How To Win By Sealed Bids
Case Study: Lauren & Kieron, Brisbane SAVED $3,899 (below their target price)
This week we purchased a home on behalf of local family buyers in Brisbane. Lauren & Kieron had seen the home on Saturday and again on the following Monday, deciding that they wish to make an offer and try and wrap up a sale asap. They engaged Scott Aggett at Hello Haus on the same day to handle the negotiations.
Seek And Discover
On our call to the selling agent, we quickly established that the home was in high demand and was likely to be a multi offer scenario. We took time at this stage to understand why the sellers were trading and what the ideal sale terms look like for them. The agent informed us that he expected between 2-4 competing buyers to make offers and that the process would be done via “sealed bids” to his office by 5pm Tuesday. On the Tuesday evening, the agent would then present all offers to the vendors and complete the deal assuming they had an acceptable offer.
Next, we discussed with the buyers their thoughts as to the current market value and what they were comfortable setting as their “Target Price”. Further, we established what terms their offer needed to include, these were as follows:
- Subject to a satisfactory Building and Pest inspection report (7 days) and approved finance clause (21 days).
The buyers informed their conveyancer to review the contract of sale & spoke with the bank / broker regarding the offer process and intention to buy the home.
Hello Haus received the paperwork to sign, liaised with the buyers to complete that early Tuesday and were ready to set the final offer price prior to the 5pm Tuesday deadline. The advertised selling range was set at “over $615,000” with Lauren and Kieron comfortable paying $635,000. We discussed their fear of loss over this home and also the work required to bring it up to their standard prior to moving in. Given the many other options for similar homes in the area coming to market, they were comfortable taking our advice to offer slightly lower to try and win the home at a discount.
When making offers in a competitive environment, most people move in round number bids, $1,000, $5,000, $10,000 and so on. Expecting it would be a close competition, we advised that they offer $631,101 to just pip any lower offer. Ending on a odd number indicates this is an absolute stretch, it’s a psychological edge to paint the picture that this is your real “best and final” number. As it turns out, we secured the property for less than $1,500 above the next best offer made.
We moved through the buying process with speed and confidence by asking the right questions, being super organised and having confidence in our market knowledge and negotiation skills. Emotional bidding can cost you tens of thousands of dollars, as a leading selling agent for most of my career, we would run this process weekly on different properties and the results varied dramatically, buyers literally guessed what they should pay and it cost them dearly by either missing the home or heavily overpaying.
Ways to win a ‘sealed bids’ or ‘multi offer’ negotiation:
Be better prepared and move faster
- If the selling agent is telling you it’s a multi offer situation or you need to make an offer against other competing buyers via “sealed bids”, you can bet there are other buyers super keen to own the same property.
- Ensure you’ve inspected the property twice, ideally two different times of the day to check noise, light, privacy. A 2nd person with you always helps to ensure you haven’t overlooked anything.
- Get the contract reviewed by your conveyancer / solicitor
- Do a building and pest inspection (houses) or strata inspection report if required (apartments)
- Notify your mortgage broker you are planning to make an offer on the property
- Organise a bank or private valuation if required for the finance approval
Ask lots of questions of the selling agent/vendors
- Why is the current vendor selling?
- Will they accept a 5% deposit?
- What is the ideal settlement timeframe?
- Will the property be sold with vacant possession or is it subject to a tenancy?
- Are there any outstanding works to the property that the vendor is undertaking prior to change of owner?
Be clear on the offer process and how the agent wants to handle the offers
- Do you need to submit a written offer or verbal?
- Does the agent require a simple offer/terms sheet submitted or the entire signed contract of sale?
- What is the closing date for the offers to be submitted?
- Where do you leave your offer and who do you give it to? Is it the vendors solicitors office or directly to the agent?
- Does the agent want “best & final” offers or will they negotiate further once they have seen all the bids?
- If you are successful with the winning offer, what are the next steps such as paying the deposit or signing the full contract of sale if you haven’t done so already?
Ensure you have the finance to complete the purchase if successful
- Does your lender require an upfront valuation?
- Are you pre-approved?
- Are there any conditions on your finance approval?
Be educated about the property condition
- Easements or covenants over the land such as rights of way or location of sewage/drainage effecting future development plans
- Ongoing repairs required, faulty electrical wiring, plumbing, leaking roofs, rising damp, subsidence
- Council orders for previous illegal works to the property or future legal obligations
- Pending development approvals/lapsing approvals
Set your maximum walk away price
- Valuation Reports, does the bank need to complete one before approving your finance or will you order your own report to determine a fair market price before offering?
- What are the most recent comparable sales to compare with this property?
- What other homes are competing with this property today that buyers could consider as an alternative?
- Average days on market currently for the suburb, if it’s blown out then you may have more room to negotiate on price, if it’s short you know it’s competitive.
Ensure your offer is simple and attractive to the sellers
- Make your offer stand out for it’s simplicity and match it closely to the sellers plans to help them out of this home and into their next property
- Offers that are made “subject to the sale of another property” are weaker
- Short or long settlement periods may create problems for the sellers, ensure your dates match up as best they can