The Tender Process: How It Works
The tender process is a popular method of selling property that offers both buyers and sellers a unique set of advantages. Unlike auctions or private treaty sales, tenders allow for a more flexible and potentially more lucrative approach to property transactions. This article will delve into the intricacies of the tender process, explaining how it works and what both buyers and sellers need to know.
What is a Tender?
A tender is essentially a silent auction where potential buyers submit confidential written offers for a property by a specified deadline. The Real Estate Authority (REA) defines it as a process where buyers give confidential written offers to the agent before a specified end date. This method is particularly useful for unique properties that may be difficult to price or when sellers prefer not to disclose their price expectations.
The Tender Process: Step by Step
1. Property Listing
The process begins when a property is listed for sale by tender. The listing will typically include a deadline date and time for offers to be submitted. It’s crucial to note that some tenders may include the phrase “unless sold prior,” which means the property could be sold before the deadline if an attractive offer is received.
2. Marketing Period
During this time, the property is marketed to potential buyers. Open homes are conducted, and interested parties can request additional information or arrange private viewings. This period allows buyers to conduct their due diligence, including property inspections, LIM report reviews, and financial preparations.
3. Registering Interest
Prospective buyers should register their interest with the real estate agent. This ensures they will be informed of any changes to the tender process, such as deadline extensions or early offers being considered.
4. Preparing the Offer
Buyers prepare their offers using the official tender document provided by the real estate agent. This document is a legally binding contract and differs from standard sale and purchase agreements. It’s highly recommended that buyers seek legal advice before submitting their tender.
5. Submitting the Tender
Offers are submitted in writing, usually in a sealed envelope, by the specified deadline. A deposit (typically 10% of the offer price) is often required with the tender submission. This deposit is returned if the offer is unsuccessful.
6. Opening of Tenders
After the deadline, all tenders are opened, usually in the presence of the seller and a representative from the real estate agency. In some cases, tenders may be opened as they are received to check for completeness, but this should be specified in the tender documents.
7. Consideration and Negotiation
The seller reviews all offers and has several options:
- Accept the highest or most favourable offer
- Negotiate with one or more tenderers
- Reject all offers
The seller typically has five working days to make their decision, during which time buyers cannot withdraw their offers.
8. Acceptance and Contract
If an offer is accepted, the seller signs the tender document, creating a binding agreement. The successful buyer is notified, and the property sale proceeds as per the terms outlined in the tender document.
Advantages of the Tender Process
For Sellers:
- No public disclosure of the sale price
- Potential for higher offers as buyers don’t know what others are bidding
- Flexibility to consider both the price and conditions of offers
- Time to review all offers simultaneously
For Buyers:
- Opportunity to include conditions in the offer (e.g., subject to finance or building inspection)
- More time to prepare an offer compared to an auction scenario
- Ability to make their best offer without the pressure of public bidding
Key Considerations
For Sellers:
- Set clear terms and conditions in the tender documents
- Decide whether to allow pre-deadline offers
- Consider engaging a lawyer to review the tender process and documents
For Buyers:
- Conduct thorough due diligence before submitting an offer
- Understand that offers are typically binding for five working days after the tender closes
- Consider including a personal letter with your offer to stand out
- Make your offer as clean as possible, with minimal conditions
The tender process offers a unique approach to property sales, balancing the interests of both buyers and sellers. It provides a level of privacy and flexibility that other sale methods may lack. However, it’s crucial for all parties to understand the process thoroughly and seek professional advice when necessary.
For sellers, a well-managed tender can result in achieving the best possible price for their property. For buyers, it presents an opportunity to put their best foot forward in a competitive market. By understanding the intricacies of the tender process, both parties can navigate this method of sale with confidence and potentially achieve their property goals.
Remember, while the tender process can be advantageous, it’s always wise to consult with real estate professionals and legal advisors to ensure you’re making informed decisions throughout the process.