Win the sealed bids war as unlucky buyers are frozen out of hot spots

Win the sealed bids war as unlucky buyers are frozen out of hot spots

With house prices in London and other hot spots continuing to soar, growing numbers of desperate buyers are being drawn into bidding wars as they fight to get their hands on the property of their dreams.

On Thursday, the Royal Institution of Chartered Surveyors said UK house prices rose for the 15th consecutive month in January. Prices of some family homes in London's Chelsea have jumped by 50% in the space of a year.

With so many people competing for the best properties, "sealed bid" auctions are increasingly becoming the norm - and not just in the capital. They are also commonplace in Cambridge (see right) and Sheffield, among other places. But what exactly is a sealed bid auction? How do they work? And are there any tips for coming out on top?

An estate agent will often organise a sealed bid auction if there are several people chasing one property. The agent writes to them, asking for their "best and final offer" by a set date and time. When the deadline has passed, the envelopes are opened and it is usually the highest bidder who is successful.

But sealed bid auctions are not legally binding; the seller does not have to accept the highest offer or, indeed, any offer. Sometimes, an unsuccessful bidder will come back with a higher bid and the seller may decide to dump the original winner. Meanwhile, there is nothing to stop the winner pulling out, or trying to knock the seller down. Tales abound of dodgy estate agents and greedy sellers.....continued below

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manipulating the system. However in Scotland, the highest bid is usually accepted and the contract is binding from that moment.

Tim Le Blanc-Smith at agents John D Wood & Co, with offices in Kensington, Chelsea, Belgravia and other locations, says that while the sealed bids system "is not particularly pleasant," it is arguably fairer and quicker than going backwards and forwards with offers and counter-offers. He says a reputable agent would never open the envelopes until after the deadline (sometimes the seller or their solicitor may want to open them). When contacting bidders, he only tells them whether they were successful and will not divulge by how much they won or lost.

There are no rules as to how many bids there have to be. "We had a development where we had 26 sealed bids," says Mr Le Blanc-Smith. On another occasion, the clock struck 12 and "we had one [bid]. We expected three or four".

Sealed bid hot spots in London include the borough of Kensington and Chelsea, and Belgravia. In many cases, a successful sealed bid is considerably higher than the asking price. The difference can be £100,000-£200,000 or more.

r.jones@guardian.co.uk

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