What is "Sale by tender"?

RowaN

I'm thinking of selling my studio flat and the estate agent seems to be pushing me towards a "sale by tender" method. What is this? He tried to explain it..

What i understand:
For the sale I pay a flat £299 instead of the usual fee 1.5% (£3000 in my case).
It is the BUYER who then pays the £3000 (1.5%) fee.

Great for me paying less to sell, but for the buyer, surely they will just make a lower offer than usual to take the extra fee into account?

So I'm not clear on who if anyone is benefiting from "sale by tender" vs traditional methods.

Am I missing something? Any advice would be greatly appreciated - thanks in advance.

gazfocus

An estate agent offered this to us as well. It's basically 'Sealed Bids', so you put your house on the market for 4 weeks (let's say), people come and view your house, make an offer as sealed bids, then at the end of the 4 week period, all bids are opened by the Estate Agents and the highest bidder gets it.

I personally think it's a waste of time because if I wanted to offer on a house, I wouldn't want to be waiting 4 weeks (or whatever period you set) to find out if the offer had been accepted.

Paully232000

Isnt sale by tender where the price isn't listed and people just bid what they think it is worth. I could be wrong.

googler

Buying and selling in the UK traditionally involves the seller paying the lion's share of the fees to an agency to sell their house. As people move, they pay on one side of the transaction, and don't pay on the other.

Moving the lion's share of the fee from the seller to the buyer will leave the buyer in this transaction severely disadvantaged, as they'll be paying an EA to sell their current house, and also paying for the 'privilege' of buying one under this method.

I fail to see the incentive to participate from the buyer's perspective. I'd walk away.

It would be different if we had a system like the American one, where there are buyer and seller agents who collaborate to bring a pool of buyers to a seller's property, and who share the selling commission between them.

eddddy

RowaN wrote: »

...
For the sale I pay a flat £299 instead of the usual fee 1.5% (£3000 in my case).
It is the BUYER who then pays the £3000 (1.5%) fee.
...
So I'm not clear on who if anyone is benefiting from "sale by tender" vs traditional methods.
...

It's just a bit of "salesmanship"... trying out different approaches to see if it generates more interest.

As you say, if you look at it rationally there's no real benefit - you would expect people to simply offer £3k less. (Although this may result in a small saving on stamp duty, I guess.)

But then I don't see the rational behind offers like "£300 cashback when you buy a tv" - why not just reduce the price of the tv by £300 instead?

Try to find out if the EA has had success with their "sale by tender + buyer pays fee" strategy before - or if it's a new whacky idea that came out of this week's Monday morning brainstorming session.

If you do go with it, make sure you understand what happens if no acceptable tender offer is received. Does your contract change to a conventional agency agreement? Or does your contract immediately end, so you can move to another agent?

TBagpuss

Definitely talk to the agent about what the advantages are and why they recommend it.
I can see it being something which might put people off simply because it is an unfamiliar way of doing things. Obviously that's unlikely to put off someone who falls in love with the property, but it may reduce your pool of buyers as some may decide not to view.

Running_Horse

I have seen it for a large probate property, slightly dilapidated with potential. If there is a pack of builders chasing then it makes sense to force their bids up rather than down, although I think an auction could do that just as well.

Try to see this from a potential buyer's perspective. Why would you go to all the hassle of registering and bidding blind not knowing what the outcome is, and potentially paying over the market value? I would be moving on and looking for properties to buy in the normal way.

What percentage of your potential buyers are going to be put off?

MonsieurFrugal

It would certainly put me off.

googler

TBagpuss wrote: »

I can see it being something which might put people off simply because it is an unfamiliar way of doing things.

I can see it being something which definitely puts people off, because if you're the only buyer in a chain participating in a tender, you'll be the only one paying effectively double the fees of the others.... as you'll be paying one set of fees to sell your own property, and another to buy the property under tender.......

If everyone embraces it all at once, it might work, but not introduced piecemeal...

spender717

It put me off when I was house hunting. Just ignored any sale by tender houses as didn't understand how it worked....

RowaN

Thanks all.

I think the EA's logic is that mine is only one of only 3 properties of this type for a very large area, and there are 70+ buyers looking right now for this type of property here (so I'm told). So the EA thinks people won't have the luxury of "being put off" because they're desperate to buy.