Take the price out of your real estate listing and you remove a key barrier to potential buyers, meaning people will visit your open home based on emotion (and hope) — and not be put off by the price.
While there seems to be a trend toward auctions over tenders, particularly in Auckland, both have their place.
Some vendors see value in people openly competing with each other at an auction. Others like the idea of buyers putting in sealed bids — perhaps one will go high with their offer, for fear of missing out.
The upside of an auction is its transparency. Bidders know what they need to pay to stay in the game and, with the reserve met, a sale is assured.
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With a tender, buyers can put in their best offer and they’ll still be in play should their first figure not make the grade.
“No-price marketing keeps the price out of the way and so emotion comes first,” says Campbell Dunoon, auction manager at Barfoot & Thompson.
“An auction or tender also puts a time period on the sale; there’s a date for the auction to be held or for the tender to be submitted. It’s a good motivation for buyers. They know they have to get things done by the deadline.”
Dunoon says vendors like auctions and tenders because it drives committed buyers to them.
“It is hard to argue with what happens in an open forum, such as an auction room, and I think people take comfort in that,” he says.
Unlike auctions, tenders can mean buyers missing out on a property because the next guy bid a few hundred dollars more – or offered a good price without any conditions attached.
“A bid without conditions will be preferred over a bid with conditions — so long as the price is right,” says Dunoon.
“From a buyer’s perspective the tender process is confidential because you are not in a public forum. So if someone wants to buy without anybody knowing then there is a better chance of that by buying with a tender.”
Of course, plenty of people use phone bids at auctions to stay out of the limelight.
Dunoon says tenders evolved from commercial real estate and, having moved from Australia 12 years ago, was surprised at how popular they are for selling residential real estate here.
One little fishhook with a tender is that the vendor has five working days after the closing date to mull over the offers and negotiate with bidders individually.
Dunoon says: “People putting in a tender are put on hold, so if they see a wonderful house during that time then they may not be able to move on it.”
If a tender is accepted, then the property is sold and the deposit cheque — typically 10 per cent of the offer price — will be cashed. Really serious bidders might offer a larger deposit.
What some people worry about is the opening of the tender envelopes — is it a fair process?
Dunoon says the vendor or their representative (normally their lawyer) should be there when tender envelopes are opened for the first time: “At Barfoot & Thompson we will have an auctioneer come in to oversee it from the company’s side so we have an impartial person there.”
One sales method Dunoon isn’t impressed with is the so-called ‘deadline sale’. This is neither a tender nor an auction, merely a date by which potential buyers need to show their hand.
“A deadline sale just means that you want offers in by the date stated and nothing more than that,” he says. “There is no formal Real Estate Institute procedure in place that I am aware of for these. Other companies may have their own policy on it, but we do not use this method of sale at Barfoot & Thompson.”
The key take-away for sellers is that, by going to market without an asking price, then you remove a barrier for potential buyers.
Then, whether you go to auction or invite bids by tender, you’ll get a snapshot of the market price for your home on the day and – if all goes well — a sale.
