Of the many real estate selling methods, tendering for sale is usually used sparingly.
It’s generally reserved for high-end properties or those with unique features such as water frontage. However, it may have real benefits in a regional market.
So how does a tender selling process work, and what are its advantages in non-metropolitan real estate?
What is a tender selling process?
A tender process is a little like an auction. The vendor invites expressions of interest (tenders) from selected people for the listed property. However, its key difference to an auction is it is conducted in secret — bidders are not made aware of each other’s bid, and there is no public gathering of people. Interested parties submit tenders in sealed envelopes, and the vendor examines all tenders at a specified time and date.
Before this process, the property is made available for inspection to prospective buyers. They assess the value of the house before submitting their tender. This contains a signed contract, any added conditions of sale requested by the buyer — such as a building inspection — and a deposit payment.
If no acceptable offers are received by the end of the expression of interest (EOI) time period, the property may be returned to the market for private sale.
Clear listings are critical
While a tender process can be valuable for regional real estate markets, it’s important to be clear in the listing of the property. Interested parties are asked to submit a tender based on the listing. The clearer the description of the property in the listing, the more likely a potential buyer is to submit a bid.
Regional real estate may have less comparable sales based on market history
The tender process works best where it is difficult to judge the value of the property due to less sales history of comparable properties in the area. This is why it is useful for unique, high-end properties.
But regional markets also have slower sales than their city counterparts due to fewer properties available on the market. This can make it difficult to decide on the market value as there may be few houses in the same category to compare with the property.
Choosing a tender process provides a consensus view on how much the property is worth, and it may well be a better option.
Valuation accuracy based on local market research and testing
Real estate agents may find it more difficult to gauge prices in regional areas because the history of sales in the current market may be lower. Asking for tenders, therefore, may be a valid alternative to auctions and private sales.
Tendering may be an excellent alternative to auctions and private sales in regional areas. As prospective buyers don’t know what others are bidding, their sealed bids may be higher. This differs from an auction where the highest bidder will stop once the lower bidders end their bidding. Unlike auctions, bidders may submit certain conditions that need to be met before the sale. This gives the buyer more flexibility in their bid compared to auctions where they must accept the property “as is.”
Talk to the experts at R & R Property to ask if a tender process will work for your regional property sale.
