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I’m being asked to offer at a closing date what does this mean?

I’m being asked to offer at a closing date what does this mean?

Following the first lockdown the property market in Scotland has exploded. There is such high demand for properties it’s no wonder the most recent statistics* are showing  an average annual increase in value of over 11% for residential properties in Scotland.  Currently  the average price of a property in Scotland is £182,755, said to be “one of the highest reported for any month since the index started in 2004.”* Whether owners had more time during lockdown to finish DIY projects to get their property sale ready, or people discovered they wanted more space, or to be closer to a certain area, it certainly doesn’t seem to be slowing down any.

With that being said, it is no surprise that there aren’t enough properties coming on to the market to satisfy the number of purchasers. The result being sellers are experiencing huge demand for viewings (up to 50 viewers in this author’s own recent sale) and multiple bidders offering. We are seeing that the majority of bids are over the Home Report value and in some cases reaching to 20% - 30% over the Home Report value. We have had several instances where the successful offer was between £50,000 - £100,000 over the Home Report value! 

So what is a closing date? …

When it becomes obvious to the Estate Agent that there will be more than one interested party for a property they tend to suggest a closing date to the seller. This is a date and time that is agreed and passed to all potential interested purchasers. On this date the purchaser will instruct their solicitor to put in their offer. This will be a onetime offer and should be the purchaser’s  best offer that they are willing to pay for the property. This is a blind bidding process so you will not know what anyone else has offered. All interested parties’  offers are then received for the time stated and collated together. The estate agent will then go through each offer with the seller  and accept one. There are no do-overs or a chance to place a higher bid/change terms - once your offer is in at closing then that is it.

The successful offer will usually be the highest offer however the purchaser’s position may also have an impact. If the purchaser’s offer isn’t conditional upon selling their own property or obtaining a mortgage they may be viewed as a more secure option. Even if the purchaser only requires a mortgage, providing they have an agreement in principal, they can be viewed as a more secure purchaser.

We are often asked how much you should offer and, unfortunately, we cannot tell you. We can however give you some hints and guidance due to our extensive knowledge of the property market and what the trend is in your chosen area, based on previous offers we have submitted. You should however consider your own financial situation and the condition of the property based on the Home Report survey. If extensive work is required, you should make sure you have enough funds after your offer price to carry these out. You should also take into account your legal fees, outlays and any Land and Buildings Transaction Tax (and possible Additional Dwelling Supplement Tax). Please also remember anything you offer over the Home Report value has to be funded from your own funds. Your mortgage will only give you your loan to value figure based on the Home Report value. Therefore if you have a 90% mortgage you have to account for 10% deposit to the Home Report value plus anything you have offered over this.

House hunting can be a daunting task, especially for first time buyers, however we are here to help you with every step. Please do not hesitate to contact our Conveyancing Team to discuss your next move.

Written by : Lindsey Taylor