House For Sale By Tender
When a house is sold by tender, any offers (tenders) for the property are made by a set date and time (the tender date) and can include conditions. The offers are all sealed (confidential) and are all opened after the close of the tender. The vendor can choose to accept any tender (not necessarily the highest one), reject all the tenders, or enter negotiations with one or more of the tenderers.
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. A House for sale by tender is usually not marketed with a price. However, a recent trend is the ‘tender reserve’ where a guide as to the minimum amount acceptable to the vendor is advertised.
If you are interested in making a tender on a property, request a copy of the tender documents from the real estate agent. The tender documents usually include:
- A partially filled in sale and purchase agreement
- A copy of the certificate of title
- Terms and conditions of sale by tender
- Instructions to use when filling out the tender
- Any other documents relevant to the property
Never assume that the tender documents include all the relevant documentation with regard to a property. You still need to do your own checks.
It is very important to get your lawyer to look over completed tender documents. In most cases, the vendor will have added conditions and deleted standard clauses in the sale and purchase agreement. Your lawyer can tell you the implications of these changes and should also check the title.
After all these checks have been done, and you are happy to proceed, the tender can be submitted (usually to the real estate agents’ offices), with a cheque for the deposit, before the tender closes.
Be aware of the fine print as some houses are advertised for sale by tender (unless sold prior), which means the vendor is open to offers before the tender date. In this situation, you can choose to approach the vendor early or wait to the tender date. Registering your interest in the property with the agent ensures that if an offer is being submitted prior to the tender date, you get a chance to put an offer in also.
With a house for sale by tender situation you may be the only tender, or one of many. You may be able to gauge this by asking how many copies of the tender documents were sent out, or you can ask the agent – neither is a reliable method. The reality of a tender is that unless you have reliable information to the contrary, you have to assume you are in a competitive bidding situation and have to put in your best offer.
You should hear back within a couple of hours past the tender close time whether or not you have been successful. If you are, you now have a contract with the vendor and can start working through your conditions (if any). If you have not been successful, your deposit cheque will be returned.
If the vendor does not receive the price they want, they may choose to start negotiations. The submitters of the top tenders can be asked to re-submit a new offer, or negotiations can continue with just one of the submitting parties (and not always the one with highest price).
This can mean that tender negotiations continue well past the tender date. If you do not hear within a few hours the result of the tender, contact the agent and discuss the situation. Make sure you are comfortable with what is going on. Ultimately, if the tender deadline has past, and the vendor is in negotiations with another party, your offer was not accepted. You are free to pursue other house purchase opportunities.
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 the 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 is that offers will not be accepted prior to the tender date.
Looking to buy a house by auction or buying a house by negotiation – we have all the information you need.
