The tender system of home buying could have many advantages

An interesting procedural innovation could make a significant difference in the way in which some homes are sold in South Africa in the future, says Bill Rawson, Chairman of the Rawson Property Group.

“Asking potential buyers to submit a written tender is now being accepted by a growing number of sellers and their estate agents,” said Rawson, “and the good news is that in certain cases this has resulted in a price above what the agent believed it was possible to achieve.”

Under the tender system, said Rawson, buyers have to place a written offer with the agent stating what they are prepared to pay for the home. These offers are then all opened simultaneously at a specified time in the seller’s presence.

The seller, for his part, as in an auction, is not obliged to accept the top tender, especially if it has not achieved his target figure, but he can, if he wishes, ask the top tenderer to increase his price or he can lower his own price if he sees fit to do so.

“From the viewpoint of the buyer, the system has the big disadvantage that if he is outbid, he cannot resume negotiations. He is, therefore, likely to lose out altogether and this could be devastating if he has set his heart on the property. If a buyer really wants a property, he should then tender higher.”

From the seller’s viewpoint, said Rawson, the system has two big advantages. Firstly, it is less ‘invasive’: the seller will not have potential buyers trooping through his home for weeks on end. Secondly, the system encourages the agent to spend heavily on advertising to promote the property. As he is operating on a sole mandate basis, he will have the time to do this thoroughly without the fear of another agent coming in with a rival offer which the seller might accept.

“The tender system is especially well suited to the more sophisticated, expensive homes where the promotional plan should include a virtual realty video tour of the entire interior and exterior of the building, as well as other marketing aids,” said Rawson.

Agents using the tender system, said Rawson, will usually ask for six to 12 weeks to publicise the property thoroughly, during which time the seller should insist on seeing the agent’s full marketing plan and his budget. In return for a lower commission, the seller might agree to fund part or all of the marketing costs.

“The new system of calling for tenders clearly can work to the advantage of the seller and I would suggest that people consider going this route, especially if they have reason to believe that their agent is highly competent. The system should not be used if you lack faith in your agent because then a great deal of time can be wasted.”

Article: www.rawsonfinance.co.za

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