The property market in Scotland works differently to other parts of the UK. On the one hand, it saves you from gazumping – but it also means making a commitment early on.
How it works
Properties are marketed for a specified period – usually two to three weeks. During this time, prospective buyers can view the property as many times as they like.
Interested parties place their offers – usually above a guide price – in an envelope and give it to the estate agent at a specified date and time. Once the deadline is passed, the envelopes are opened to reveal the highest bidder.
In theory, gazumping can be avoided. And where there are three or more keen buyers, a sealed bid will save time, trouble and money, assuming it’s all carried out in good faith. No one needs to get caught up in the long-winded offer and counter-offer process.
It’s great for buyers as they know that the vendor is not going to sell before the specified date, so they don’t feel rushed into putting in their offer. And if you are not around to view a property immediately, you still won’t miss out on the opportunity to buy it.
It’s also good for sellers as they will be able to identify the buyer most suitable for them.
It’S not all cut and dried. Sellers don’t always go with the highest offer and may talk to a “losing” bidder with ready money or no chain involved. And it all depends on the honesty of agents in keeping offers secret.
As a buyer you may well end up being forced into paying a higher price for the property to ensure you win the deal. There have also been allegations of agents ensuring that property developers win auctions in return for a cut of the profit.
Sealed bids have no legal status which means that supposed winners can still be gazumped. However, there are developments which will help make the process less problematic.
Sealed bids tend to come and go depending on the state of the market. They become much more commonplace when there is a supply problem or if the property is unusual and agents are unsure how to price it. It is about the type of home involved and the demand for that property.
For example, in a place where there is a relative shortage of a particular property – for example in a town where there is a big demand for family houses but there are mainly flats for sale – you get a situation where the family houses go to sealed bids and not the flats.
Seven steps to help you seal a deal
- Get your finances organised before you make an offer so you can move quickly once you decide you want to bid on the property.
- Find out how many people are bidding against you – it will help you decide how much to bid as the more in-demand the property, the more it is likely to fetch.
- Make sure you explain your buying position fully in your bid, emphasising the positive points – such as lack of a chain or if you’re a cash buyer.
- Aim to bid a little higher than your competitors, which means you usually need to bid more than the asking price.
- Don’t bid a rounded figure – try an odd amount (like £200,101) to avoid a tie with other bidders which will obviously complicate and extend the process.
- Remember that you will only get one opportunity to make your offer, so put in the maximum you can afford – if you are still unsuccessful at least you will know that you did all that you could.
- And remember, if you desperately want the house, even if your bid fails you can go back and negotiate with the vendor as the winning bid is not legally binding.