Tenders are an extremely popular method of sale for real estate, particularly in Wellington, and alongside auction are a great mechanism for a property to find its premium value in the market.
Tenders are most popular when it is a seller’s market.
When houses are selling well with strong demand, it can be pretty tricky to accurately predict potential selling prices, and tender, alongside auction, allows for the premium value of a property to be found.
From a seller’s perspective it ensures that the prospective purchasers of a home are competing against one another rather than competing against them as the seller.
Every day there are surprises what properties are selling for and usually such surprises are delivered through tender or auction campaigns.
If owners choose to market their property by negotiation with a price guide or asking price, they could be costing themselves many thousands of dollars by under-selling their home, as it instantly restrains the emotional buyer who might have paid more.
However, every method of sale can have its place in real estate, so I don’t discourage due consideration for sellers for any other method of sale to suit their situation, its simply this article is focused on the matter of winning a tender.
For you as a buyer, tenders are not necessarily a particularly appealing prospect, but to this day I am yet to see a buyer win a tender who has dismissed the process and refused to engage.
You get one chance to offer on the property you may have fallen in love with and usually will have no opportunity to negotiate. This can be a reality of tenders – but the one maxim holds true – you definitely don’t win if you don’t make an offer.
Tender is a proven method of sale and in all likelihood it’s here to stay – just look forward to when it is your time to sell a house and the benefits to be found for you then. As they say, what comes around goes around.
How to win a Tender…
You have set your heart on a home, it feels like the one, you may have been hunting for this one for a long time… You can visualise all the memories that will be created in the property and you can see that this will be a real investment in your future and the future of your family.
It’s time to figure out how you can make a winning tender, and every detail counts. Here are some tips to help you win your next tender…
First Tip – Make The Offer
One thing with tenders is an absolute certainty – you will not win if you don’t submit a tender.
The old saying – you have to be in to win is absolutely true – so be in like Flynn and back yourself for the win.
There is nothing truer than to say you will never win all of the tenders all of the time but you might just win one, one time, and that’s what you’re after.
Whether you have made one tender or many, missed out on one tender or many, just keep firing them in, never be discouraged, just keep firing them in.
Offer what you are willing to lose the property for.
When deciding what price to offer on your tender, ask yourself what you are prepared to lose the property for.
For example if you are thinking of offering $542,000 on a house, consider how you might feel if the agent told you it sold for $546,000.
If you would be disappointed and forever regret missing out then boost your offer.
In many cases of course your budget will constrain what you can practically offer but if not keep asking the question… would I be disappointed if it sold for $XXX,XXX?
Until you say NO keep boosting it.
Don’t be scared off by empty shoes.
Frequently buyers go to a busy open home and decide they don’t have a chance because there were about fifty people there.
Many of those buyers either are simply scoping the market, can’t afford the house, just don’t like it, or are curious neighbours.
Focus on your own game and on making yourself and your offer the most desirable prospect for the seller.
It could be that 50 people equates to only a few offers, if any, so don’t write yourselves off just because there were a lot of empty shoes at the door.
At the end of the day whether you are in competition with one other buyer or one hundred, you’re still in competition and you only ever have to beat the second highest offer.
Retail Pricing has no place in Real Estate
If you are trying to buy a home you think is worth approx $600,000 avoid offering something like $599,000.
It might be your budget is stretched even in the high 500’s but trying to finding that bit extra could very well win you the house.
An offer of $601,000 looks a whole lot better than $599,000 but in reality is only slightly different.
Department stores want to make their products look cheap so they use the .99 at the end.
On the other hand you want to make your offer look nice and fat, so try to avoid it.
Pick an odd number.
Many buyers miss out on a house by a few hundred dollars and although there can only be one winning bid, it doesn’t necessarily need to be you that misses out.
Avoid making an offer with an even number like $400,000. Mix it up and offer something odd like $403,750. Consider this, 2 or 3 offers on the table all the same at $400,000, and yours with that “pick me” on top.
You chose that number for that house for a reason so another buyer might too, just boost your chances by being different.
Sometimes odd numbers can give the impression you are pouring every last cent into this offer to make it work – in a lot of cases the truth is you probably are.
Boost your offer on paper before even making it.
Show the owners your working thoughts on your tender form! It sends a really effective message. Your offer should look something like this:
$490,000 $501,000 $502,750
This can also reduce the likelihood of the owner coming back to ask you for more money – they can already see you have given due consideration and reconsideration to your offer, as indeed in most cases you will have.
You really want to advertise to the seller that you have rifled down the back of the couch and delved deep into the car ashtray for every last red cent.
Naturally if you haven’t scratched around for every last cent you may not be offering enough to begin with, so ask yourself again, would I lose this house for a few hundred or thousand dollars more?
Attach a Personal Note.
I have seen occasions where sellers have overlooked the highest offer because a buyer has attached a personal note saying a little about themselves and why they have fallen in love with the home.
Owners do – on occasions – appreciate this approach as most genuinely want their home to go to someone who is going to love it as much as they have.
Remember money is not always the main motivator and even if a seller places no weight on it nine times out of ten, wouldn’t you want to be the ten?
Only recently I read an article in the news about a homeseller who was committed to selling to a first home buyer, over all other comers.
Powerful stuff, and you can harness it to your benefit.
Cash Is King.
I always recommend including any and all conditions that are necessary to protect your interests and always seek legal advice.
However many winning tenders in this market are unconditional – Cash Is King.
Motivated buyers who have missed out on other homes are making every effort to get themselves in a position to make unconditional offers so to compete with them you are going to have to try and get yourself in the same or preferably better position.
The costs can add up talking to a lawyer to get title searches done and getting a building inspection in advance if there is not one provided but remember you might expect to pay decent money for a mechanical check on a second hand car worth a few or tens of grand so why not on a house worth hundreds of thousands?
If you need to have conditions, then put them in but seek the shortest possible time on them. 5 working days is a lot more appealing than 10 working days. Builders, valuers, mortgage brokers etc will usually do what they can to attend to things quickly if need be.
If you are conditional and thinking of keeping some money in the bank for some renovations, a holiday or a boat – don’t! Conditional offers need a higher price.
We always recommend to sellers to accept the cleanest offer followed by price.
For instance if a conditional offer is submitted at $591, 000 and there is an unconditional offer at $583,500, depending on the conditions it is probable we would advise the seller accept the unconditional offer even though it is lower in price.
The Last Tip – Its the First Tip Again – Make The Offer
The last tip is the same as the first – you will not win if you don’t submit a tender. So make the offer!
Don’t hold back – get alongside a good real estate agent and subject to legal advice you can draw up, sign, seal and deliver your offer in about 15 minutes, it really can be a straight forward exercise if you know the process so don’t let the worries of time and effort put you off.
For further advice or any assistance in buying or selling property just get in touch anytime I am always happy to help.
Corey Watts is a licensed salesperson under the REAA2008 selling real estate in the greater Wellington region
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