With a Tender the property is offered for sale with no price, but with a deadline upon which offers need to be submitted (for example, in four weeks) on terms and conditions specified by the owner. The idea is to create a competitive situation for bidders, with a strict timetable, and process that means bidders do not know what others are offering, allowing for a winning offer to be significantly higher than the next closest offer.
For the owner, this means they can:
- Attract a high level of interest through an intensive marketing programme.
- Create urgency as a result of a fixed time frame.
- Attract a wider pool of buyers (not just those in a cash position), but with the ability to define some of the conditions.
- Allow buyers to include other conditions important to them.
- Have buyers expecting they are competing, so needing to put their “best foot forward”
- Offers from buyers are confidential - they are not public like an auction - so the purchaser has to put their best offer on the table or potentially miss out.
- Review options/bids in their own time and not have to make immediate, pressured decisions.
- Negotiate with one or more bidders if the offer/s are not acceptable
The rules on Tender offers prior to the deadline have changed. The REINZ code of practice used to prohibit offers prior to the tender deadline. That is not the case now, and the reality is that all deadline type sale methods - auction, tender and deadline sale - have mechanisms allowing early offers.
For the Buyer there are benefits too. For example, they can:
- Compete for properties if they are not in a position of cash.
- Include conditions required/desired as appropriate.
- Buy immediately rather than having to wait until the submission day.
The Tender process creates buyer competition, with a wider pool of potential purchasers, on the seller’s terms. Pretty much covers the bases?
Peter Lewis said:
Rubbish.
Posted 6 th July, 2013If I see a residential property "for sale by tender" I immediatly lose interest and turn the page.
Most property people I know are of similar mind.
If you've got something to sell, don't dick around. Tell me the price you want for it.
Grant Wakelin (Author) said:
Hi Peter
Thanks for taking the time to read and make a comment!
Buyers do like to know owners expectations and the first question from a prospective purchaser for an auction, a tender, or a "by negotiation" sale is often "what's the price".
However, it is not about doing what the individual buyer prefers but what is best for the owner and the property they are selling. Rather than competing with others in a tender a buyer may just elect to move onto another property (if there is choice available of course). That does not change or alter the benefit of the tender approach, it just means that buyer is not part of the target group - ie those interested and willing to compete to purchase the property.
Posted 7 th July, 2013