Tender, negotiation and deadline
This is general guidance only – your agency will have its own sales process for you to follow.
Listing a property for sale by tender is a confidential process where buyers submit written offers to you before the specified end date.
Listing a property by tender
When a property is sold by tender, prospective buyers (the tenderers) submit confidential written offers to you, the agent, before a set closing deadline.
Tenders are submitted in a sealed envelope, so the licensee and other tenderers do not know what buyers are offering. The tenders are usually opened after the tender has closed and in the presence of the vendor. The vendor’s lawyer may also be present.
Listing by tender may be useful when:
- the property has unique features which make it difficult to price
- the vendor has time constraints or a deadline
- the vendor doesn’t want to share their price expectations with buyers
- there are privacy concerns for one or both parties.
Important things to know about tenders
Features of the tender process include:
- A property can be sold before the tender date but must be advertised ‘for sale by tender (unless sold prior)’. All marketing material and tender documents must make this clear.
- Tenderers will be asked to fill in a legally binding agreement: ‘The Particulars of Sale of Real Estate by Tender’ which includes the tendered price, deposit amount, settlement dates and any conditions attached to the offer.
- Tenderers provide a deposit which is negotiable and typically 10% of the purchase price. The deposit is returned to the tenderer if their tender is not successful.
- Copies of all tendered offers must be kept by you for 12 months (Rule 10.12).
When the tender offers have been opened the vendor may choose to negotiate further with one or more tenderers or reject all offers.
Dealing with tender offers
Tenders can be submitted any time up to the closing date and time. It is a good idea to let buyers know to put their best offer forward because they are unlikely to have an opportunity to change their offer once it is submitted.
When tenders are submitted, they should be kept in a safe place where they will not be opened until the closing date. Buyers who submit a tender offer should be made aware they cannot withdraw their offer until 5 working days after the tender closing date.
Opening and accepting a tender
When the tender has closed, the offers can be opened with the vendor and your branch manager or supervisor. You’ll need to check that the tenders submitted meet the vendor’s requirements and are completed correctly, with the necessary signatures and deposit.
The vendor has the right to accept a tender, reject all of them, or negotiate further. The 5-day withdrawal rule helps provide the vendor with time to consider the offers, make enquiries, and negotiate if necessary.
When the vendor accepts an offer, they will need to sign the Sale and Purchase Agreement form, and you will notify the successful party. You will also need to advise the unsuccessful parties and return their deposits and documents.
In this sale method, there is no end date for offers, and potential purchasers make offers based on what they think the property is worth in the current market.
Listing a property by negotiation
A vendor may want to list their property for sale by negotiation when it’s difficult to estimate the market price of their property.
Buyer enquiry over (BEO)
There are different ways of selling a property by negotiation. One is to market it as buyer enquiry over (BEO) or buyer budget over (BBO) a set price or by providing a pricing guide.
The BEO needs to be realistic, and if the vendor rejects offers over the BEO, you may need to re-evaluate the BEO.
Quoting a negotiation range
You can quote a negotiating price range. The price range can be wide, but the lower end of the range must be an amount the vendor would seriously consider accepting.
How to best protect yourself
Take care when setting BEO prices. Buyers view the BEO price as an amount the vendor will seriously consider. The BEO price needs to be consistent with the vendor’s price expectations.
If the lower end of the BEO price range is not an amount the vendor would consider, and you know the vendor would only accept something higher, the advertising could be misleading. Have an honest discussion with your vendor about their price expectations so you can set and advertise an accurate BEO.
Guidance from a decision
A CAC decision has provided industry guidance about the importance of advertising a realistic BEO price.
The case involved a licensee marketing a property at a ‘buyer enquiry over’ price which was lower than the price the vendors had indicated was the minimum sale price they would accept for their property.
The vendor of the property made it clear to the licensee that they would not sell for less than $300,000. However, the licensee listed it for a BEO of $295,000. Negotiations began with potential buyers (the complainants), and they submitted an offer of $300,000 which was over the BEO but was rejected by the vendors.
When the complainant complained to the licensee about the misleading price expectations. The licensee said he believed he was within the Commerce Commission’s guidelines. The licensee incorrectly thought he could advertise the price within 10% of the vendor’s price expectations.
Read the full decision here.
Incorrect interpretation of the Commerce Commission guidelines
The licensee indicated that he considers this method of advertising to be ‘within Commerce Commission guidelines’. Use of the description ‘buyer enquiry over’ when listing properties for sale has been the subject of litigation in a case from the Commerce Commission.
It is clear from that case that the ‘90% within sale price’ range cannot be applied when the ‘buyer enquiry over’ method is used.
Read more about the case here(external link).
Vendor had clear price expectations
‘The Committee considered that the clear indication provided by the vendors to the licensee at the outset of their property being marketed (as well as later when the offer from the complainant was presented) meant that there was not likely to have been any mistake about the bottom price that the vendors would take for their property.’
The licensee was found to be guilty of unsatisfactory conduct and was in breach of the Code of Conduct rule 9.4 which states:
9.4 — A licensee must not mislead customers as to the price expectations of the client.
Deadline sale is a sales method where a property is marketed for a set period with an advertised end date.
Listing a property by deadline
Offers can be made at any point up to the end date and because vendors can choose to accept an offer at any time, buyers need to be proactive in registering their interest with you.
The marketing should make this clear for interested buyers by stating something like ‘unless sold prior.’ Deadline sales do not require a property to have an advertised price.
Offers are made on a standard sale and purchase agreement.
How is it different from a tender process?
A deadline sale offers vendors more flexibility than sale by tender. The vendor can accept an offer at the time that suits them.
They may also choose not to accept any offer until the end date. Offers are made on standard sale and purchase agreements and prospective buyers can include terms in their offer.
Consideration of offers
The vendor can wait until the end date has been reached, and consider all the offers together, or they can accept an offer at any point during the listing period.
Under rule 10.10 you are obligated to submit all written offers you receive to the vendor.
Rule 10.10 — A licensee must submit to the client all offers concerning the grant, sale, or another disposal of any land or business, provided that such offers are in writing.
You must advise your client about all written offers so the vendor can decide whether to view the offer at the time or wait until the deadline date. You may also want to inform potential buyers about the vendor’s time frames to better manage their expectations.
You cannot withhold an offer from your client.
Is the vendor bound to accept the highest offer?
The vendor is not bound to accept the highest offer.
The vendor drives the process and chooses when they’ll look at the offers, whether they’ll accept any offers, and who they will negotiate with.