Deadline sales vs tender – Which is better?

Out of all these options, a tender and a deadline sale are most similar.

One real estate agent we spoke to said: “A deadline sale is like a deregulated tender”.

Unlike auctions, tenders and deadlines work off conditional offers, and therefore you’ve got some ability to negotiate the conditions.

But a tender cannot be sold before the tender date, whereas a deadline sale can. So, from this perspective a deadline sale is less restrictive – for both parties.

This means buyers in a deadline sale can put in conditions to accompany their offer (e.g. conditional on 10 days’ due diligence) and sellers can accept an offer at any time.

With a tender, there’s less negotiation going on because everyone is putting in bids at the same time.

Like a sale by negotiation, you are going to want to put your best foot forward – first, get accepted, and then do your negotiating down the line.

The hope is that, by the time you get to your negotiations a few weeks in, some of the other offers have gone cold – and then you can negotiate some of your clauses (or price) once you are a bit further down the line (that actually might be your legitimate strategy).

Usually the negotiations are on things like: finance clauses, solicitor’s approval, or a builder’s check.

But a word of warning: finance isn’t something you can use as easily to get you out of a contract these days, and a builder check can be something the owner can remedy ahead of going unconditional.

What are some tips for negotiating in a deadline sale? How do I win?

You’re more likely to negotiate a good price if you know why the seller is selling.

This is because in a deadline sale, there is more room for negotiation on certain clauses. Here are the top 2 tips to be aware of when negotiating a deadline sale as a buyer.

Tip #1 – Find out what the seller cares about, other than price.

You don’t need us to tell you that everyone cares about price – obviously. But there’s usually something else too.

For example, do they want a quick sale? Let’s say, the owners have another offer on another property and they need to settle as soon as possible to avoid having to deal with expensive bridging finance.

Or one of the home owners is moving to another city, and they are running on a tight deadline.

Said another way, is there some sort of time restraint for the existing owners that you could use to your advantage?

If this is the case, you might be able to introduce clauses.

For instance, you could organise an early settlement date or forgo some conditions around alterations to the house that you would otherwise ask for.

And you could find the owners will be more willing to give on price in exchange for these conditions.

The only way to find out this sort of information is to ask the real estate agent some exploratory questions.

Here are some examples:

• How quickly does this need to be sold?

• What are some of the deadlines the vendor has given you?

• What’s going to make this offer stand out from any other offer?

Tip #2 – Make price your last point of negotiation.

This is an important tip – leave the price negotiating till last.

Even if the other party tries to push it earlier, you can deflect on price and bring it back to something else before actually getting to specific numbers.

Ideally, what you want is a situation where you’ve been flexible with your offer. For example you might have:

• been flexible on the owners wanting to take the curtains with them and

• flexible on taking the awkward settlement date of December 23

And now the owner is so invested in the sale, he or she might just be more willing to negotiate on price. (This is the hope anyway).

Sure, these conditions might not be ideal, but you want to be flexible on all these prior details before you get to price … if you want a good deal.

What if I ask for too much, and I’m unsuccessful?

The only way to win a deadline sale every single time is to be high on price, light on conditions. But if you do this every time you may not get a good deal on your prospective investment property.

The point we’re trying to make is: You’ve got to be willing to lose.

You’re not going to win every single one when you’re hunting out a good deal – and that’s OK.

This is really important for investors because you need to do your numbers, and know what your limit is before going in. Then you don’t go a dollar over it. Because there will be an instance where you think: “Ah, I'll just go a bit higher”. And then all of a sudden you are no longer buying a good investment.

Remember, any property can be a rental, but not every property is a good investment at that particular price.

Write your questions or thoughts in the comments section below.