Coffeys - Tourism Property Brokers ltd. | LREA

30 years in business. 1984 - 2014

Deadline Sale Protocol

No Price Marketing

This is a process which could be considered when it is expected that there may be more than one interested buyer for a property or business, hence creating a competitive purchasing environment.

Potential purchasers usually prefer to deal with listings that have an asking price, or where they can at least expect a reasonably prompt response from the vendor. It is important therefore, to ensure that the appropriate type of marketing is applied relative to the anticipated level of interest for the listing.

The three main types of no price marketing are auctions, tenders and deadline sales. The main difference with auctions, is that all bidders are aware of the level at which their competitors are bidding, whereas with tenders and deadline sales, they are not. This could mean that the winning bid may be considerably higher than the next best offer. This “silent auction” method of deadline sale or tender can be to the vendor’s advantage.

A deadline sale is essentially a simplified tender, without the formality and with more flexibility. It is generally favoured over tender and as such, a tender is now relatively rare for Real Estate and Business sales.

A property or business is usually promoted over several weeks inviting offers to be submitted on or before a specified date and time - the deadline.  On receipt of any offer/s, the vendor should determine which offer, if any, is in their opinion the most favourable. The vendor may accept the best offer, or they may wish to counter-offer and enter into negotiations over price and/or terms.

Your agent would usually prepare an information pack. This would include the usual information about the property or business for sale, also a Sale and Purchase Agreement template, which purchasers would use as the basis of their offer document.  The template would have details entered such as the vendor and property legal particulars, along with any other further terms and/or conditions the vendor would like to see included.

To assist purchasers to present unconditional offers, or at least with as few conditions as possible, relevant documents such as Council LIM, copy of Certificate of Title, lease (if applicable), financial information and any other relevant documents to enable purchasers to conduct early due diligence, should be included.

A deadline sale procedure does allow a purchaser to present a conditional  offer. Whilst unconditional offers may be ideal, it could be counter-productive to exclude bids from those just needing some more time to satisfy any queries that they may still have, particularly around finance, insurance, legal and/or technical matters.

The vendor will usually compare offers based on price and any terms and conditions. Sometimes a lower, but unconditional offer may be more attractive than a higher offer with conditions. An astute purchaser may complete early due diligence in order to be in position to make an unconditional offer.

The integrity of this sale method is reliant on confidentiality.   All purchasers would be required to sign a multi-offer acknowledgement, noting that they have been advised to make their best offer, as they may not have another opportunity to negotiate. Real Estate Agency protocol should recognise potential conflicts of interest if competing offers were coming through various sales people. In a situation such as this, the offers would usually be presented by an independent person in the agency, such as the principal or sales manager.

Traditionally tenders, or competing offers, would be delivered to the vendor in sealed envelopes. With the common use of email, the situation is different. Particularly so when the parties, be they the vendor, purchaser/s or the agent, are in different localities and presentation of hard copy offers is not so practical. Agencies may have different ways of dealing with this. At Coffeys for example, all offer documents are stored in a specifically created secure (computer) file directory that only management can access.

Often deadline sale advertisements are qualified with the words “unless sold prior,” although not always. If a purchaser wished to have their offer presented prior to the deadline date, it would be up to the vendor as to whether they would consider an early offer. Agency protocol in this situation, should be that all interested parties are contacted and informed that an offer is to be presented. Usually they would be given some time to indicate whether they wish to become involved in the early offer process.

Whilst the agent may offer advice to the vendor, it is ultimately the vendor’s decision as to how to respond. They may accept the most favourable offer without further consultation, or they may elect to enter into negotiations with one of the potential purchasers.

In summary, a deadline sale can be advantageous to the seller in terms of achieving the best price and conditions. Most purchasers do prefer though, to negotiate one-on-one and could be discouraged by this process. This method of sale is less likely to be appropriate unless it is expected that more than one party will be ready and willing to enter into a multi-offer situation by the deadline. 

Kelvyn Coffey

© 2019  

 

 

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