Selling real estate by tender

A call for tenders or an invitation to tender (tender) is a special procedure for generating competing offers from different bidders looking to obtain a property. When buying and selling real estate in New Zealand, there is no one method that is universally accepted as best practice as both the property itself and the circumstances surrounding each sale contain wide ranging variables. Following on from last week’s article concerning selling real estate by public auction we will now look at the tender process.

Pros and cons of selling real estate by tender

  1. Aspects of the tender process are similar to that of auction given that both have a finite time frame and there is no set price. The greatest benefit of tender to both seller and buyer is that the terms and conditions of their offers remain confidential.
  2. The property will be fully exposed to the market to ensure every potential buyer is given an opportunity to place an offer. The marketing will stipulate the time and date that tenders close and buyers must complete their due diligence investigation prior to this time. A buyer may place more than one tender, each containing a different price and conditions.
  3. Once a buyer has decided to proceed, they must complete a written offer and submit this, together with a preliminary deposit, to the real estate agent prior to the closing date of the tender. Offers may or may not contain conditions, dependent on the seller’s instructions and this will be stipulated in the tender documents.
  4. As there is a deadline to the process, prospective buyers are encouraged to conduct their investigations promptly to enable them to make informed decisions prior to placing their offers.
  5. The written offers are kept in sealed envelopes and placed in a tender box, only to be opened in the presence of the real estate agent and the seller immediately after the cut off time and date. The written offers may not be withdrawn until five days after the cut of date, allowing the seller time to consider the strength of each on its own merits.
  6. The seller may choose to accept a buyer’s offer, they may choose to negotiate with one of the buyers, or they may choose to do neither. If they choose to accept an offer, it does not necessarily have to be the offer with the highest dollar value. Once the seller has accepted an offer, there is a binding contract between themselves and the buyer. If there are conditions to be met, the buyer must endeavor to fulfill those conditions by the date of fulfillment.
  7. Like the auction process, marketing a property by tender does not disclose the price the seller is seeking. As the buyer has no way of knowing where other buyers are pitching their offers, they must place their very best offer in order to be considered.
  8. Should the seller decide to decline all offers, the level at which the buyers saw the property is not disclosed publicly, further maintaining confidentiality as opposed to an Auction, wherein the property may be ‘passed in’ without meeting this reserve.
  9. The real estate agent, on behalf of the seller, will draft the terms and conditions of the Tender Documents in consultation with the seller’s solicitor. Both buyers and sellers are advised to take legal counsel before entering into a contract; this applies equally to Auction, Tender or Private Treaty sales.

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July 29 2010 11:04 pm | Selling Rural Waikato Real Estate and Waikato Rural Real Estate Agent

One Response to “Selling real estate by tender”

  1. Business Broker » Selling real estate by Private Treaty on 05 Aug 2010 at 9:28 pm #

    [...] reviewed the auction and tender methods of selling real estate In New Zealand, we’ll now consider the sale of real estate by [...]

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