Selling guide
Sale by tender: a NZ homeowner’s guide
Tender is one of the most popular property sales methods in NZ.
Last updated: 11 December 2024
If you’re a homeowner in NZ, you’ll know just how much jargon is involved in buying property.
And now, if you’re thinking about selling your house, you’ll probably be learning a whole bunch of new words and phrases that come along with being on this side of the transaction.
Some of the most important real estate terms to get your head around as a vendor relate to the different options you have for selling your property. Here, we’re going to explore one of these – sale by tender. We’ll look at what this means, how the process works, and some of the pros and cons of selling by tender.
What does it mean to sell a property by tender?
If you choose to sell your property by tender, prospective buyers will submit offers to you, or your real estate agent, before a pre-determined date.
As well as their offer, which will usually come in a sealed-envelope, would-be buyers will also submit a deposit, which will be refunded to all buyers who aren’t successful. They’ll also fill in a legally binding tender agreement which includes the price and any sale conditions.
In most cases, you won’t open any of the tender offers until after the deadline has passed. However, this isn’t always the case. If you want to have the option to open tender offers as they come in, you can include a clear statement like “sale by tender unless sold prior” in your Trade Me Property listing.
You'll receive tender offers in sealed envelopes.
One of the real advantages of selling a property by tender is that you have a degree of flexibility which doesn’t come with other methods, such as selling by auction. At an auction, if your property reaches its reserve price (the minimum that you set) you have to accept the highest bid, and you can’t negotiate further. When selling by tender, you don’t have to accept any offer at all, if you aren’t happy. And, if you do decide to proceed with one offer, you have the ability to negotiate further with that specific buyer.
Usually, you’ll have a five (working) day period, known as the five-day withdrawal period, to consider the offers you’ve received, and negotiate if necessary. Note, after 5 working days, prospective buyers have the right to withdraw their offer, if they want to, meaning that you shouldn’t take too long to make up your mind.
What’s the difference between a tender sale and a deadline sale
If you’ve already read up about the ins and outs of deadline sales (an alternative sales method), you might be thinking that there’s not a whole lot of difference between deadline and tender sales. And you’d be right, there are plenty of similarities between the two.
However, there are also some key differences, which include:
- Opening the offers: in a deadline sale, it’s standard practice for offers to be reviewed as they come in. Normally, in a tender sale, the offers are opened together after the specified date has passed. Although, see above about getting around this through specifying “unless sold prior” in your listing.
- Documentation: in tender sales, the settlement date and deposit amount are decided by you, the seller, and stated in specific Tender Documents. For deadline sales, the would-be buyer puts their requested settlement date and deposit in the offer.
- Deposits: in tender sales, it’s normal for everyone offering to submit a deposit along with their offer. For deadline sales, this isn’t a requirement.
Tender sales can lead to higher sales prices.
Advantages of sale by tender
1. Opportunity for a higher selling price
Selling by tender can result in a higher sale price, as buyers are unaware of competing offers. This often motivates them to submit their best possible bid from the beginning, creating a competitive environment.
2. Time to think
After the tender closes, you have those five days to review all the offers you received. This gives you the chance to assess not only the price but also the conditions attached to each offer, leading to a more informed decision.
3. Buyer flexibility
Unlike auctions, which require unconditional offers, tenders allow buyers to include conditions in their bids. This flexibility can attract a wider pool of potential buyers, such as those who need to secure financing or sell their property first.
4. Ideal for unique properties
Tenders are especially effective for properties that are difficult to price due to their unique features or lack of comparable sales, as they help gauge market interest and value.
5. Privacy
Tender sales offer greater privacy compared to other methods, as the final sale price isn’t publicly disclosed. This can appeal to both buyers and sellers who value discretion.
Disadvantages of selling your home by tender
1. Risk of lower offers
While the confidential nature of tenders can drive up offers, it can also lead to lower bids if buyers are uncertain about the property's value or are attempting to lowball you.
2. Seller uncertainty
There’s no guarantee that any offers will meet the seller's expectations, which can lead to stress and a prolonged selling process if the property needs to be relisted.
3. Risk of buyers working together
Though rare, there is a risk that buyers may attempt to collude to lower the price. Ethical real estate agents work to prevent this, but it remains a potential issue in smaller markets.
4. Marketing costs
Tender campaigns typically require substantial marketing efforts to generate enough interest in a short period. This often results in higher upfront costs for advertising and promotion.
5. Buyer reluctance
Some buyers may be wary of the tender process, feeling it lacks transparency or fearing they might overpay for the property. This reluctance could reduce the number of interested buyers.
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