Welcome to the Propertytoolbox three part series on tendering on a house. This first post explains just what a tender is. Next post, we talk about putting in a tender, and the post after that will be that all important subject of - what happens after the tender has been put in!
A tender is a way of marketing and selling property. When a house is sold by tender, any offers (tenders) for the property are made by a set date and time (the tender date – which is set by the vendor) and tenders can be conditional offers. A vendor with a house for sale by tender is usually not open to offers prior to the tender date.
The tender process attempts to encourage a competitive offer situation with the tenderers all being unaware of what the other is offering. Sometimes the ‘winning’ tender can be far in excess of any other tenders. The reason for choosing to sell a house by tender are many and diverse! But the most common are:
- The real estate agent feels that there will be a number of people interested in the house, a tender is a good way to structure a multi offer situation.
- The vendor wants a strong marketing campaign with a set end. The house will be marketed intensively over the days/weeks leading up to the tender date.
- The property is unique and difficult to value – a tender lets the market decide the value.
- A house being sold by tender can give the illusion that there is strong interest in the property – this is a clever marketing technique that implies a multiple offer situation when in fact there is likely to be little interest in the property.
Properties for sale by tender are usually not marketed with a price. However, a trend over the last couple of years has been the ‘tender reserve’ where a guide as to the minimum amount acceptable to the vendor is advertised.
What is the difference between a tender and an auction? A tender is different from an auction because of two crucial points:
- The tender offer can include conditions (an auction bid is an unconditional offer).
- When tendering you don’t know what other potential buyers of the property (tenders) are offering, unlike you fellow bidders at an auction.
The terms ‘open’ or ‘closed’ tender can often be used – this can be a confusing! An open tender is a tender made available to anyone while a closed tender is where only selected individuals or companies are invited to submit a tender on a property.
Open tenders are the most common form of tender used for the sale of private dwellings. Often the term ‘closed tender’ is used incorrectly – most commonly the intended meaning of ‘closed tender’ when used with regard to residential property is that offers will not be accepted prior to the tender date – but this should be confirmed.
Next – Part 2 - Making a Tender on a House - Putting in Your Tender
Want to find out more about house buying? The Propertytoolbox house buying guide has all the basics – check it out. Want to bookmark a great dictionary for all those real estate terms – the Propertytoolbox definitions section is a fantastic reference.
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About ClaireClaire is a member of the Propertytoolbox team. Her background is engineering, and IT. But she is very passionate about houses! Claire uses her experiences, the experiences of other home buyers, current topical issues and questions from Propertytoolbox website readers to provide inspiration for her Propertytoolbox blog articles.
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