In some New Zealand cities, the most common sale process is auction, however, many of the houses for sale in Wellington are sold using a tender process. Sometimes this is referred to as a Closed Tender, and sometimes simply as Tender. Some readers may still wonder, what is a tender? What is the difference between the two forms of Tender sale? And what are the benefits of a tender sale? In this article, we break down the tender process and the advantages of this selling using this method.
What is a tender offer?
When a property is listed as being for sale by tender it is a process where buyers submit written offers to the agency on, or before the specified deadline. Potential buyers must submit their offer in writing using the Tender Document or Sale and Purchase Agreement as supplied by the salesperson and submit their tender at the specified closing location, usually the real estate agency managing the listing, by the tender deadline. Tenders are held secure until the deadline closes.
If a property is marketed as selling by Closed Tender, the seller will not look at earlier offers, even if a tender is submitted earlier than the advertised deadline. If the Tender states that the “vendor reserves the right to consider earlier offers”, then the selling agency may refer to this simply as Tender, or as Deadline Sale. Always confirm with the salesperson what form of Tender the property is being marketed using.
Unlike auctions, tenders can include conditions of sale. The vendor may be more interested in attractive conditions or no conditions, and a better settlementdate and decide to accept a tender based on this.
How does a tender sale work
Understanding the tender sales process makes it far easier to comprehend a tender sale. Here, we give you a rundown of how a tender sale works.
First and foremost, prospective buyers register their interest with their real estate salesperson and will ask to be kept informed of any changes, such as any additional disclosures discovered during the marketing process, changes to the tender document or in the case of the tender deadline moving forward (only the case if the process is not a closed tender and the vendor has reserved the right to look at early offers).
Both sellers and potential buyers can include conditions in their offer. Buyers may choose to include conditions such as their offer being conditional upon a property inspection report, a valuation, approved finance, or selling another property. If a buyer has been able to complete their full due diligence and has sought legal advice before submitting their tender, they might be in a position to offer unconditionally.
Unlike house auctions, the seller has time to make their decision. The seller has five working days to consider the tenders after the deadline, during which time the buyer cannot withdraw their offer. For this reason, Tenders suit properties where several people must be consulted, such as Trusts and deceased estates, but are also commonly used for other property sales as well. A deposit is either provided with the tender offer, or by electronic transfer upon hearing your offer has been accepted. When the offer is unconditional, the remainder of the purchase price is due on settlement day.
What are the benefits of a tender sale?
Now you know what a tender is, learn the benefits of a tender sale and whether it is the right choice for you.
One benefit of a tender sale is having an advertised deadline by which time buyers need to decide whether or not they wish to submit an offer. Without a deadline in place, it is easy for buyers to get caught up with other distractions and other properties, and delay making a decision on offering on a property of interest.
As a buyer, a tender process provides a set amount of time to complete your due diligence, re visit the property and have the time to give full consideration to your decision. It is important to clarify with the salesperson you are working with whether the Tender process is Closed (not selling prior), or whether it is a tender process that the sellers have reserved the right to sell earlier than the advertised deadline. This will be noted on the property marketing also.
For sellers, a tender deadline brings a sense of urgency to the selling process and can often result in competition between interested buyers to secure the property. As a property owner choosing to go down the route of a tender sale, you are maintaining privacy and not allowing the public to know what the house is selling for (until it has settled) as opposed to an auction where the sale price is made public the day that the property is sold.
For both buyers and sellers, a tender process gives greater flexibility with the ability to alter terms and include conditions as needed. This would always be done in consultation with a solicitor. A tender sale offers no price limitations and can help you cast the net wide for potential purchasers.
Similarly, buyers get much more room to manoeuvre than at an auction.
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