Drawbacks of a Public Auction
The sale of immovable property by Public Auction has become more and more popular, especially when a Seller has certain time constraints or decisions need to be taken, e.g when a current tenancy is terminating, or the Owner is considering relocating. More and more property owners are appreciating the merits of selling a property by Public Auction as opposed to private treaty, due to the fact that the property is exposed to a far greater number of potential purchasers. The auction process does have certain limitations in that it is more difficult to massage or structure negotiations. Lead-in times can tend to be fairly short and do not always allow a Prospective Purchaser to complete an adequate Due Diligence. Further the process is not always transparent with parties at times viewing the process with suspicion and hesitation.
The Tender Alternative
All the benefits of an auction, but none of the drawbacks
A method of "auctioning" property whereby all the benefits of an Auction are enjoyed while cutting out and eliminating fence sitters, negative impressions derived from other prospective bidders and / or "Ghost Bidders".
What is a Tender?
A Tender is simply the process in which prospective buyers are invited to submit confidential written “bids” for a property by a certain date. Tenders / Offers are opened publically and then all scrutinized, with the property going to the highest bidder or the one offering the most favourable terms, provided, of course, that any reserve price and / or conditions have been met. Transfer of ownership takes place in the usual way. Because the bids are confidential, buyers are inclined to make their "best offer first", which they may well not do at a traditional auction.
Advantages for the seller
The advantage to a seller is that a sale can be concluded without any conditional clauses within a stipulated time span. Relevant Terms and Conditions are stipulated when the Property is put up for Tender and the sale is subject to confirmation (generally within 7 days). The sale is secured by a deposit and the balance of the purchase price is guaranteed within a relatively short period. An additional and very important advantage of selling by Tender, is that the seller can reap the benefits of the creation of competition. The immediacy of competition and the emotion of the moment drives prices up and if there is high demand, the Tender can produce the very highest price. The seller may well achieve a higher price than his asking price.
Advantages for the buyer
Via the Tender the Seller is publicly telling the market that they are ready and really want to sell. Buyers are enthused by this and are encouraged to grasp the opportunity. It also essentially allows greater flexibility in accommodating a buyers’ needs resulting in a win win situation for all concerned. A complete analysis and investigation of the property can be timeously completed giving adequate time to make suitable financial arrangements so that any offer is not subject to securing finance, or any other suspensive conditions. The potential purchaser can confidently submit a tender, with the knowledge that the price achieved will be a true reflection of the market price of the property, without any manipulation or "Ghost Bidding".