If you have been scrolling through Perth property listings in the past year, the words “expressions of interest” will be all too familiar. Many sellers are choosing not to disclose a price for their home and the strategy is quite simple - don’t put a cap on the potential price. In an uncertain Perth property market, Tender sales effectively allow sellers to “test the waters”, with buyers being the ones to determine the value of the property.
So how does it all work?
In very basic terms, selling by tender invites interested buyers to make an offer on the property by a specified date. This is also sometimes referred to as ‘Expressions of Interest’, ‘Set Date Sale’ and ‘End Date Sale’. While a price guide may be listed in some cases, it isn’t necessary.
Think of it as a silent auction. The bids are disclosed in a sealed envelope to keep confidential from other buyers. Buyers have no way of telling if their offer is higher or lower than their competitors which encourages them to put their best foot forward and effectively, drives the price up (or at least that’s the hope).
When the value of a property is difficult to evaluate, for example, it’s an unusual property type or located in an area with little competition to use as a comparison base, the selling agent may recommend using the Tender method.
The marketing for a Tender sale is usually quite intense (much like an Auction) in order to drum up competition. It’s important to note that during this time, no offers can be accepted by the seller.
Much like selling by private treaty, buyers are able to put in a conditional offer by tender, such as subject to sale or building inspection, and these conditions are submitted in the official tender document.
After the closing date, the Seller and the Real Estate Agent will go through all of the submitted tenders. The Seller can then decide on the tender offer that suits them, with the help of their Agent. If none of the tender offers are found to be acceptable to the Seller, the Agent can negotiate with any of the potential buyers to see if they would be willing to increase their offer, or amend the conditions.
There are many advantages to selling by tender, including:
· No listing price means buyers cannot compare to other properties and potentially discount your property. This can result in the property achieving true market value.
· As all bids are kept confidential, to have the best chance at securing the sale, a buyer must put forward their best offer. Even when the sale is closed, the buyer and the sale amount is not usually disclosed to the public.
· The seller is able to control the cost of advertising and the time on the market by changing the closing date.
· In an auction, more than one bidder is required to push up the price. However, tenders only require one buyer.
· Tenders have a clearly specified end date, which puts the impetus on the buyer to make a move before the closing date.
It is important to consult thoroughly with your enlisted Real Estate Agent, to decide if this method will be right for you, as not all properties will suit the tender method. Perhaps more importantly, the success of the marketing campaign will rely heavily on the Agent’s experience and real estate knowledge, so ensure you make an informed decision when choosing your Agent!