Finally, your questions about sale by tender answered

Selling your asset through a sale by tender may maximise your return and provide you with an understanding of the market value of your property, but don’t rush past the complex process and risks involved.

Sale by tender sealed envelope

If you have a premium property with few comparable sales to gauge a realistic market price, a sale by tender may be a viable sale method. While a sale by tender or a “silent auction” may be more attractive than a public auction, a sale by tender may yield higher marketing costs and negative buyer perception, so be sure to consult your local agent before committing to this type of transaction.

What is a sale by tender?

In a sale by tender, the seller encourages interested buyers to submit an anonymous offer or “tender” for their property. Prospective buyers provide their offer in a sealed envelope with a signed contract, deposit payment and any specific terms that the buyer would like to request.

The seller will identify a closing date after which they review all the offers and either select the most favourable offer or reject all of them if they are not satisfied with the price or terms.

Sale by tenders are normally suited for high-end residential properties due to the complexity of the process involved.

How does a sale by tender work?

Described as a “silent auction”, the property is marketed for sale by tender either without a price or with a price guide as well as a deadline for the offers.

Interested buyers can then attend inspections and submit a written tender by the specified date and time. The seller is not permitted to accept any other offer before the pre-determined date.

When you sell a property by tender, the seller will accept tenders from prospective buyers and consider these offers on the date of the specified deadline. Prospective buyers are unaware of the offers made by other interested buyers.

After the closing date, the seller and their agent will review the submitted tenders. With their agent’s recommendation, the seller will determine which tender is most attractive based on the price and conditions offered.

There is no obligation for the seller to select one of the tenders if they are not satisfied with any of the offers. However, the seller can request the agent to contact the prospective buyers who have made an offer to see if they are willing to negotiate a higher price or more favourable terms.

If a buyer is willing to offer more favourable conditions, the best offer will be confirmed in writing and presented to the seller for review.

Pros and cons of a sale by tender

Pros

  • Increases property profile. A targeted marketing campaign can generate significant interest in your property. Since interested buyers are required to submit their “best, highest and final offer”, this can stimulate competition and lead to a higher sales price.
  • Control over sale process. You assume control over the sale process since you don’t have an obligation to sell to the highest tender if you are not satisfied with the price or conditions. You also have the option to extend the tender deadline as you see fit.
  • Indicate market value. If you’re uncertain about the market value of your property, a sale by tender can give you a better understanding of a buyer’s perceived value of your property.
  • Higher offers. If there are numerous interested buyers in the property, the competitive nature of a sale by tender can motivate buyers to bid higher than they normally would. The discrete nature of a sale by tender means that interested buyers cannot base their offer on other competing offers, which can lead to higher offers as there is no ceiling on the asking price. A sense of urgency, as identified by the closing date, may also encourage interested buyers to raise their offers.
  • Wider pool of buyers. As the majority of tender transactions are completed in cash, your property may appeal to a broader range of buyers, such as buyers who may not otherwise have qualified for pre-approval with a lender.
  • Attractive alternative to auction. A sale by tender eliminates the perceived stress that is associated with a public auction.

Cons

  • Lower bids. While the confidentiality of a sale by tender may drive up offers, the reverse is also true. If buyers don’t know the market value of the property, you could face lower bids.
  • Higher marketing costs. A targeted marketing campaign is usually required to create awareness of the property, which could affect the closing date and increase marketing fees.
  • Buyer perception. If there is no price guide, buyers may assume that the property is priced beyond their reach and may not consider the property altogether.

Are there advantages to a sale by tender over an auction?

In theory, a sale by tender only requires one interested party, whereas an auction generally needs at least two interested bidders to drive up the price. As auctions can be intimidating for many buyers, a sale by tender removes the pressure associated with a public auction as their offers are not public knowledge.

When would a sale by tender be appropriate?

A sale by tender can be effective for unique and highly valued properties or properties with an uncertain value. In particular, this method of sale may be appropriate where the property is difficult to appraise and there are no recent comparable sales to guide a realistic asking price.

Are there any costs to submit a tender?

The seller’s advertised tender will disclose if there is a required deposit and will also identify whether or not there is a fee to submit the tender form.

What are the risks?

The main risk when selling your asset via tender is that you may not be satisfied with any of the offers, which could result in wasted time and lost financial resources due to the high cost of the marketing campaign and associated administrative costs.

Selling a property by tender is risky, which is why it's important to ensure that you're working with a qualified real estate agent and other professionals to help you through the process.

Is a sale by tender the right method for me?

Your real estate agent will recommend the most suitable type of sale for your property, which may be based on the following factors:

  • Property type
  • Location
  • Local market conditions
  • Timeframe

Is sale by tender legal in Australia?

Selling residential property by tender is legal in every Australian state.

Is there a cooling-off period when property is sold by tender?

A cooling-off period applies to all states in Australia except the ACT and NT. During the cooling-off period, the buyer can change their mind and withdraw from the purchase, subject to the tender’s individual terms.

Check with your state authority to see how cooling-off periods are treated for tender sales in your area.

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

Was this content helpful to you? No  Yes

Related Posts

Home Loan Offers

Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Tic:Toc Live in Loan Variable Rate - Principal & Interest

Get a very low interest rate and avoid big fees. Apply online for full approval in under 30 minutes and add a 100% offset account for $10 a month.

HSBC Home Value Loan - (Owner Occupier P&I)

Get a low interest rate loan with no ongoing fees. Plus you can make extra repayments and free redraw online. Available with just a 10% deposit.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy.

2 Responses

  1. Default Gravatar
    SusanOctober 6, 2018

    I asked to look at a property and was sent an email informing me that I had until a certain day to put in my highest offer. I have not even seen the property it was not advertised as a tender sale. I found the email a strange way of attracting a buyer. It says it’s my one and only chance to buy the property. This property is not high end or sought after. It appears to me to be a lazy way to sell. So my question is. Is this legal.

    • finder Customer Care
      MayOctober 7, 2018Staff

      Hi Susan,

      Thanks for your question.

      Honestly, I couldn’t really tell whether the marketing strategy in selling the property outlined/advertised in the email you received was legal or not. But if you like to know, you can verify it with ASIC directly. Check whether the lender or developer of the property is licensed and the advertisers are also registered. It would be best to be careful not to give into deals that you’re unsure of especially that buying a property involves large sum of money.

      Hope this helps.

      Cheers,
      May

Ask a question
Go to site