Blind bidding can boost “sold” price
Offering property for sale by informal tender can deliver good results for vendors. Sharon Dale reports.
A two-bedroom terraced house close to Skipton town centre attracted fierce competition when it went on sale with Dacre, Son & Hartley recently.
A total of 22 would-be buyers put in offers for number seven Prospect Terrace, which was in need of extensive renovation. The asking price of “over £100,000” was smashed by a winning bid of over £130,000.
The secret of that 30 per cent uplift, according to the agent, was the decision to use informal tender as a mode of sale. This requires buyers to put in sealed bids within a specified timeframe.
Tim Usherwood, a director at Dacre, Son & Hartley, who heads up the firm’s Skipton office, says: “The owners were keen to secure a quick sale, so we advised them to sell by informal tender at a guide price which would attract a large numbers of buyers.
“The phone started ringing immediately and we were inundated with enquiries for it, showing 75 different potential buyers round.”
Late last year, a terraced house on Sun Lane, Burley-in-Wharfedale, was on the market for offers over £170,000 by informal tender with Dacre, Son and Hartley and the winning bid was £240,000.
One of the keys to success, according to Tim Usherwood, is to set the price at “the lower end of expectations without being ludicrous” and to make sure the property is the right fit for informal tender.
He adds: “It doesn’t work for all properties. It’s very much a question of letting the agent spot the opportunity that this is the right method of sale. We tend to use it only for homes that need a vast amount of work and are more difficult to value.
“It works well for deceased estates and for charities that want a quick sale and need to know that the money will be forthcoming. It’s also helpful because it shows that you have got the best price that the market will allow.”
The process includes a four to five-week marketing period when sealed bids are invited. The winning bidder must exchange contracts within four weeks and complete the deal within two weeks after that.
“That concentrates the mind. If a solicitor is dawdling and the buyer can’t hit the target date we will tell them that we will be offering the property to the second best bidder,” says Tim.
While would-be buyers have the frustration of bidding blind, the highest offers do not always win. Proof of funds, commitment and ability to exchange quickly are also taken into account.
It doesn’t usually cost anything to bid, though some agents charge a fee, a practice that has been criticised by the Property Ombudsman.
Buyers can also be assured that informal tender is not legally binding, unlike buying at auction. Even if you are the winner, you can still pull out if you need to, though few people do.
“Over my time at Dacres I’ve marketed 87 properties this way and the hit rate is 84,” says Tim, who believes that informal tender is a better option than auction for some properties as it attracts more interested parties and a good price.
“The winning bid for the Skipton property was £131,000 but the second best was £126,000. At auction they go up in increments of £1,000 so it may have only fetched £127,000. Plus we had 22 bids and it’s unlikely you’d have that many people bidding for a property at an auction.”
While informal tender is most commonly used for properties in need of renovation and for land, there are exceptions.
The owners of a detached three-bedroom house on Main Street in Cherry Burton, near Beverley, have opted to use this form of sale after advice from estate agent Richard Welpton, of Quick and Clarke. It is on the market for offers over £275,000.
“The house needs some redecoration work but that’s it. I suggested informal tender because I knew there would be a lot of buyer interest and the vendors want a quick sale,” says Richard. “It doesn’t work for all properties.”