I beg to move,
That leave be given to bring in a Bill to prohibit the sale of property by sealed bids; and for connected purposes.
The role of Government is to ensure that markets work and that deals are fair and as transparent as possible. We make rules to ensure that unfair exploitation does not occur. That is clearly more important in land and property transactions, as they are usually the largest deals that most of us will ever do with our own money.
The purpose of my Bill is therefore to enhance transparency, to reduce costs and opaque behaviour, and to ensure that both buyer and seller are treated fairly by the estate agent. Let me say that, despite the vast number of good agents, there are still some who think that using such opaque techniques to try to extort money is acceptable.
We know that when one buys a property, one does a search and survey before exchanging contracts. That is sensible and prudent. However, when one is asked to submit a best and final offer or a sealed bid, that is done to try to extract more money without any extra information being given. That is not in the interest of any party except the agent, who has made little or no effort to assist in the deal making, as a broker of any other transaction would expect to do.
A sealed bid or private treaty sale will be suggested to a seller when multiple potential buyers are interested in purchasing the same property. Prospective buyers are invited to submit bids for the property through a secret ballot or through an invitation to submit a best and final offer. All bids are then supposed to be considered at once. The owner of the property and the estate agent then decide behind closed doors, in an unclear and opaque process, who should be declared the winner.
Agents are not bound by any legislation setting out appropriate processes for how transparency following bids should be handled, nor is there any later declaration of the price or any other useful information that would help the market. In fact, there are no credible statistics available recording how many sales take place by sealed bid, which demonstrates the overly relaxed nature of the regulations surrounding property buying.
The system is therefore ripe for abuse and detrimental to the confidence of potential buyers. I hope that this Bill can generate real reform and encourage genuine transparency in the property market.
It is inefficient that with such a process of sealed bids the prospective buyer has no idea what their competitors have bid. To be eligible to submit a bid, one must go through the cost of searches and surveys—an expensive procedure. The average homebuyer pays between £1,000 and £1,500 for conveyancing before exchange of contract. There are also other tedious undertakings, such as letters from one’s bank or lengthy pieces on one’s suitability to own the property.