Buyers across the UK are paying over the asking price for their properties, as the current demand to move combined with a lack of available homes has resulted in competitive bidding wars.
More than a third of property sales were subject to multiple offers during the first three months of 2021, according to research by Hamptons.
A huge 36 per cent of homes sold by the Countrywide estate agent group, which has 58 offices nationwide, received offers from at least three buyers.
London is the UK’s least competitive property market at the moment – although more than a quarter of sold properties in the capital have still had offers from three or more buyers
Almost one in five properties were even more fiercely fought over, with sellers receiving offers from five or more buyers.
Property sales in Scotland were most hotly contested, with almost two thirds of transactions receiving offers from three or more buyers, and 43 per cent of sales involving offers from five buyers or more.
At the other end of the spectrum, the London property market was the least competitive during the first three months of 2021. Just over one in four sales in the capital were subject to offers from three buyers or more.
The buying frenzy going on across the UK also means that a larger number of homes are now selling for more than the asking price, according to Countrywide’s data.
So far in 2021, 28 per cent of homes have sold above their asking price, up from just 19 per cent in 2020.
‘There is a lack of stock on the market, as sellers appear to be waiting for full vaccine protection before allowing estate agents and buyers into their homes,’ says buying agent, Henry Pryor.
‘Add to that the demand stirred up by the Government’s stamp duty holiday extension – and it’s no surprise that some houses are receiving multiple bids and many buyers are being asked for their best and final offers.’
Pryor describes the stamp duty holiday as ‘ill-advised’ as he says it has over-heated the housing market.
‘Whilst the stamp duty holiday may have made some sense back in July last year, it is just pouring petrol on an already over-heating housing market,’ he says.
‘The current market resembles the great toilet roll panic of 2020 – people seem to think we might run out of houses.’
The stamp duty holiday, which saves buyers up to £15,000 in taxes, had been due to end on 31 March, but this was extended in the Budget on 3 March.
The stamp duty ‘nil rate’ band will now not revert to normal levels until the autumn.
How can buyers prevail in a bidding war?
To stand any chance of prevailing in a bidding war, a buyer must demonstrate they can proceed as soon as their offer is accepted.
For example, if a buyer needs to sell their own home first, their property should be on the market, ideally with a buyer already agreed.
‘In this highly competitive property market, it might even be worth considering being chain free – selling first and moving into a rented property before searching for a new home,’ says David Westgate, chief executive of Andrews Property Group.
‘You want to put yourself in a stronger position than the competition, and that means being able to move faster to exchange. This will make you more attractive to a seller than someone who still has their own home to sell.’
Whether someone is a first-time buyer or is moving home, having a solicitor organised and a mortgage in principle agreed may also help to set them apart from other buyers.
‘The current market resembles the toilet roll panic of 2020 – people seem to think we might run out of houses,’ says Henry Pryor.
But it’s not just about being organised – a buyer also needs to show they are emotionally committed.
‘Put your offer in writing and add some emotional content to the email or letter, as this could make the difference to the seller,’ says Joanna Cocking, head of prime country sales at Hamptons.
‘Best and final offers are not necessarily decided by the highest bid.
‘I had an example from last week, where the buyer won a bidding war because the seller liked the fact they were a young family, that they were ready to move and had nothing to sell and therefore, had the flexibility to exchange contracts and complete quickly.’
Buyers will also need to be decisive and prepared to act quickly when they are informed about a new property on the market.
It can take time for an estate agent to put together the advert with the description, photos and the floor-plan – so there may be a week before a property is listed on Rightmove and Zoopla. If you can arrange a viewing during this time, you stand a better chance of beating the competition.
‘I’ve had to bully my way into some homes ahead of the rush of more polite buyers,’ says Pryor.
‘Last week I secured a house within 24 hours of it coming onto the market, and ahead of 22 other buyers with appointments booked to see the property.
‘This is a dog-eat-dog market and not one for the feint-hearted.’
But whilst buyers might need to be a bit aggressive when arranging viewings, the advice is to remain calm and to not get carried away if other offers appear.
‘Be very clear in your own mind about what the maximum you can afford is and don’t overstretch yourself,’ says Cocking.
‘If you’ve gone to sealed bids, the worst thing you can do is second-guess what other people are trying to offer.
‘It is better to focus on putting forward the best offer that you are comfortable with, so that you are not left rueing a missed opportunity, but also not over-stretching yourself were the offer accepted.’
If another buyer’s offer is accepted this does not necessarily mean you have missed out, either.
A total of 306,198 property sales fell through in 2020, according to the residential property data agency, TwentyCi.
‘It is worth just sitting tight and making the estate agents aware that you are still there and still interested if the situation should change,’ says Cocking.
‘You will be the first person an estate agent will contact if the transaction falls through.’
What’s the advice for sellers during a bidding war?
Sellers should want to know the circumstances and motivations behind each buyer before accepting an offer.
‘The highest offer is not necessarily the best one, so have an idea of buyers’ profiles before you jump in and accept an offer,’ says Westgate.
‘You might find one of the buyers who offered slightly less than the top bid is in a stronger position to proceed.
‘This could be because they have a mortgage in principle, have a larger deposit, they’re a cash buyer or don’t have their own property to sell.’
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Typically, the advantage of a buyer whose offer is not dependant on the sale of their own home is that they can exchange contracts faster, but there are other factors to consider according to Westgate.
‘Someone who is chain-free might be a first-time buyer, which could mean you’re going to face other potential pitfalls, such as affordability issues.
‘If you’re in the enviable position of having multiple offers, your agent needs to fully manage the process, and that includes qualifying the buyers before they make an offer to ensure they are in a position to proceed.’
As with buyers, sellers should also be fully prepared to progress the deal once they accept and offer.
‘It is vital your solicitor is ready to submit full draft documentation to the chosen buyer’s solicitor immediately after the offer is accepted, and an unconditional exchange of contracts is sought within no more than two to three weeks of that acceptance,’ says Jeremy Leaf, of Jeremy Leaf & Co estate agents.
‘This way, the seller is more likely not only to achieve the certainty of a sale at the agreed price, but they also reduce the risk of the other bidders disappearing in the event the buyer decides to renegotiate or withdraw for any reason.’
Beware of gazumping
Once a buyer’s offer is accepted it may still be vulnerable to being gazumped by another bidder.
Gazumping is when another party makes a higher offer on a property which a buyer is in the process of purchasing, forcing the initial’s buyer’s agreement to collapse.
Only once contracts have been exchanged, is there no possibility of being gazumped.
It is vital for the buyer to ensure the transaction keeps moving once the offer has been accepted, according to Westgate.
‘Conveyancers will have a mountain of cases to work through and it’s easy for your case to fall to the bottom of the pile of work if you’re not keeping in regular contact.
‘That doesn’t means calling them every day, but if you feel like the transaction is starting to stall, there’s nothing wrong with ringing or emailing your solicitor to find out what’s going on.
‘It’s also good for the other side to see you’re committed and focussed, and that forms are being signed promptly.’
The closer a deal gets to exchange of contacts and the more the buyer demonstrates they are committed to the purchase, the harder it will be for the seller to accept alternative offers.
‘Recently, one of our sellers received a substantially higher offer, just a few days before contracts were due to exchange with their current buyer,’ says Cocking.
‘But they stuck with their original buyer, because they had been so quick, efficient and attentive at moving the process forward.
‘The seller not only felt morally committed to the original buyer – they were also comfortable they would fulfil their promise and complete the sale.’
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