Property shortage leads to sealed-bid auctions

A record shortage of homes for sale in London has prompted a new property trend - the sealed-bid auction.

Tennis star Tim Henman bought his palatial home in Barnes by sealed-bid auction.

But experts say the system - where all potential buyers make a confidential offer in a sealed envelope by a particular deadline - is open to abuse.

Rupert Wiggin from Lane Fox's Kensington office said: "Last year sealed bids were a very, very rare sight. But since the market has begun to pick up we are now seeing a significant increase in competitive bidding and sealed bids, not only at the top end of the market but at the lower end too."

The last time sealed bids were a major feature of the market was before the terrorist attacks in America.

Experts say today's growing popularityof sealed bids is down to the scarcity of property for sale.

The number of buyers has outpaced sellers every month since July 2003. There are now 10 per cent more buyers than sellers. This means vendors are able to ask potential buyers to make a bid at their maximum price. Sealed bids can also be arranged when a property is especially hard to value.

Henman's home, the Old Essex House in Barnes - where Elizabeth I is reputed to have held love trysts with the Earl of Essex - fell into the former category. Dozens of people had shown an interest but the tennis star won the property auction by offering the highest price.

Kensington agents Bective Leslie Marsh recently sold a run-down house through a sealed-bid auction.

A spokesman said the Notting Hill property was "difficult to value" and was sold after sealed bids from six different buyers. Agents Cluttons also report a rise in sealed bids. A spokesman said: "We have seen three in the last month, spread across the market."

But Tim Le Blanc-Smith of John D Wood said sealed bids could drive prices unrealistically high. "The advantages to the seller are the chance of someone offering way above the odds," he said.

"There will also be a quick result... some sellers ask us to quote a low asking price to create more interest and competitive bidding, culminating in sealed bids."

And Which? magazine recently warned of the risk of agents inventing "phantom" offers to persuade bidders to offer more for a home they had set their heart on.