Method of sale - Auction Method of sale - Private treaty/ for sale by negotiation

Method of sale - Tender

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This is one the most popular methods of sale for commercial and industrial properties, particularly those valued at under $10 million, and has proved to be the most successful sales method for this sector of the market. This is reflected in the clearance rates of auctions run in conjunction with our Total Property portfolios, which are currently in excess of 70%. Auction is a highly effective way of creating buyer competition to ensure that the best possible price is achieved and allows the vendor to determine the terms and conditions of sale. However, there is flexibility to alter these for some individual potential bidders to encourage their attendance at the auction.

The auction process places a time frame (usually a 4- to 5-week period) on the sale which instils urgency into the minds of prospective purchasers. All interested parties are provided with the relevant property information allowing them to undertake due diligence well in advance of the auction day. Auction is a highly transparent process enabling purchasers to see where their competition is on the auction room floor. It also provides vendors with the best means of determining how the market values a property.

A reserve price will be set in consultation with the vendor prior to the auction and the property will be declared “on the market” only after this price has been met and will then be sold to the highest bidder when the hammer comes down. If the reserve price is not met in the initial bidding process then the auction may be paused for discussions to determine whether the highest bidder would be prepared to raise the bid to a level that would enable bidding to recommence. If this is unsuccessful then the property will be passed in for further post-auction negotiations. A significant number of properties that are passed in are sold after auction.

If an offer is received that the vendor will accept prior to the auction then the auction date may be brought forward. All parties that have expressed interest in the property will be notified and given the opportunity to participate in this auction, with bidding starting at the offer price, which will become the declared reserve price.

A vendor or a representative may bid on a property up to, but not beyond, the reserve price. These bids are normally made through the auctioneer and are used infrequently, sometimes as a way of starting off the bidding or trying to move bidding closer to the reserve price. The auctioneer must declare any vendor bids.

When a property is sold at auction the sale is unconditional, and a non refundable 10% deposit is required to be paid. The date for settlement of the sale is predetermined by the vendor (generally one month from settlement), unless the purchaser has asked for a variation to this prior to auction date.

METHOD OF SALE - AUCTION

METHOD OF SALE - TENDER

Tender is a popular method of sale particularly for larger, more complex properties. Prospective buyers prepare and submit confidential written offers for a property to the agent for the seller’s consideration. There is no reserve price and the vendor is under no obligation to accept any of the tenders made.

A tender sets a specific timeframe within which a formal offer must be made, usually a minimum of 4 to 5 weeks to allow purchasers to carry out their due diligence and organise any finance required. However, this may be longer where considerable further investigation work may need to be undertaken or where international exposure is an important part of the marketing strategy.

Purchasers are required to submit on the vendor’s predetermined conditions. However, tendering does offer considerable flexibility to vary those terms and conditions to suit a purchaser’s specific requirements eg, a vendor occupying the property being sold may agree to a lease-back term to fit in with the purchaser’s preferred occupation date.

Following the tender deadline, the agent will provide all tenders to the seller who can weigh up offers and conditions and decide which, if any, they want to accept. Unlike an auction, the vendor does not have to sell to the highest bidder. The seller can seek, through the agent, to negotiate with any tenderer with the aim of reaching agreement. It is up to the tenderer to decide if they wish to do this.

This generally involves the sale of a property with a fixed price in mind. This is decided by the seller in discussion with the agent, taking into account the seller’s views and the agent’s appraisal of the property’s value.

The seller will also agree a marketing plan with the agent. The price will not necessarily be disclosed in marketing material particularly when it is hard to estimate what a property is likely to sell for. Prospective buyers make offers based on their perception of the market value of the property and the seller will negotiate with them on price, through the agent.

Each prospective buyer will be asked to make a signed written offer. Prospective purchasers are made aware of the vendor’s expectations so any offers should be from genuinely interested parties. The agent will present all offers to the seller who will weigh up which, if any, they want to accept. The seller may also choose to instruct the agent to negotiate further on price or conditions.

There is generally no timeframe around this sales process (unless the property is for sale by deadline private treaty) so there is less pressure on vendors and purchasers. The process encourages both conditional and unconditional offers and purchasers can make conditional offers at any time during the campaign. As a consequence a sale may take longer to conclude and there is higher chance that an offer will “fall over”.

METHOD OF SALE - PRIVATE TREATY/FOR SALE BY NEGOTIATION

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