In case you haven’t heard the property market is once again on the ascendancy. For the first time in years, most sales agreed are going to sealed bids with people fighting for the same property. In January, most of the properties we sold at sealed bids were the same ones that struggled to sell the year before for much less.
One such instance in which another agent struggled to get a sale on last year at £550,000 came back on the market in January with us at £600,000. I told the vendor the market had picked up and I was confident we could sell it. I very rarely get my expectations wrong but in all honesty the dramatic upturn in the market caught me off guard and I wasn’t expecting to achieve the asking price with this one. Within days we had an asking price offer and after the first weekend of viewings the bids came in. £620k, £625k and so it went on. There were two people desperate for it. The ironic thing was one of the buyers had noticed the property 6 months ago with the other agent at £550,000 and could have bought it for less than that then. They just didn’t want to sell theirs in a depressed market. As I was saying all last year, a depressed market is probably the better time to sell and upsize. What you sell and buy for is all relative anyway so why not sell and buy at a lower figure. If your property has come down 10% then the chances are the bigger and more expensive property you are looking to buy has also come down, so you are in a better position.
I digress. When it comes to having buyers fighting over a property, the cleanest way of handling the situation is via a sealed bid scenario. Best and final offers to the manager of the agency by a set time. Otherwise you end up in a “Dutch Auction” in which all buyers involved outbids each other by £1,000. This can take a lot of time and becomes stressful for all involved.
The problem arises when one buyer gazumps another. The only ones to get the blame are the agent. What many people are not aware of is that, as agents, we are legally obliged to disclose every offer to the vendor, whenever they come in. The Ombudsman code of conduct is as follows “The agent must record all offers received and pass a written copy of the offer promptly to the seller. The agent must not conceal, misrepresent, withhold or delay communicating offers”
Estate agents are working for the vendors (Sellers). They are our paying clients and as such our job is to get them the best possible price. Many buyers however, have the preconception that we like to gazump buyers by a thousand here or there and will call us untrustworthy when that is far from the truth. We cannot control if and when a buyer decides to offer. Once they do, if we were to withhold that offer from the vendor (unless they have specifically asked us to) then we can get in serious trouble, as this in itself would be untrustworthy. Unfortunately in UK law, anyone can offer until the point of exchange which can make things difficult.
From our perspective, if we have conducted viewings and secured a good buyer, done all the paperwork and started progressing a sale, the last thing we want to do is start again with a new buyer. Remember, money is just one of many factors. Someone with £5k more may not be in as good a position due to chains, financial standing, etc. Your average estate agent will earn approximately 8% – 10% of the agency’s fee. There is really no merit in them actively pushing to gazump their buyer if they are solid and proceeding. Agents just move on to the next sale. For example, on a £350,000 property at an average 1.5% fee of £5,250, the agent will earn £525 at 10%. To get another £5,000 on the offer would mean the agent earns an extra £7.50!
To a vendor this can be a lot of money which is why we need to disclose it but most will stick with the original buyer out of goodwill if they are progressing well. However, some may not. If that is the case the agent will get the brunt of the original buyers fury, possibly a bad review online and then having to start with a new buyer, delaying the time they will get paid their extra £7.50!
Whilst buyers hate them, sealed bids are a way of slimming down the chances of gazumping. The idea is buyers do really stretch to their best and final offers and not carry on the negotiation process. The preconception is that agents love doing big open days and getting 20 or so offers. We went through it some years back but I actually quite prefer a calmer yet active market whereby we achieve the vendor an asking price (or very close to) with a solid buyer, then move on. You can only sell to one person so letting 19 or so down can be difficult and stressful for all involved. I am not asking for anyone to feel sorry for us, just my honest perspective of what goes on behind the scenes