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.
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 entering into negotiations with another potential buyer, the solicitor/estate agent has 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 out with 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 . This is done 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’…
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can you offer on a repossed house after the closing date?
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.
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.
I am selling and have 2 offers & a note of interest. Estate agent kinda talked me into a closing date [which is in a few days]. I did the viewings myself. DILEMMA: Of the two offers I have, I prefer the people who offered £1100 less than the other offer. They would just ‘fit’ the house / street and I really liked them Is it illegal or unethical for me to try and contact them & negotiate a higher offer? I know I do not need to accept the highest [or any] offer but I am not prepared to loose out on the extra £1100 & I obviously do not know if the note of interest will offer or offer higher. I prefer honesty and would rather be up front with people.
Been told. My estate agent that they need at least two notes of interest before setting a closing date. I have one very interested party who think they are the only game in town and have put in a note of interest. My view is they are just waiting to see what happens with a view to making a low offer eventually when they see no one else coming forward. I would like to set a closing date and let flush out their offer. My estate agents says they are not allowed to do this on one offer. Is that correct?
Thanks for getting in touch. I completely understand your frustration on this, but unfortunately it is a difficult one for us to offer guidance on. If your estate agent is purely an estate agent (i.e. they are not a solicitor estate agent) then they would not be bound by Law Society Regulations.
The best suggestion I could offer is to get in touch with your agent and ask them to give you some detail on exactly why they are unable to act as you would wish them to, as they will obviously be best placed to explain things. While it may not change the situation, it should at least clarify what the issue is.
Sorry that I can’t be of more assistance on this one. Hopefully your agent can explain what is going on and I hope you get a positive result from our sale soon.
I am currently looking to buy a house that I love and would suit my family perfectly. I am worried about allowing my heart rule my head as the house needs a lot of work and if I offer way over the home report value I would be leaving myself short in funds needed to carry out essential work. My question is, is there a standard percentage or value over home report values that can be followed? There are 2 other notes of interested submitted but no official bids, we have put an offer in today but I expect it will be rejected and go to closing date.
I’ve seen my dream house and keen to make an offer however my house isn’t on the market yet. I’m worried that my offer won’t be very strong without an offer on my own house. My dilemma is that the one I want to offer on is going to a closing date, but if we’re not successful I don’t want to sell my own. How’s best to play this as if I put mine on the market now (so my offer is stronger) it may be sold and I’d end up with nowhere to go.