Closed Tenders Explained
By Craig Lowe
Buyers are always telling me how much they hate closed tenders. And for good reason; the tender process always favors the vendor. Buyers often tell me how much they wish the property was being auctioned, especially seasoned property investors. I believe this is conclusive evidence that auctions are weighted towards the buyer. Unfortunately for those buyers I always do what’s best for my vendor.
During a closed tender the property is exposed to the market through an expertly advertising campaign, without a price, or with a BBO guide. BBO stands for Buyer Budget Over and basically means that any buyers with more than the figure stated should inspect the property. The BBO is a very general guide.
The advertising campaign usually spans 1-3 weeks, any longer and there is a risk of over exposing the property to the market and people may begin to wonder why it hasn’t sold. This can be difficult to recover from.
Interested buyers are then invited to submit tenders which are essentially Sale & Purchase agreements that are sealed in an envelope. There is a “closing date” by which all offers must be submitted. On the tender closing date the vendor will open every tender that has been submitted and then accept or negotiate with the highest offer. Under most circumstances buyers will only have one chance to make their best offer.
The vendor is under no obligation or pressure to accept any offer and is in complete control of the situation. In comparison to an auction the tender process is very private, less stressful and cheaper (no auctioneer fees).
Buyers are forced to put their very best foot forward and if conducted properly with good negotiation by your salesperson, you will have no doubt that the highest market value has been achieved.
Another benefit of a closed tender is perceived competition. Even if there is only one tender, that person does not know how many other tenders there are and will still have to put their best offer forward. If there was only one bidder at an auction the whole process would be a disaster, unless your auctioneer is taking phantom bids, which is unethical and illegal.
There are many more benefits to closed tenders but when combined with a perfectly executed marketing plan and excellent negotiating they are by far the simplest, most effective way of achieving the highest possible price from the widest pool of buyers in any market.
If you would like to discuss the benefits of a closed tender for your property, please contact me on 021 764 647 for an obligation free consultation.