In a normal market, sellers experience joy when told there is an offer on their home and are happy to have it presented in person by the buyer’s agent. A speedier market in our area leads sellers to delay hearing offers until an appointed day, often five to ten days after marketing begins. 

As multiple offers have become the rule in this most ludicrous of markets, sealed bids are on the rise. This means buyers’ agents who wish to offer on a particular property must deliver a signed purchase contract in a sealed envelope to the seller’s agent by the designated date and time. Sellers need to know why most buyers and their agents dislike sealed bids; buyers must understand how this increases their vulnerability.

Reasons for sealed bids

Some reasons for this procedure are:

• Numerous offers. This is subjective. Some agents do sealed bids with five offers, others with more than 15
• One or more sellers are out of town 
• Sellers are elderly or ill
• Bank owned property
• Large number of sellers
• Probate sale or conservatorship
• Property where seller has no personal connection, e.g., an inheritance
• Extremely busy seller

Concerns about sealed bids

Some concerns and negatives about this approach:

• By scheduling personal presentations, the listing agent knows how many offers to expect, although this can fluctuate. With sealed bids, buyers’ agents frequently do not indicate their intention to write a contract in advance; they simply drop it off at the last minute. In this situation, it is almost impossible for buyers to get a reading on how many offers they are competing against. Not having this key information makes bidding, already stressful, even more difficult and uncomfortable for buyers. 
• The seller and his agent do not get the opportunity to compare the quality of Realtor presentations.
• Buyers may assume there will be too many other offers and not write a contract. One of my buyers recently benefited from this exact scenario. When multiple offers did not materialize as anticipated, I called him before presenting and he lowered his price accordingly. Later, other agents said they had buyers who would have made an offer, but the competition expected with sealed bids scared them off.
• Some buyers refuse to play the sealed bids game. This could result in fewer offers, depending on the property and price.
• The winning buyer could find a reason to renegotiate or rescind if the number of offers was less than he anticipated when he determined his price. 

The best and most professional Realtors provide information and let the client decide. Some listing agents, however, dictate the presentation process without adequately explaining the advantages and disadvantages of closed bids. 

As a seller, you must decide if there is a compelling reason for you not to personally listen to offers on your home. Ask yourself if the possibility of netting more is worth three or four additional hours of your time. 

An experienced professional can coordinate the presentations and limit them to 10 minutes each. If you are considering sealed bids, tell your agent how many offers would be more than you would be willing to hear personally. 

Understand that there is an in-between approach where you can tell the market you are entertaining sealed bids, but you will listen to personal presentations of those agents who insist. It is best to resolve these questions before marketing begins.

Beware of real estate salespeople who say they do not want to hear too many offers. An agent who is looking out for you will do everything possible to maximize the number of offers you receive. 

Buyer should protect himself

Make sure you instruct your agent to call you before delivering or presenting your contract if the number of competing offers is substantially less than you expected. This is true any time there are multiple offers.

It might cost you a house if he does not present and another contract is chosen. On the other hand, it could save you tens of thousands of dollars if fewer bids occur.

Final thoughts

Sealed bids can work out well or they can be a disaster. The implications are not always fully considered by buyers, sellers, or their agents. Make sure you choose a professional who knows the pros and cons and is working in your best interests.

Related Articles: Multiple Offers, Part 1 and Part 2; Hot Market Gambits