What is Informal Tender?
In the process known as For Sale by Informal Tender a property is valued, the vendor pays a one-off admin fee (normally £360 incl VAT), rather than a percentage of the selling price.
The property is then marketed for a set period of 2-6 weeks, during which time an open-house event will take place, enabling potential buyers to view the property.
The asking price will not be stated but a guide price will be given. Written offers will be invited (sealed bids) and a closing date for such offers published.
All offers are opened at the same time. The vendor is not committed to accepting the highest or any offer. The offer is not binding and on acceptance of any offer, the transaction proceeds subject to contract.
How is it different to a traditional method of sale?
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.
What are the fees for the buyer?
To purchase a property which is for sale by informal tender, the successful buyer will pay an introduction fee of 2.4% incl VAT of the contracted sale price or £4,200 incl VAT (whichever is greater) to the agent. This fee becomes due for payment on exchange of contracts. The total fee will be confirmed in the memorandum of sale and must be lodged with the purchasers solicitor prior to the exchange of contracts and settled by the purchasers solicitor within 10 days of completion of the sale. Interest may be charged at 4% per annum above Barclays Bank base rate if the account remains unpaid after this time.
Why do Waterfords Estate Agents offer this selling method?
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 scepticism 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.
Darren Walter, Associate 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."
From a vendors point of view, they dont 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 Darren. From a buyers 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. Darren 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 Walter goes on to say "Informal Tender is certainly geared more in favour of the vendor as they dont 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 wont 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."
If you feel that selling your property by informal tender suits your requirements versus the traditional private treaty method, contact your local Waterfords branch for free advice.