If you're buying or selling property the word "tender" will pop up sooner or later.
Tenders are a way of selling property with private and confidential offers made by a set deadline. In short, you put in an offer before the deadline and the best offer should win.
The buyer gets one shot only and no chance to negotiate unless, of course, none of the offers meets the reserve — in which case the owner or their agent might open negotiations.
A tender can be unconditional, where you are making an offer according to the terms set out in the contract. Or it can be conditional, where you have conditions attached, such as arranging finance, the sale of your own home or a building report.
Tenders are particularly popular in Wellington, says Relatable agent and blogger Andrew Duncan. Duncan has bought two houses at tender, and on the other side of the coin has phoned hundreds of unsuccessful buyers to tell them they missed out by a few thousand dollars.
His tips for buyers include:
1. Don't let the competition psyche you out. Just because there are dozens of people at the open home, says Duncan, there may only be one or two offers.
2. Don't be like The Warehouse with everyday low prices, which is an epic rookie mistake. Bid what you truly think the home is worth.
3. Pick uneven numbers. Don't choose $800,000. Try something unusual, such as $801,475. Also, cross out a few numbers by hand, such as $790,000,
$800,000, $801,000 before the final price of $801,475.
"This shows the progression you have taken to get to the price you are offering."
Andrew Murray, real estate agent at Apartment Specialists, is seeing more tenders in Auckland. He says auctions are not as effective in the current market. Tenders are common in all markets with more expensive properties, where sellers don't want to put a price on the home.
His tips include:
1. Make sure an owner can't accept an offer prior to the tender date, otherwise the agent could be dealing direct with another buyer. If the tender document allows for the offers to be opened before the deadline day, then you may as well try to negotiate.
2. Reduce the number of conditions. Sellers like unconditional offers. The less due diligence you have to do before buying, and the fewer conditions, the better.
In fact even the phrase "due diligence" puts some vendors off. Spelling out the conditions can set a vendor's mind at ease, says Murray. If you say that you want to check if there is a cavity, for example, and the vendor knows there is one, he or she may be more relaxed about the process.
3. Hand write a letter to the vendor with your personal story. Murray has seen vendors accept $20,000 or $30,000 less than the highest offer because they liked the buyer.
"It sounds a bit cheesy, but tell them about your struggle."
Murray lost at tender once because the vendor chose a lower offer.
"My offer was the highest by eight grand, but the vendor didn't want it going to a real estate agent."
For more information, the Real Estate Authority's Settle.govt.nz website has a useful guide to buying at tender.