The Daily Telegraph - Saturday - Money
How to win in Britain’s frenzied market
Alexandra Goss learns how to deal with sealed bids, avoid getting gazumped and compete with the 13 buyers chasing every home for sale
S‘One house went for £100,000 over the asking price – how do you compete with that?’
arah and James Carter are trying to move from London to the countryside near Exeter, where Mrs Carter grew up. Four houses they wanted to buy went to sealed bids – and they lost out on them all.
“It has been so stressful,” said Mrs Carter, who spoke using a pseudonym. “Properties are going under offer before the agent has even taken the photographs. On one house, we were one of eight bidders and it went for £100,000 over the asking price. How do you compete with that?”
There are, on average, 13 buyers chasing every property on the market, according to NAEA Propertymark, a trade body, while research by estate agency Hamptons revealed that a quarter of all property sales in Britain in April went to sealed bids, with three or more buyers making a best and final offer on the same day.
“Of these, 80pc went on to achieve the asking price or more,” said the firm’s David Fell. “Sales in Yorkshire and Humber and the East Midlands are most likely to go to sealed bids as this is where the shortage of properties for sale is most acute.”
As well as a dearth of homes on the market – thanks in part to many sellers being uncomfortable letting people into their homes during lockdowns – the buying frenzy is being fuelled by low interest rates, large increases in household savings over the past year and buyers’ rush to save up to £15,000 before the stamp duty holiday tapers down on July 1, said Mike Scott of Yopa estate agency.
“Covid has also caused a reassessment of what people want, with many on the hunt for more space and gardens,” he added.
James Baker of Stags estate agency in Devon said the past four months had been frantic, with twice the number of buyers competing for half the usual supply of properties.
“Fairly ordinary homes have been going for 10pc over the guide price, with the really sexy stuff going for a lot more. One house that was on at £1.25m went for over £1.5m,” he said.
In the Cotswolds, houses are going for eye-watering sums after bidding wars, said Harry Gladwin of the Buying Solution. “Some buyers have agreed to pay more than £1m over the asking price.”
Yet while sealed bids may be good for sellers – and estate agents – they are not always popular with buyers, said Paula Higgins of advice website Homeowners Alliance. “Sealed bids can be very stressful, but there are no long, drawnout bidding negotiations. They also mean all buyers are treated equally.”
Here are the top tips on how to survive in a sellers’ market, and compete with the other frenzied buyers.
HOW DO SEALED BIDS WORK? Scotland has its own system, but in England and Wales if there have been several offers on a property, an estate agent will often recommend sealed bids. This means each buyer will need to submit their bid in writing in a sealed envelope by a certain deadline, with all put to the owner at the same time.
As well as stating the amount they are offering, buyers need to outline their financial position, whether the offer is subject to any conditions such as a survey and the details of their solicitor, said Charlie Rearden of buying agency Stacks Property Search.
Best and final offers work in a similar way, although bids don’t have to be formally submitted in an envelope.
HOW CAN I WIN? Of course, you could simply offer well over the asking price, as some buyers have done recently, said Alex Coates of Humberts estate agency. “Many people have already been disappointed several times through a sealed bids process, so are putting in extremely high offers to blow everybody else out of the water.
“One of my clients agreed to pay £300,000 over the £1.8m asking price to secure a country house with a few acres.” One tip is to avoid round numbers so you don’t offer the same amount as someone else – so bid £ 375,050, rather than £ 375,000 – yet it is not always the highest price that wins out. “Be prepared to enter a beauty parade as well as a bidding competition,” Mr Rearden said.
While cash purchasers and those not in a chain are often preferred, a buyer who can exchange quickly and has immediate access to funds, with proof of the deposit and a mortgage in principle, will move up the pecking order.
Doing your research on the property and the vendor, as well as being flexible with timings, can also pay dividends, said Jo Eccles of London property search firm Eccord. That means both moving quickly with the transaction, but also accommodating the vendor. She is acting for a cash buyer who didn’t offer the highest price at sealed bids but offered to let the owners – who needed to renovate their ongoing property – continue to live in the house rentfree for 12 months.
“While this level of flexibility won’t be possible for many buyers, understanding what is motivating the seller is key to structuring a winning offer package,” Ms Eccles said.
You should handwrite your offer letter and add as much personality – and emotion – as you can, said Varun JohalSharma of Johns & Co estate agency. “Sellers, particularly those selling homes they have occupied for many years, often feel more drawn to offers from buyers who resonate with them,” he said. “Explain why you like the house, your plans for the future, even the fact your children will be going to the local school.”
It is important to stick to your budget, especially as your mortgage company may not lend the price you are willing to pay, Ms Higgins said. Above all, you need to ensure the property is really what you want and need in the long term, advised Edward Heaton of buying agency Heaton & Partners.
“Literally everything is selling now, even the old dogs no one wanted to touch before. The best advice to any buyer is to avoid getting carried away in the heat of the moment.”
HOW CAN I AVOID GAZUMPING? Sealed bids are not legally binding and, by law, estate agents must pass every offer on to their client. As such, there is nothing stopping a seller accepting a higher offer from another buyer after the bid deadline has passed, a process known as gazumping.
In the first three months of this year, 25pc of property sales that fell through did so because the seller accepted a higher offer from a new buyer, according to analysis by property company Quick Move Now.
In popular spots, gazumping is rife, said Carol Peett of West Wales Property Finders. “It is happening at all price ranges. One client was buying a waterside property for around £1.25m and was gazumped on the day of exchange; it happened to another who was buying a £450,000 property.”
You are less likely to be gazumped if you’ve built up a rapport with the seller, said Marc Schneiderman of Arlington Residential estate agency. But you should insist that, if your offer is accepted, the estate agent takes the property off the market and changes the listing and for sale board to “under offer” or “sold subject to contract”.
You could also consider paying a non- refundable deposit. Property company Gazeal has come up with a way to prevent gazumping, using a reservation agreement for the buyer and seller. When an offer is agreed, both parties pay a reservation fee, typically £250 each plus VAT, and if either pulls out, Gazeal pays the other party. There is a minimum payout of £2,000, which is recovered from the defaulting party.
Mrs Carter, meanwhile, is waiting to see what happens after the stamp duty holiday ends. “The market might cool off a bit then,” she said. “At least, we hope it does.”