House prices across the South-East have continued to rise, as a dearth of new properties to the market continues to be the main stumbling block for ‘would-be’ buyers, struggling with the lack of choice. In a bid to encourage more sellers to test the market and give buyers greater choice, some agents have started offering alternative selling methods, such as ‘Informal Tender’, which has been met by some skepticism in the media. Waterfords estate agent says greater understanding of this option is needed so that vendors can make a choice that is right for them.
Pent-up demand and lack of stock have caused average house prices across the South-East to rise by as much as 8% versus this time last year. Brendan Cox, Managing Director of Waterfords says "buyers are becoming increasingly frustrated at the number of properties being sold before they even reach the market, forcing agents to look at new ways to encourage market activity."
One method being tested is that of ‘Informal Tender’, which offers both an alternative marketing strategy and fee structure. Using Informal Tender, a property is valued, the vendors pay a one-off admin fee (normally £360 incl VAT), rather than a percentage of the selling price, and the property is then marketed for a set period of 4-6 weeks, during which time an open-house event will take place, enabling potential buyers to view the property.
With the traditional method of sale, vendors are informed of offers as they are made, meaning they may take the property off the market before many buyers have even had a chance to see it. With Informal Tender, the property remains open to offers, which are submitted by sealed bids, for the agreed marketing period. Anyone making an offer must declare their affordability and buying position. After the deadline for offers has closed, all the tenders are opened and the vendor can then choose which offer is most suited to them. The successful buyer then pays an introduction fee, typically 2.4% incl VAT, to the agent, rather than the vendor paying a selling fee.
From a vendors’ point of view, they don’t have to pay a percentage of the sale price to the agent and are likely to have several offers to choose from. "This might not necessarily be the highest, but perhaps the person in the most proceedable position" says Brendan. From a buyer’s perspective, they are effectively being given an opportunity to put an offer on a property they might not otherwise have even had a chance to see. A buyer only pays the introduction fee if their offer is accepted and they are free to take this additional cost into account when making a bid. Brendan adds "Because the tender is ‘informal’, if a seller is not satisfied with any of the bids on the closing date, they remain at liberty to decline to sell, just as the chosen buyer is free to retract their offer."
Mr Cox goes on to say "Informal Tender is certainly geared more in favour of the vendor as they don’t have to pay a commission fee and are likely to achieve a best price. However, we do feel that because it aims to make selling more affordable, it could encourage more sellers to the market giving purchasers a wider choice, which in the long term would help calm house prices, thus benefitting both parties. With that said, it won’t suit everyone, particularly those who are on a tight time-frame to sell, so it is advised to discuss all options with your agent before deciding the best way forward for you."
Visit our page about Informal Tender and whether it suits your requirements versus the traditional private treaty method, contact your local Waterfords branch for free advice.