seller is at the stage of seriously considering offers.
This in turn speeds up the selling process and adds certainty to it.
From the buyer’s point of view, sealed bids also increase transparency. They know that sellers know they are in competition and so are more likely to best honest about their offer.
In other words, they are less likely to try negotiation tactics common in regular offers.
Disadvantages of sealed bids
Sealed bids might limit who views the property.
Some potential buyers might be unwilling to take part in it because the competition implies uncertainty.
They are also vulnerable to manipulation. Bad actors might suggest a price they are unwilling to pay to win a sealed bid before gazumping owners with lower prices.
Sealed bids vs. auction bids
Bids in property auctions are done in the open. This enables others to get a sense of the competition and make higher counterbids.
Sealed bids offer a more uncertain but simpler process. Other biddings don’t know what one another’s’ bid is, so bidding wars are less likely.
So, sealed bids are closer to ‘blind auctions’ than they are regular auctions.
Having trouble getting offers?
Sealed bids help when there are multiple interested buyers. They can also speed up the house sale process.
However, sometimes sellers have trouble finding buyers or finding buyers that can complete in their time frame.
This is where cash house buyers like We Buy Any Home can help.
We provide free, on-obligation cash offers that enable sellers to sell in a fraction of the time possible on the open market.
