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Sealed bids: buying agent says process should be more transparent

The sealed bids process - where purchasers submit their final offer by a specific time and date - should be more transparent, according to a buying agent.

George Barkes, who represents Stacks Property Search & Acquisition's Cotswolds office, describes the sealed bids process as 'badly outdated'.

"They should be restructured, formalised and made more transparent," he argues.

Barkes suggests that buyers should have to prove they can proceed in advance and that as is customary in the property auctions sector, winning bids should be legally binding.

“The current system is virtually impossible [for the purchaser]," says the buying agent.

"Submitting the highest bid won’t necessarily secure the property; the vendor and agent will weigh up all the information and make a choice on the basis of the size of the offer and the situation of the buyer."

He says that because the acceptance of an offer is not legally binding, if a new buyer appears with a higher offer, things can change very quickly.

The agent says that despite a current period of low transactions, his firm is seeing a significant number of property marketing campaigns culminate in a sealed bids process.

He adds that sealed bids are not being used solely for the preserve of 'top dollar' properties and that it is being used as a method of sale across all price brackets.

The agency says it advises buyers to try and get the vendor to accept an offer before the sales process gets to the sealed bids stage.

It points out that sealed bids can be a 'beauty parade' as well as a bidding competition, stressing that proving 'commitment, proceedability, ability to exchange quickly and flexibility of terms' are equally as important as a good offer.

Stacks says it also advises buyers to 'quiz and badger' the selling agent to get information. Although selling agents are unable to reveal the sum of the bids, they are able to discuss the number of bidders and how many offers were made before the sealed bids process.

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    It is quite frightening the lack of knowledge of some practitioners in our industry. None of us know everything, but the system that George Barkes refers to has been in place for donkey's years and is the fourth method of sale - Formal Tender. This method is used more than occasionally and is very effective and is exactly what Mr Barkes is asking for. I do one or two formal tenders a year myself.

    The property is offered for sale just as it would be by informal tender (otherwise known as "sealed bids") or by auction with a finite date for offers to be received. A tender pack, almost identical to an auction pack which contains everything required to exchange contracts is provided by the vendor's solicitor. Prospective buyers sign the contract, enclose a bankers draft or equivalent for 10% of their offer and the seller then chooses whom he wishes to sell to. The successful offeror has his bankers' draft banked, the others have theirs returned and contracts are exchanged. It's as simple as that! Completion is 28 days later or by arrangement. One of the reasons people choose this means of sale is that it provides the certainty Mr Barkes wants and the vendor can choose who to sell to, which he can't do in the auction room.

    No need to change anything, we just need to look around more at the other methods of sale which have been around for ages and are not used as much as they could be.

    Richard Copus

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