Is this the norm/ legal?

Hi all,

Currently down in Sydney and happened to be to a chatting to a friend who has just purchased a half million dollar unit in Harboard (freshwater). He described the process leading up to the sale and I thought it sound dubious to say the least although I am not familiar with the negotiation process in Sydney so maybe it is the norm.

He was asked by the agent to submit his 'best offer' on paper which was then put into an envelope and sealed. Apparently the agent also had done this with numerous other potential purchasers. My friend was told that all the envelopes would be openned on Friday afternoon at 4pm and whoever submitted the highest bid gets the property. Surprise surprise he got the proerty at 530K.

The agent apparently stated that they were conducting affairs this way as the market was "so hot".

Is this a common practice? Is it legal?

Would welcome your input.

Thanks
Slingshot
 
Last edited:
Is this a common practice?
Yes, it is common especially when the market is as hot as it is.

Is it legal?
Yes, it is legal. It is also called For Sale by Tender - same thing.

I just had to do one, and I hate them. It is just a lucky dip which you cannot be sure you want to win, for fear of paying over the odds.

I suppose in my own case I was not so concerned as I'd already done the research.
 
Sometimes they do that here in Vic when several purchasers want to buy, but are unable to because there is no sect 32 (vendors statement) available.
 
OK great, good news and thanks for your replys everyone. I'll pass on the news to my buddy.

Guess we can consider this post closed.

Thanks again

Slingshot
 
Is this a common practice? Is it legal?

Would welcome your input.

The practice goes by many names and is a perfectly lawful way of transacting real estate ;

  • Offers to Purchase
  • Expressions of Interest
  • For Sale by Tender


This is how we have been buying properties for the past 6 years. It's brilliant for the Seller and damn hard work for the Buyer. You are forced to know what you are talking about, and aren't afforded the luxury of being handed an asking price on a plate.


As Propertunity pointed out, you need to tread a fine line of offering enough to secure it (if you want it of course) vs not ripping yourself off.


For alot of property for sale, this is the only method of sale available....so if you wish to not be excluded from the market, you need to educate yourself on it's characteristics.
 
I love tenders; much preferable to auctions IMHO. What I like about it is that it forces you to think very clearly about exactly what the property is worth to you, and decide exactly where your cut-off is. And you can (usually) put in conditions, which the vendor just balances against price and other considerations. This is possible, but much less likely, with an auction.

I think tenders are the most ethical, and optimal, form of sale for all parties.
 
I think tenders are the most ethical, and optimal, form of sale for all parties.

I understand where you are coming from, but I still hate them. :p

Here's an example I just went through this week:
I have a client who wants to buy a unit.
I find one that fits the bill and they want to make an offer.
I do my research and work out that the place is worth $520K. But I also know that in a slower market, it might actually go for as low as $500K and if it went to auction, might get to $540K if there were emotional buyers involved.
I also know that there is a private buyer submitting an offer and another BA with their client. So there's 3 of us who want this property.
So I get one chance to make my 'highest & best offer'.
What number do I put on the offer I submit, remembering that I won't get a 2nd chance?
 
Buying via tender is more common in a sellers market, such as the one we're experiencing in most parts of Sydney right now. It's no different really from a silent auction situation, yet without the opportunity to go and scribe a higher amount later in the night :D

The process can backfire, however, given a smaller pool of buyers, and especially if one or two of them decide not to enter the party and put their hat in the ring. It does focus you, however, into deciding on a definite walk away price yet leaves little or no room for negotiation. I actually prefer auctions if given the choice.
 
I actually prefer auctions if given the choice.

Me too (if you hadn't guessed). At least you can actually see who you are up against, watch the body language, see if they need to get approval to spend more from their significant other and take appropriate action to put yourself in front.
 
Couldn't give a stuff - 500K.
We really like it - 520K
Get it - 540K.
Next....
They want it. Get it. But if you have to pay silly money, then move on there are other properties to buy.

But I am too tight (especially with OPM) to pay $540K if I don't have to.
 
I do my research and work out that the place is worth $520K. But I also know that in a slower market, it might actually go for as low as $500K and if it went to auction, might get to $540K if there were emotional buyers involved. ... What number do I put on the offer I submit, remembering that I won't get a 2nd chance?
Ask your client exactly how badly do they want this box.

Couldn't give a stuff - 500K.

We really like it - 520K

Get it - 540K.

Next....
I'm with Dazz. :D
They want it. Get it. But if you have to pay silly money, then move on there are other properties to buy.
But you get to decide what's silly money, and you don't offer that much. ;)
Propertunity said:
But I am too tight (especially with OPM) to pay $540K if I don't have to.
I don't understand the obsession with paying the absolute lowest price for an investment. I'd prefer to find a property that I'm so confident about that even if I pay 10% over asking, I'd be happy.

Or think of a small building in the CBD of your city, currently worth, say, $10M. Somebody bought it 20 years ago for, say, $500K. Would you really care today if you'd been "ripped off" and paid $550K?
 
Exact-a-moondo Perp.

Concentrate on the quality of the property and it's future potential, not screwing the Vendor down with a G-clamp vice.


BTW - are you overseas - what is it with people changing their moniker - just leave it as is - it drives me nuts everyone changing their names.....just keep it steady and keep it real. ;)
 
I don't understand the obsession with paying the absolute lowest price for an investment. I'd prefer to find a property that I'm so confident about that even if I pay 10% over asking, I'd be happy.

Or think of a small building in the CBD of your city, currently worth, say, $10M. Somebody bought it 20 years ago for, say, $500K. Would you really care today if you'd been "ripped off" and paid $550K?

I understand what you are saying here and it is perfectly valid. But one of the reasons people hire a BA is that they want you to, as Dazz puts it so eloquently, [qoute]screw the Vendor down with a G-clamp vice.[/quote] and since they are paying my fees to do so, I do my best to comply.

In a hot market where I purchased, it was not a matter of screwing the vendor down so much as getting my clients into first position.

Just FYI, the private buyer offered $520K, the other BA offered $521K and we took the prize by offering $522K. So a good result for us and our client. Not so much for the other intending purchasers.....but I am not contracturally obligated to them. :p
 
Propertunity said:
I understand what you are saying here and it is perfectly valid. But one of the reasons people hire a BA is that they want you to, as Dazz puts it so eloquently, "screw the Vendor down with a G-clamp vice." and since they are paying my fees to do so, I do my best to comply.
Working for clients like that sounds about as much fun as a mortgage broker having clients who are only interested in interest rate. :rolleyes:
BTW - are you overseas - what is it with people changing their moniker - just leave it as is - it drives me nuts everyone changing their names.....just keep it steady and keep it real. ;)
LOL, TPFKATPFKAD...
 
Last edited:
My friend was told that all the envelopes would be openned on Friday afternoon at 4pm and whoever submitted the highest bid gets the property.

Correct me if I'm wrong, but regardless of the game they play to sell the property, isn't it legal for the vendor to consider other offers up until the second the contracts are exchanged?

I ask as when I was hunting for my current PPOR, a REA called me and said "hey this apartment you were interested in, it's going to be exchanged this afternoon at 4pm. do you want to put an offer in before the exchange?"
 
Top