Disclosing bids on a house sale. Legal?

Houseseller2020

Evening all,

      As executor of an estate, I have a house to sell.  In this capacity, I have to achieve the best price possible on the property so that the beneficiaries get the maximum inheritance (I am not a beneficiary). Naturally, I also have to go through a process that stands up to scrutiny.

The property will be marketed on an “Offers invited in excess of £xxxK” basis, as it is an unusual property and hard to put a fixed price on.

Is the following legal?

1.       Wait for all the bids to come in.

2.       Inform an underbidder of the top bid & give them a chance to submit an increased bid

This obviously is OK in that it gets the best price, but is it OK to disclose bids to a potential buyer?

unkle

On repossessions the agent will state what the highest bid is, don't see what you can't do the same.

theoretica

When you say 'wait for all bids to come in' how do you see that working? It sounds a bit like the closing date system in Scotland, which does not lead to trying to persuade people to up their bids.  In England potential buyers put their offers in whenever they please and may include timescales in the offer which do not fit with your plans for a bidding war.  Have you got an estate agent involved or are you planning on marketing and selling it yourself?

Houseseller2020

Thanks for the replies. 
@theoretica
The plan is flexible to a degree, the general idea is to stick it on the market and wait to see what bids we get, and then respond accordingly. While there will be no stated closing date as such, once the initial flow of bids has dried up, we're going to work with that. Yes, a higher bid may appear at an unknown point in the future, but I can't wait forever in the hope of a better bid coming out of the woodwork. 
Buyer funding availability/timelines will obviously be a consideration. £250k from a cash buyer will beat a £260k offer from someone in a messy chain & a mortgage to raise.
I'm going to use an estate agent, and will take their advice, but in the mean time I thought it would be useful to see if certain options were a complete no-no. 

princeofpounds

You're overthinking this. 

IF you happen to receive more than one offer at a time, then you may have a competitive bidding situation.

Having more than one offer at a time is not rare, but it's not exactly common either. Normally the first person to make a serious offer will demand that the property is withdrawn from marketing if it is accepted in principle. Why would they spend money on e.g. a survey or searches, if you are still trying to flog it to somebody else?

If you are in a competitive bidding situation, the usual practice is to make the parties aware of that fact and then invite them to submit best and final offers. 

You do not directly disclose the details of other offers to the bidders. I'm sure you could start a long discussion here about exactly how unlawful/unethical this is and why, but for starters it breaks the industry codes of practice that estate agents have to sign up to.

But you can say something like 'offers under £x will miss out' to the lower bidders, which is not the same thing.

You can also try multiple rounds of bids, rather than request final offers, but it risks buyers getting annoyed and walking away so it's not usual practice.

But your estate agent will be experienced (or should be) at handling this kind of stuff.

Scotbot

Where is the property?  I assume Scotland as this won't  work in England or Wales,  then the only way you will get multiple bids is if you underprice it. Otherwise when you get an offer you have to accept or decline, if you don't respond the buyer won't wait. Offers over generally results in people offering the stated price. 

eddddy

It is legal to disclose offers.

However, I'm not sure how well your plan would work in practical terms. When you get EAs to come along for market appraisals, discuss different options with them.

As a starting point, most EAs are members of the Property Ombudsman scheme, and the ombudsman's mandatory code of practice says:

9g  You must be fair and not misleading when disclosing the amount of any offers made to other buyers. Before disclosing the amount of an offer, you must advise the seller of such intention and get the seller’s agreement; and you must warn all buyers who make offers that it is your practice to do so. If you do disclose any offer to one buyer, then all offers must be immediately disclosed to all buyers with a current interest in negotiations for the property

Link: https://www.tpos.co.uk/images/Codes_2019_a5/TPOE27-8_Code_of_Practice_for_Residential_Estate_Agents_A5_-_Effective_1_June_2019.pdf

Houseseller2020

Thanks to everyone for the input. 
To clarify, the property is in England, not Scotland, so obviously customary practice is different. 
@princeofpounds
You say "Normally the first person to make a serious offer will demand that the property is withdrawn from marketing if it is accepted in principle."
Can't disagree with that. However, it would seem unwise to accept the first serious offer & withdraw the property when you have no idea whether or not there is someone out there who is just about to submit a better offer. It's like an auctioneer shouting "Sold" when there are still hands in the air!
@Scotbot
You said: "the only way you will get multiple bids is if you underprice it."
The property is highly individual, with bags of positive features, fantastic location & masses of potential (I should be an Estate Agent!). The consensus from the EA's we've spoken to is that it's very hard to price (valuations have varied by £50k+) and that it will attract a lot of interest, so multiple offers are anticipated. 
You said: "Otherwise when you get an offer you have to accept or decline, if you don't respond the buyer won't wait."  The intention is that we will respond. The response will be along the lines of "Thank you for your offer, the property is attracting a lot of interest, we will get back to you in the next couple of weeks to let you know the situation". House buying is generally a pretty drawn out process, so you would like to think a couple of extra weeks on the timetable wouldn't deter a keen buyer. 
@eddddy
Many thanks for the link, that's exactly what I'm after. As it says, the EA can't tell one bidder what they're up against without informing the other bidders. 
However, I'm not an Estate Agent, and not bound by the code, so presumably there's nothing, other than ethics, to stop me from informing a bidder where they stand. 

Having bigged the place up so much, knowing my luck, it won't get a bid!

eddddy

Houseseller2020 said:

@eddddy
Many thanks for the link, that's exactly what I'm after. As it says, the EA can't tell one bidder what they're up against without informing the other bidders. 
However, I'm not an Estate Agent, and not bound by the code, so presumably there's nothing, other than ethics, to stop me from informing a bidder where they stand. 

Yep - but it isn't always the best tactic.

• If buyers know what somebody else has bid, they're likely to bid £1,000 or £2,000 more.

• But if you tell buyers they'll only get one chance to offer, so you want their 'best and final' offer at the outset, you might end up with a higher final price.

Although it sounds like you might be planning to fib, and tell buyers they'll get one chance to offer, so you want their 'best and final' offer - but then invite the losers to bid again. 

I guess you'd have to get hold of the bidder's contact details and do that yourself behind the EA's back - as it would probably mean the EA was breaching Consumer Protection legislation if they got involved or assisted you.

princeofpounds

@princeofpounds
You say "Normally the first person to make a serious offer will demand that the property is withdrawn from marketing if it is accepted in principle."
Can't disagree with that. However, it would seem unwise to accept the first serious offer & withdraw the property when you have no idea whether or not there is someone out there who is just about to submit a better offer. It's like an auctioneer shouting "Sold" when there are still hands in the air!

But it's not an auction unless you get simultaneous bids. And that doesn't happen in a majority of cases. 

If you like, you can consider an offer for a few days whilst continuing viewings in the hope of receiving a second bid, to make it a competitive situation. But most buyers, after anything from a couple of days to two weeks of being stalled, will either time-limit or withdraw their offer to put an end to that kind of game. Or go and find another property in the meantime. 

Again, the agents normally have far more experience with this kind of thing that you do. For example, if you don't like the price, they can go back to the buyer and say 'our client is considering it but is a bit disappointed and isn't prepared to take the property off the market. Could you make a better offer to help get them over the line?'. That potentially achieves a similar result without actually having to wait for a second bid.

To give you an idea, research suggests that the average property requires about 15 viewings to sell at the rate of a couple a week. Obviously the spread is huge so that doesn't tell you anything about an individual property, but you can see why simultaneous offers are not the norm.

But I hope you get a bidding frenzy and a good result. Perhaps it will happen!

davidmcn

I would follow the EA's advice really. They do this for a living. If I were a prospective buyer and it became apparent that the vendor had their own peculiar ideas about how to handle offers, I'd be concerned they'd continue that sort of attitude with the remainder of the transaction.