Clear Realty Real Estate Blog

Tender marketing is very much a “dark horse” method of marketing. I say this because there is lots of commentary about it, but no one really explains the pros and cons and how to ensure the tender process is the right one for Vendors. So let’s shine a light on tenders.

Tenders became a more well-known form of marketing in New Zealand in the late 1980’s – early 1990’s. Clear Realty used the tender process with much success during its “infancy” and still can confidently recommend it as a valid form of advertising today provided the process is followed properly and the right foundations are in place.

So how does the tender process work?

Tenders are a “no-price” form of marketing. When I say “no-price” I mean there isn’t a price that is shared with the market. Rather than having a price, prospective clients are encouraged to submit their one and only best offer and to do so within a particular timeframe.

One of the great benefits of marketing one’s home by tender is that it creates a deadline for any interested parties. Typically a tender process lasts between 3-4 weeks with a closing time and date.
There is more than one way to sell a vendor’s home under the tender method and as agents we are guided by our client’s preference, and market activity in the area.

Pure Tenders

Pure Tenders are described as such, because the process runs from a start date – to the closing date.  Typically for a pure tender, you’ll see the advertising as follows: “Tenders Close Friday 2nd April 2010 at 5pm.”

The benefits of this method are that the purchasers have more time to complete any due diligence on a property and can invest money and time on their due diligence without the risk of the property being sold prior to the closing date. There is also a chance that a higher percentage of the offers will be unconditional as opposed to conditional (this isn’t always the case as each buyer’s circumstances are different, but there is no harm in having multiple offers that are cash unconditional as opposed to conditional!) The drawback with this method is if you come across a hot buyer and this buyer wants to purchase the home; that can’t purchase the property prior to the closing date. In some cases if the agent isn’t careful, he or she could run the risk of losing this buyer (who could potentially be the best and only buyer of the property.)
 
Fixed time-frame marketing method

The fixed time-frame marketing method differs from a Pure Tender as vendors can have the option of selling their home prior to the closing date. Typically you can tell if this method is being used because of the advertising language used e.g. “Offers Close… unless sold prior by any alternative method.” As a buyer this will help you identify the method of sale plus it can help with your planning on the type of offer you want to present (conditional or unconditional ) and when you elect to present an offer (earlier in the case of the fixed time-frame marketing campaign, or before to close-off date.)

The benefit of this process is (as a vendor,) you don’t have to wait for the closing date to deal with prospective purchasers if their offer(s) come in. As a purchaser, you still have an opportunity to deal with the vendor on a one-to-one basis, without having to compete with other purchasers (especially if you present an offer early during the process). Just remember, if any other interested parties register their interest for this type of marketing method, the agent must make them aware if the property is to be sold prior to the close off date, and this party must be given the opportunity to present their best offer. This is important so that the process is transparent and fair for all interested parties.

Summary

Tender is a great marketing method to consider using, especially if vendor’s have an aversion to Auction but still like the idea of a deadline style of marketing.  Tenders are good to especially consider if a property is unique and difficult to gauge the value of. Often these types of properties are character homes on large subdivisible sections, houses that are unique and have not been presented to the market for a number of years (if at all) and homes that generally offer something slightly different to “typical” properties available on the market.

If you are choosing Tender or the fixed time-frame marketing method  make sure your agent understands the process well and can give you a good explanation of how they are going to get you (the vendor) the best possible result.  It is important to remember that as tenders are a “no price” marketing method, people can sometimes be less responsive to this type of marketing if they aren’t given a compelling enough reason to visit the property. It is the responsibly of the agent to work with prospective buyers and help them overcome this barrier.

In the case of a fixed time-frame marketing method; the key to this process succeeding is in the marketing and the ability of the agent to communicate well, with the buyers, particularly before they go to paper.

Tomorrow I am going to talk about auction marketing and the pros and cons of this process. What are your questions about Tender marketing? Feel free to ask below.