Sealed bids - is this normal?

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Mushforbrains

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I'm bidding on a house. There are two others bidding at present (6 bids in total have been made). Last offer was 302,000. The agent has now told us that the sale will be by sealed bid. We have to submit our best and final offer by a specified time this week.
Is this normal practice? We feel that it will artificially inflate the price of the house. Compared to other areas, there is not a huge amount of interest in this property.
We are really interested in the house and don't want to lose out. We don't want to be stupid either and end up paying way more than what it's worth. We feel that 310,000 is a fair price, but fear it may go for more because of the sealed bid method.
Any advice?
 
The agent is acting in the interests of the vendor. They *want* to see the price inflated - that's their job.

I understand that a sealed bid is not unusual, but not very common, either.

z
 
We feel that 310,000 is a fair price, but fear it may go for more because of the sealed bid method.
Don't blame the messenger. The price won't go high because of the sealed bid method. The price may go high if one of the bidders is willing to pay a higher price.

Bidding is a double-edged sword. You're quite happy to bid 302k or less for a property which you reckon is work 310k, but you're getting stressed now when you think the price might go over the 310k.

Bid what you think the property is work (presumably the 310k). Note that if you had bid this in the first place, there's a fair chance you wouldn't be in the bidding war/sealed bid process now.
 
I agree with Rainy just make sure to make it and odd number eg. €310251 just in case someone else puts in 310k.

Have done this myself on 2 occassions and won (not sure if that's the right term!!!!) however I believe in taking the long term view, especially if it's going to be your home for 5 years or more.


Roy
 
Thanks for the advice. The asking price for the house is 280,000. The bid of 302,000 was not our bid. We made 2 offers on the property. When it went to 302,000, we were then informed for the sealed bids decision. We had planned to offer more but the agent was not accepting further bids.
We will offer what we feel it is worth. We'll have to be prepared to be out-bid. It will be a learning experience.
Thanks again.
 
...

Rainyday - just a few remarks on your comments on the bidding process: I've noticed before that you seem to take offence at people placing starting bids at less than the final amount they would be prepared to pay for the property.

The market determines the final price of a house - if the asking price is 280k and I would be prepared to pay 300k for it, there is not a lot for me to gain by jumping straight in at 300k (though, in a tiny percentage of cases the seller may be interested in a quick sale). I have seen similar situations whereby someone puts such a bid on the house in an attempt to seal the deal early, but this only leads to the vendor believing they will get more for it. If a person at the next viewing really likes the house, they may go with the attitude 'ah sure its only a couple of grand more'. This leads to the situation where people bid based not on how much the house is worth to them, but rather how much they like the house.

I've seen this time and again and I believe that there is nothing to lose by starting out at 275k on such a house - if noone outbids me I will get the house at that price (or maybe a few grand more to sweeten it for the seller). True I was prepared to go to 300k but the market has not forced me to, so why, other than offending the poor estate agent's feelings would I jump in at 300k?

If I start at 275k and a person at a subsequent viewing likes the house they might bid 280k. We will then get in a bidding war and one of the bidders may well get tired of it by the time it reaches 300k and pull out. If not, then we end up at the same figure we would have ended up at anyway, we just took a litte longer getting there, and plus theres the peace of mind of knowing that someone else was willing to pay almost the same amount and this helps clear any doubts about the true market value of the house. If asking is 280k and I put in the sole bid of 300k, thered always be a bit of 'did I overpay' doubt in the mind.

This is less true when similar houses in the area have sold recently - their price will be a good guide. However, in the current climate, when prices houses under 381k (I will speak only on the D12 are of which I have much experience) are rocketing, there is bound to be doubt in the buyer's mind as they are the first person to pay that amount for such a house in that area, and so knowing that 2 or 3 others were willing to pay almost the same gives a good indication that it is a fair price. E.g. a house on comeragh road, drimnagh was on the market with a guide price for 330k, and sold for 381k with 3 bidders still in the running. Would that bidder have been doing the right thing by coming in with a first bid of 381k when the agent was expecting 360k max.?

By using sealed bids, the agent/vendor is denying you the chance to get the house at below the maximum which you would be prepared to pay for it. If everyone takes this approach, everyone pays more for their house. E.g. I just bought a house at 317.5k - I was prepared to pay 330k for it and would have bid 330k in a sealed bid. As it was there was not many bidders due to the amount of refurbishment involved, and so I got it at that price. Sealed bids would have artificially inflated the price of this house, which is not good for an already over-inflated market.
 
couple of points

I viewed a house once that went to sealed bid, stayed away as I was not that interested. In fairness the estate agent handed out a leaflet explaining how the process worked. Although it should help increase the price in favour of the seller, it does also have the advantage of bringing things to a relatively quick conclusion for everyone.

Don't forget:
- previous bids don't matter, there is nothing to stop you bidding 302K or less. As others have said, you should only bid what its worth to you.
- seller doesn't have to take the highest price. Other considerations can matter, e.g. not being part of a chain, flexibility around early or late closing of contracts.

Good luck!
 
Best & final

Mush...
Remember that it may not necessarily be the highest bid that is successful as I hope the agent told you. Often, if you can confirm how quickly you can close or how long you are willing to allow the vendor the close. If you are loan approved, or if you are in a chain, all these factors could swing the vendors decision. Try to find out is the vendor under pressure to sell or have they even bought yet.

When I purchased under Best and Final we were €10K below the highest bid but agreed to close the deal in four weeks. The vendor was moving into their new house and decided that this was better then carrying a bridging loan and agreed to sell to us.
Put your best foot forward.
 
Re: ...

I've noticed before that you seem to take offence at people placing starting bids at less than the final amount they would be prepared to pay for the property.
No offence taken at all - Just want to point out the double-edged nature of this approach. If you're prepared to bid low-ball bids, don't be surprised when the seller plays hardball later on.

I disagree that this causes inflated prices - What causes inflated bids is when buyers offer inflated bids by whatever route.
 
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