After discussing selling a home via an auction and through private sale, we now come to the third selling method that is, selling by tender. This means that vendors can take advantage of the organic, competitive nature that tendering entails.
Offers are made by potential buyers in secret in an effort to secure the property. Although it proves quite an effective selling option, there is also a high level of risk involved. Using a local real estate agent to assist with the process is one way of minimising that risk, ensuring you achieve maximum sales potential.
How It Works
Basically, tendering is very similar to a secret, or ‘silent’ auction. Buyers show their interest through bids (just like a regular auction), however, who has specifically bid and the exact amount is only known by the seller. Essentially, after enough bids have been submitted, the seller will take the highest or closest offer to the one they originally had in mind. There is usually also a deadline date set to ensure a relatively quick sale. This can fuel competition as bidders can be encouraged to make higher offers as they know they only have one opportunity to ‘outbid’ the others.
Let’s look at some of the advantages and disadvantages of selling a property by tender:
Advantages of Selling Your Home By Tender
- It is almost impossible for buyers to compare your home to other similar homes on the market as there is no listed price. While people may have a general idea, this still works emphatically in the vendors favour.
- As competing bidders don’t know what each other have offered, there are no set, or asking figures for buyers to compare to. This entices people to make their best offer right off the bat and in most cases, can weed out the timewasters.
- More flexibility – The vendor doesn’t have to accept the highest bid. Having everybody’s bid virtually ‘on paper’ in front you is extremely handy though.
- It’s a more cost-effective option – By setting a closing date the time period for running marketing or advertising campaigns is usually shortened, saving sellers a substantial amount of time and money.
- The tendering process is particularly useful to sellers who have relatively little idea relating to how much their property is actually worth. A calculation of the total number of bids can help with finding out a true representation of your home’s value.
- The tendering process is completed using cash. Buyers must meet certain finance-related criteria before being allowed to participate in the tender. This can provide extra reassurance to the vendor.
Disadvantages of Selling Your Home By Tender
- The secrecy of the tender process is a classic catch twenty-two. It can also go horribly wrong, to the point where buyers may bid lower because of their lack of knowledge of the true market value.
- Sometimes the seller may not be entirely happy with the offers, starting a negotiation which can be drawn out much longer than anticipated by vendors.
- Although a shorter advertising campaign can save vendors money, it can also limit the amount of interest as the fewer people will know about the sale with a shorter closing date attached.
Always speak to your local agent for expert advice prior to deciding on a selling method for your home. Every seller’s circumstances are different and figuring out the best method to suit your situation is highly recommended before proceeding.