What is a Closing Date in Scotland?

What is a Closing Date in Scotland?

A Closing Date is a day and time, set by the seller’s estate agent, by which time the seller’s agent must have received an offer from anyone who wishes to submit an offer on that property.  Most often, buyers’ solicitors will fax the offer prior to the time of the closing date, on the day of the closing date.

Sellers’ estate agents or solicitor/estate agents will advise their clients to set a Closing Date when multiple potential buyers are interested in buying their property. The seller’s estate agent will know that there are multiple parties interested in purchasing the property because they have received multiple offers or multiple Notes of Interest, see: http://www.mov8realestate.com/blog/item/88-what-is-a-note-of-interest-or-noting-interest-in-scottish-property?-how-do-i-note-interest-in-a-property?.html.

The seller isn’t obliged to accept any of the offers that they receive at a Closing Date and isn’t obliged to accept the highest or ‘best’ offer on the table either.  They can still choose which offer they like the best.

For solicitor/estate agents, Closing Dates are regulated by Law Society of Scotland guidelines. These restate the fact that, at a closing date, the seller is not obliged to accept any offer or indeed to accept the highest offer.  However, they say that if the seller’s solicitor/estate agent enters into negotiations with any parties ‘with a view to concluding a bargain’ with that potential buyer, they cannot then enter into negotiations with another potential buyer until all negotiations are at an end on the original offer.  If the seller insists on them doing that, they have to withdraw from acting for the seller. 

Just as with Notes of Interest, non-solicitor estate agents are obviously not bound by these Law Society of Scotland guidelines.

What are the benefits of a closing date over negotiating multiple offers?

The benefit of a Closing Date is that it allows the seller’s estate agent or solicitor/estate agent to get all of the potential buyers’ best offers on the table.  This can be preferable to going backwards and forwards between multiple buyers, asking the buyers to submit their best offers but never being quite sure whether these offers are actually their final offer.  Negotiating multiple offers outwith a Closing Date environment can also be very difficult, particularly for solicitor/estate agents, again because of the Law Society’s guidelines on gazumping and handling closing dates. 

A seller’s solicitor/estate agent cannot tell one potential buyer what the another has offered.  However, the potential buyer tends to want to know this so that they can decide whether they can match or indeed beat the other offer that was received. 

In addition, the seller’s solicitor/estate agent has to outright reject the original offer before they can start negotiating any further offers, even though there only might be a vague possibility that the further offer is better than the original offer.  This leads to the potential of losing the original offer. 

It also can cause all sorts of communication problems as the seller’s agent has to rely on the buyer’s representative to accurately communicate all of this to the potential buyer to avoid complaints from the potential buyer about entering into negotiations on their offer and then entering into negotiations on a further offer, contrary to Law Society guidelines.  Even whilst I’m writing this I’m conscious of how confusing and counter-intuitive this all is when set against the basic principle that somebody can sell a property to whomsoever they like and that it’s a solicitor’s professional obligation to do the best they can for their client.  So you can imagine the confusion that arises between, often non-legally qualified representatives and their clients over these issues.

The other benefit to property sellers is that an element of competition can creep in at a Closing Date.  Potential property buyers generally are quite emotionally invested in a property by the time that they make an offer.  The fear of losing out on something is almost as much of a driver for people as the enjoyment of getting something that they want.  For some people it’s an even more powerful driver.  If multiple people are bidding, therefore, potential buyers will tend to add a little bit extra to the offer than if they were the only person offering.

Setting a closing date is simpler and cleaner than negotiating multiple offers at the same time.  Everyone submits their best offer and the offer is either accepted or rejected.  Unless the offer is ‘Subject to Survey’…

I'm Robert Carroll, Managing Director of MOV8 Real Estate, Estate Agents and Solicitors. MOV8 is an innovative and forward-thinking estate agency and solicitor firm with its Head Office in Edinburgh, UK. It is one of the fastest growing firms in the east of Scotland. I see first-hand every day what is actually happening in the property market and am regularly quoted in the Scottish Press in property stories. Through this blog I aim to give an honest, fresh and sometimes light hearted take on what is happening in the Scottish property market for anyone who is interested in that kind of thing...

5 Comments

  1. susan klos 3 months ago

    can you offer on a repossed house after the closing date?

  2. Nick T 3 months ago

    Everything said here seems pretty sensible, but there are some potential disadvantages to sellers with the offers over system as well. Sellers tend to think that they will get everyone’s best offer, and thus the highest price, if they set a closing date. But that requires the substantial assumption that buyers will wait around for a closing date. In the past month the following has happened with me: I put in a very good offer, just below valuation, on a property that had clearly had some trouble selling given its time on the market. The vendor declined and set a closing date for about a week later, figuring, I assume, that they would get our best offer and the best offer of two other interested parties. By the time that date rolled around however we had decided we had mixed feelings about the place and didn’t put in an offer, and the other offers received were weak. The place is still on the market. Had the buyers struck when the iron was hot and negotiated with us when we were still keen on the place, they would have gotten at least home report value and perhaps more. Also, without going into details, there were two other occasions were we were prepared to put in an very very good offer, but the closing date was weeks away and we weren’t prepared to faff around waiting for it. The general point here is that although buyers think they will get everyone’s best offer by set a closing date, they are wrong to think they hold all the cards. They might miss out on the best offers too.

  3. Nick T 3 months ago

    p.s. One other thing I meant to add. Buyers also have the assumption that the sealed bid will represent the most a buyer is prepared to pay, but that is often false. When you bid on a property, you have to balance the desire to get the property with the desire not to pay more than you need to. For example, suppose a property has a home report value of £300,000, and is listed at offers over £275,000. Someone might be willing to pay £325,000 for it, but *not willing* to bid £325,000 in a sealed bids situation, since the idea of paying a lot more than the next lowest bid is galling. Maybe this is irrational but I think it does feature heavily in buyer psychology. On the other hand, if the seller had just said “look, I will sell this property for £325,000″, they might have been offered that price. Sealed bids often don’t represent the most someone will pay, they represent someone’s best guess at what they are prepared to pay *minus* what they think they don’t need to pay to beat other offers.

    • Author
      Robert Carroll 3 months ago

      Thank you for your comments Nick. You raise some very good points and it’s absolutely not possible to absolutely disagree with them. There is definitely the chance that a closing date could lead to people not actually submitting their best bid. In the same way as, if a property was in an auction that took place in 4 weeks time and you found something you liked meantime, you might buy that property meantime because of the relatively high chance that you wouldn’t secure the property at the auction, closing dates can have the same effect. For others, they just will not get involved in a closing date scenario, full stop. And I totally appreciate your point about how some people will react, psychologically, to the closing date and that they will reduce their bid to avoid the feeling of perhaps having overpaid. It really does depend on the property and also how serious a level of interest you believe the potential buyers actually have.

      However, with anything like this you have to base your actions, techniques and advice around what the majority of people do and how they think. The honest truth is that, as much as I personally really don’t like closing dates/sealed bids/auctions, they are a part of our property system and will remain so when the market is good and there is a lower supply than there is demand for certain types of properties in certain areas. I have a lot of experience of dealing with buyers, many of them very educated and otherwise sensible, who will somehow find an extra ‘few’ pounds down the back of the sofa the night before the big day and stretch themselves horribly because of the fear of missing out and not securing the property at the closing date. Our role, as advisers to the buyers, is to try to talk some sense into them when their emotions have got the better of them. There are exceptions, definitely, and it sounds like you really do think these things through on a very rational level, but most people get quite emotional about the idea of property and a home and sadly, in many cases, heart overrules head. Closing dates, and advice given to sellers in the appropriate circumstances, taps-into this and leverages it to the seller’s advantage. To most people reading this, this probably sounds unbelievably inhumane, but it’s no different to any other agent acting on behalf of their client and trying to get them the very best result from a given scenario.

      Thank you for your comments though. It’s absolutely true that there are exceptions to the rule and you have eloquently highlighted them!

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