Choosing to sell your home by tender


Selling a house by tender is certainly not the most common method used in New Zealand from a general perspective. Currently across the country just 1 in every 78 properties are being marketed as a tender; however if you happen to be selling in Wellington that rises to 1 in 10 properties - Wellington is the heart of tendering for property in New Zealand.

Having made that statement there are benefits in tendering a property for sale in many parts of the country. At the heart of the choice of the process to sell by tender, is the premise that the property engenders an appeal that will trigger strong emotional feelings and desire that will in the context of a competitive environment, stimulate buyers to offer a price which represents their perspective as to their judgement of value of the property.

This is the key. The difference between price and value. Price is a signal as to the market expectation based on comparable products, whereas value is far less tangible and is tied to emotional want and more important the fear of missing out (FOMO).

To examine the appeal of tenders you need to look at an example. Let's take a Wellington property that I have experience of first hand. Being Wellington, buyers are well used to the process. A tender offer for sale has a specific Sale & Purchase Agreement and importantly a deadline by which formal tenders must be submitted. This deadline ensures that all prospective buyers have to act in order to be able to be judged as their suitability to buy the property, as in some way that is what a tender is. The seller in complete confidentiality has the ability to evaluate all prospective buyers through their submitted tenders.

A seller when provided with a number of tenders has 5 working days in which they can accept, reject or negotiate with any of the submitted tenderers without consulting the others. In this way a seller can evaluate the suitability of any trade off of price vs, conditions of sale vs. settlement and make a judgement as to which to accept or further negotiate with. This is in someways the core reason that many buyers don't like tenders. There is a sense of blind-biding (which is what it is). You as the prospective buyer needs to make an offer at a price and with conditions (if any) that you feel will secure you the property to surpass any other offers that any other party may submit. The end result could be that the winning tenderer secures the property at a price just a bit above the others or just better conditions that suit the seller or miles above the others as the appeal of the property drives the fear of missing out to pitch a price that truly reflects the value the property represents to them.

From my experience as was the case in Wellington, tenders need to be managed by experienced agents who understand the means by which they can create this sense of real value in the property and whilst at all time honouring the Code of Conduct of the Real Estate Authority establish a sense of competitive pressure in the minds of prospective buyers.

In addition to my comments above, I would recommend you have a read of the Government 'Settled' website that provides useful advice around buying and selling property in New Zealand.

In the context of this article the section on 'Understanding Methods of Sale' is particularly relevant.

Alistair Helm