Love me Tender! Another option for selling your property
So why don’t they get used more regularly?
Buyers, given a choice, will often prefer to avoid them. They can feel pressured at an auction. They’re required to get a finance pre-approval and also to pay for a building inspection before they know if they’re even the successful buyer. And then they’re asked to put their hand up in a public forum to declare their bid.
In strong markets, or where buyers have FOMO (currently a Sydney phenomenon – ‘fear of missing out’) they’ll bite the bullet and bid at auction. In Brisbane’s inner city we see it most successfully used for character houses or anything that’s a bit unique.
So what about an alternative sale method for sellers that provides many of the benefits of auction, without scaring off buyers? We’d argue sale by tender is a great solution.
How does it work?
The property’s advertised without a price and with a deadline for tenders to close. Buyers are given draft contracts to complete and an envelope to seal up their offer. Depending on the sellers and property we’d often recommend buyers be given the flexibility of submitting an offer that’s conditional (allowing finance and building clauses). This broadens the potential pool of interest by de-risking it for buyers. The campaign is run almost identically to an auction, but without the front lawn public display of bids. And there’s a win here for both buyers and sellers.
Buyers like the additional privacy. They’ve got time to chew over and consider their best offer before the tender closing and know they may not get another chance to raise it. So here’s where tender can be superior to auctions for a seller. It’s a bit like calling for final bids at auction – except buyers don’t know how much their competitors are prepared to pay.
I’ve been a buyer in a tender and I wasn’t going to let someone else buy the property at a price I was willing to pay. So I gave it my best offer right up front.
We recently sold an inner city house by tender and received 8 written offers at tender closing. Three of them were low, a long way off the money. Then we had four offers in a cluster with prices just $6,000 from lowest to highest. Completely unaware of each others’ offers this showed us where the majority of the market saw value and these matched our original appraisal.
Then there was an offer $11,000 higher. A buyer who saw greater value than anyone else. A buyer who, if they’d bid at auction, would only have had to be one bid, probably $500, dearer than the under-bidder. But when submitting a tender, they went to their best offer first up and paid the seller a premium.
There’s many situations where auction is clearly the smartest move for selling. It’s still a tried and tested method that works. But Brisbane’s market is not yet firing hot in all quarters and buyers can often take their time to pick and choose. Sellers might do well to consider the benefits of tender as another option that can be far more palatable for buyers and broaden their appeal to the market.
Please give us your comments. Have you bought or sold at tender or would you?