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What Does Sale by Tender Mean in Real Estate?
11 October, 2023 | Jonelle Lee
Listing a property for sale by tender is the process of selling property by having buyers submit written offers on a formal tender document to the vendor or their real estate agent before a specified date or deadline. The process is similar to the concept of a silent auction, where all parties are encouraged to put their best offer forward without knowing what offers other parties are making. The offers are generally then presented to the vendor for them to select the offer they like the most, or they vendor can enter into negotiations with any one or more of the tenderers.
Can the property be sold before the tender deadline?
Yes, the property can be sold before the tender deadline. An offer can be made to the vendor prior to the deadline, and if the vendor accepts this offer, then the tender process finishes early.
The property is usually marketed with the terms “unless sold prior”. If the accepted offer is conditional, the vendor may accept back-up offers in case the original offer falls through. There is no obligation for a vendor to accept an early offer.
Cand the deadline be extended?
Yes, the vendor can choose to extend the deadline.
If you’re interested in a property that is being sold by tender, you should register your interest with the agent and ask them to inform you if anyone else makes an offer prior to the deadline.
Can I include conditions with my tender offer?
Yes, you can include conditions with your tender offer, however sometimes, as with a sale by negotiation, the vendor may prefer offers with less conditions.
We recommend you either complete your due diligence prior to making your tender offer or include conditions.
Do I need to get advice on your tender offer?
We highly recommend getting your lawyer to advise you on your tender offer because Tender documents do differ from the standard Agreement for Sale and Purchase document, and its important you understand what the Terms of the Tender document means, and that it is tailored to suit.
The tender documents will set out the conditions for the tender process.
How do I make a tender offer?
Potential buyers are requested to fill in a legally binding tender agreement which will include the conditions of the sale and the tendered price. This is a different document to the standard Agreement for Sale and Purchase of Residential Property. The potential buyer will have to provide a deposit with their offer which generally is 10% of the purchase price. If unsuccessful with their offer, the deposit is returned. As there are no longer bank cheques, you will be required to complete an electronic transfer of the deposit if your tender is accepted.
The tender documents are usually given to the Real Estate Agency in a sealed envelope, with the deposit cheque included in the envelope.
When do I make my Tender offer?
You can submit your tender offer at any time during the marketing period, prior to the deadline set by the Tender. The tender deadline usually includes both a date and time, i.e. 4pm on Monday, 2nd February 2022.
Can I withdraw my offer after I make it?
You cannot withdraw your offer until after 5 working days of the deadline date. If the vendor accepts your offer during this time, then the agreement goes through the usual process of accepting conditions (if applicable) and going unconditional.
How does the vendor decide which offer to accept?
Unless an offer has been made prior to the Deadline date, the real Estate agent (sometimes together with the Manager of the Branch) will present the offers to the Vendor to open after this date.
After the tender offers have been opened, the vendor can decide to accept one of the offers, or to negotiate further with one or more of the offering parties, also, the vendor has the ability to reject all offers.
When will I be informed if I am successful?
The vendor has up to five days to decide. If they decide earlier, the successful purchaser (if any) will be informed first, and then those that were unsuccessful. It is normal for the agent to get in contact with you within…. To let you know if you were successful or not.
Why would a vendor choose to list by tender?
Listing by tender may convenient when the vendor has a deadline, there are privacy concerns involving the parties, the vendor does not want to share a price expectation with buyers and if the property includes features that are unique and may be more complex to evaluate.
It also opens the market to potential purchasers who want to include conditions in their offer, which is not available with auctions.
Are you looking to buy or sell residential property? Property Law expert, Jonelle Lee is here to be your friendly, expert guide through the process. Protect your investment, get the right advice – Contact Jonelle today!
09 837 6838