The tender touch

The trick to being in with a good chance when bidding by tender is to know how the process works. VICKI HOLDER explains.

Buying a property by tender can seem like playing a game of Russian roulette.

It's tricky, because, like an auction, there is no advertised price. However, unlike an auction, you don't know who you're up against or the price they're prepared to pay until it's all over. It's all in the hands of the auctioneer who is handling the offers.

Some people don't like them, but Barfoot & Thompson reckon they work well for vendors. Auctioneer Marian Tolich says the only way to hedge your bets is to do your homework, quickly and thoroughly, and give it your absolute best shot.

If you really want the property, squeeze in every last dollar you're prepared to pay, because, unlike other methods of buying a house, you probably won't get another chance to make an offer.

A high proportion of tender properties are selling before the closing date at the moment, which can cause upset among the bidders who miss out.

Ross Foreman of Bayleys questions how vendors can know if they have had a fair contest when some bidders are never given a chance to raise their offer.

He believes there's a danger of conflict of interest in tenders and that bidders should be careful.

Tolich advises: "You must be well-prepared in case you have to move quickly. Have your finance organised and a 10% deposit ready if needed. Get LIM reports and anything that helps make it easier to make a decision."

Make sure you've had a thorough look around the area you want to buy in, so that you have a good idea of how much the houses are worth. If a property comes up and you haven't had a chance to become familiar with the market, get advice from your real estate agent. Ask yourself how much the home is worth to you and how you would feel if you missed out on the property.

You can get independent advice from a valuer on the home's value, but the statistics they give are already one or two months old. In this volatile market, prices are being exceeded every day, especially in some of the more desirable areas.

Valuers' figures don't allow for the intangibles and houses are an emotional purchase - people tend to buy with their hearts. Tolich always asks bidders if they would be annoyed if they missed out on a property by $5000.

The tender process takes about three weeks, from when the first advertisements are placed to calling for tenders to close. Then vendors have five working days to check the offers. Written on special forms, these confidential documents are put into sealed envelopes and posted into the tender box at the real estate office selling the property.

The five-day period gives vendors time to consult with families or trust members. At this stage, the vendors will either go into the real estate office or the auctioneer and agent will visit the vendor to open the tender offers.

Usually vendors accept the highest offer, but occasionally they turn the top dollar down to ensure their property goes to somebody they prefer. If none of the offers are acceptable, the salesperson goes back to the bidders on behalf of the vendor and asks for increased amounts.

If somebody wants to make an offer before the closing date, the agent will ask the vendors if they want to bring the tender date forward. When a pre-tender offer comes in, Tolich says she contacts the buyer's agent to ask what the offer is, and then rings the vendor to see if it's in the region of what they want. If they agree, she gets the other agents to call all the other interested parties to give them until 5pm the next day to register an offer.

With the market so buoyant at the moment, many tender offers are coming in on every property. Tolich says she had 40 offers on one Greenlane property.

Obviously there can only be one successful bid and people are going to be disappointed. However, if you know how the process works, you have a far better chance of getting the right property at the right price.