When it comes to selling property, there are a variety of different methods and strategies you can use to achieve the highest price. One of these options is to work with a real estate agent to sell a home by tender.
In this type of situation, vendors use the spirit of competition to their advantage by inviting secret offers from interested buyers. Selling by tender can be beneficial in that it allows the seller to offer a broad price range, rather than advertise the home with a pre-determined price.
There are three main strategies are as follows:
There is some risk involved in selling by tender as well, which is why it’s important to work with a qualified real estate agent who has experience with this particular type of sales process. You can view local real estate agent details side by side for comparison by registering your details at LocalAgentFinder – and start thinking about whether or not this type of sale would work for you. Because selling your property is a big step at any stage in your life, weighing all options carefully can help you maximise your profits with as little stress as possible.
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How a sale by tender works
A tender is essentially a type of closed, silent auction. When selling a home by tender, the seller will accept tenders from prospective buyers and consider these various offers at a pre-specified date. The offers are presented in sealed envelopes, which are kept secret from other buyers. This means that prospective buyers will remain unaware of what prices competitors are submitting. Before this process begins, the home is first marketed to prospective buyers at inspections. Interested parties can attend these inspections before submitting a written tender by the specified due date. Sellers are not allowed to accept any offer before the pre-specified deadline has been reached.
Buyers do have a few bargaining tools on their side. For example, they can make a conditional offer, such as making their purchase subject to a building approval certificate. These terms and conditions are included by the seller’s solicitor in an official tender document.
After the closing date, the seller and their real estate agent will go through all of the submitted tenders. With their agent’s advice, the seller can choose the tender that’s most favourable – depending on the price offered as well as the terms and conditions. There’s no obligation to choose one of the tenders that has been submitted. If none of them are found to be acceptable, the real estate agent can go back to the potential buyers to see if any of them will be willing to change their conditions or offer a higher price.
Although selling by tender has gained popularity in recent years, this practice is nothing new; it’s been used for centuries as a way to sell a property. One of the reasons it has become prominent again recently is that it helps sellers make a quick sale by a certain deadline, without drastically dropping their price to do so.
The advantages of selling by tender
There are many potential advantages to selling by tender:
- Because there is no listed selling price, buyers can’t compare your home to others on the market. The sale price of the home is usually kept secret, so complaints about an overpriced home are less likely.
- With all bids kept fully confidential, potential buyers cannot base their offer on what others are bidding. This can lead to the winning tender being significantly higher in price than other offers. The amount of the tenders may far exceed seller expectations.
- The seller retains control over the selling process. They don’t have to accept the highest tender, but knowing this figure can also open up the doors to future negotiations.
- Sales and marketing efforts can be optimised with an intense campaign that aims to put the property directly on buyers’ radars, to make them aware of the home’s existence before the closing date. This specific closing date also means that sales and marketing campaigns don’t last for long periods of time, which saves both time and money.
- The seller has control over how much money is spent on the marketing campaign, by limiting the amount of time that the tender sale is to be advertised.
- For sellers who don’t have a clear idea of what the property is worth, this tender bidding process can help indicate a true market value. This is useful for unique properties that don’t fit into the market in a neat compartment.
- If there are several bidders who are interested in the property, the competitive nature of the tender situation can cause them to bid higher than they normally would.
- Unlike other sales, all tender transactions are completed in cash. This makes tenders different from auctions, which rule out buyers who don’t already meet lender criteria for pre-approval. This opens the door to a wider selection of potential buyers.
- Another advantage that a tender has over an auction is that it only requires one interested party, whereas an auction requires at least two bidders to drive up the price. Sellers also tend to feel less pressure when they are selling by tender, because they don’t need to make immediate decisions like they would in an auction.
- A tender process tends to lead to higher bid prices than auctions, because in an auction the highest bidder will stop bidding once the weaker bidder quits. In a tender sale, there is no point when this can happen. The highest bidder will have to throw out the highest price they’re willing to pay, because they don’t know what others are bidding. There is no ceiling price that can be put on a sale by tender, meaning that the sky’s the limit when it comes to the potential price of a property.
The disadvantages of selling by tender
There are numerous potential benefits to choosing the tender process. Yet there is also a certain degree of risk involved. To minimise this risk, it’s helpful to choose a real estate agent who has lots of experience with selling by tender. You will also want to think about the following potential disadvantages:
- The confidentiality provided by this selling process can drive up bids, since the buyers are unaware of what their competitors have offered. However, this can also backfire and lead to lower bids than the expected sale price, because buyers will have no idea of the property’s true market value.
- If the tenders submitted are unsatisfactory, it’s possible to negotiate with the interested buyers. This can be a long and drawn-out process, taking a longer time than the seller initially hoped for.
- Because an intense advertising campaign is necessary to make buyers aware of the closing date, marketing costs can be high in a tender sale.
- Because the advertising campaign is often shorter than for auction or sale, it’s possible that fewer potential buyers are made aware of the property.
Like any selling strategy, it’s best to weigh the pros and cons carefully and have a discussion with your real estate agent to determine if selling your property by tender is right for you.