Buying property by tender: a how to guide
Look at buying by tender? This is what you need to know.
If you’re looking at buying a home in New Zealand, chances are you’ll see a good number listed for sale ‘by tender, especially in markets like Wellington and Dunedin.
We’ll take you through all you need to know about the tender process in case the house of your dreams is selling this way.
First things first, what does ‘for sale by tender’ mean?
In a sale by tender, interested buyers submit confidential written offers on the home for sale by a pre-arranged deadline.
As a buyer, your first steps are to:
1. Register your interest with the agent
When you do this, ask the agent to tell you if someone else has made an offer before the deadline date. If the house is advertised “for sale by tender (unless sold prior),” you and your competition can make offers before the deadline, and the seller can accept them at any time.
Make sure to register your interest in the property with the agent.
2. Do your due diligence
As with any property purchase, you’ll do your due diligence prior to making an offer This will include:
- Checking the property’s value on homes.co.nz.
- Doing some more private viewings at different times of the day.
- Getting a building inspection report
- Having your lawyer review the LIM report.
- Exploring the neighbourhood and neighbours
- Checking out the local amenities.
3. Know how to make an offer, the right way
When you’re buying by tender in NZ, all offers need to be submitted in writing, on a standard tender document.
Your tender submission could include conditions, for example the completion of a satisfactory building report. or you could make an unconditional offer. This will depend on your own circumstances and how confident you are in the purchase. Remember that once an unconditional offer is accepted, neither party can change their mind.
Important to know:
Tender documents are legally binding contracts and are different from standard sale and purchase agreements. If your tender is accepted, you’re legally committed to meeting its terms and conditions so you’ll need to take advice from your lawyer before submitting it. Make sure your finances are in order before submitting a tender. You’ll typically need to supply 10% of your offer amount along with your tender which could be in the form of a cheque or bank transfer. Of course, you’ll get this money back if your tender is unsuccessful.Bonus tip: it’s not a good idea to put in offers to two tender properties at one go – if both are accepted, you’ll be expected to go through with both sales!
4. Understand what will happen when you submit an offer
If the property is listed “for sale by tender (unless sold prior)” the seller can receive and accept offers at any point. If they don’t receive pre-deadline offers, their agent will collect offers made on the day and present them to the seller in one go. From this point, the seller has five working days to choose which offer, if any, they want to accept.
If your offer is rejected
In this scenario, you’ll ask for your bank transfer or cheque back, and then you’re all good to make offers on other properties.
If the seller chooses your offer
If the seller is happy with your offer, they might just accept and sign the sale and purchase agreement.Or, they might want to negotiate the price and/or conditions you offered. You’re not obliged to accept any changes you aren’t happy with, and again we’d work closely with your lawyer to help you through this process of negotiation with the vendor. Once the sale and purchase agreement is finalised, it should just be a question of working through any conditions, going unconditional and reaching the settlement date. Tender complete.
You will submit your tender offer to the seller's estate agent.
How to win a tender in NZ: some secrets to success
Okay, now we’ve got the process nailed down, let’s talk tactics – how are you going to give yourself the best chance of winning a tender?
1. Don’t be put off by the competition
If you attend an open home and there are heaps of other people checking out the property, don’t let this stop you from making an offer. Only a small percentage of “open homers” will actually move to make an offer. If you like the home (and it’s within your budget), go for it!
2. Offer the most you can (in line with the house’s value)
Your earlier research should have given you a decent idea of the property’s current value, so you should offer the most you’re comfortable with in line with this valuation. Remember, this isn’t an auction where the seller has to accept the highest offer over the reserve price – if they don’t like any of the offers, they can just walk away or they might come to you and negotiate a bit further. If you think the house is a good buy, chances are someone else will too, and they might not try lowballing so underbidding is probably not going to secure you the home.
Remember your budget when making or negotiating your offer.
3. Make your offer an odd number
It might sound like nothing when you’re talking about figures in the hundreds of thousands of dollars, but that extra few thousand can make all the difference if everyone has gone for a nice round figure. To the seller, this indicates that you’re going the extra mile and putting every last cent into your offer.
4. Deal with as many of your conditions as possible before offering
While you don’t want to make unconditional offers on homes unless you’re feeling very confident, it’s a good idea to try and work through as many potential conditions as you possibly can before making the offer.
This might include finalising your finances, or getting reports and title checks completed. Yes, it can be disappointing and expensive if you don’t end up winning the tender, but the fewer conditions your offer comes with, the more attractive it will be to the seller.
If you can’t completely remove the conditions, you can make them more attractive by limiting the number of days you give yourself to complete due diligence like property valuations or building reports. Just make sure these timelines are doable.
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