What is a deadline sale?
A Deadline Sale is similar to a Tender, except the rules are a bit looser.
The rules of a deadline can vary depending on the Real Estate company you are working with, so be sure to discuss what the rules are with your sales consultant.
Typically a property will be marketed with a date/deadline to submit offers. However, some deadlines can sell prior to the closing date, so be mindful of this. Tenders typically won't sell before the advertised date.
A Deadline Sale can create confusion over when the end date is to make an offer. A buyer may submit an early offer, only to be forced to wait while the real estate consultant tries to secure additional offers. This can be offputting and stressful for the buyer.
Most forms of marketing these days include a deadline in some form. The real estate industry finds providing a date to work towards ensures everyone is on the same page, allows enough time for due diligence, but also speeds up the decision-making process for potential buyers.
Previously without some form of deadline, houses could sometimes stay on the market for months. Without a sense of urgency, buyers could continue to search the market for something better, or wait to see if the asking price was reduced.
It is possible the reason deadline sales came about was sales consultants didn’t understand the Tender documentation, but still wanted to create urgency.
What is the difference between a tender and a deadline?
An offer using a Deadline Sale process is submitted on a Sale & Purchase Agreement. This is the most common contract used in New Zealand to purchase real estate. An offer by Tender is submitted using a Tender form supplied by the Auckland District Law Society. The particulars and conditions of the contract remain the same, except the Title Requisition clause has been removed. It is assumed that you have asked your solicitor to check the title before submitting an offer.
A Tender document specifies that an offer must be accompanied by a 10% deposit. In my experience, this is very rarely the case. Nowadays the contract will state something to the effect '10% deposit is to be paid upon confirmation of the contract'.
A tender document also states that any offer made must stay live for five (5) days from the close of tender. A deadline sale contract does not. This means a buyer can withdraw their offer at any point.
Should I use a Deadline Sale to sell my property?
A deadline sale is certainly a better choice than ‘BEO' or ‘By Negotiation’. These methods of sale can tell potential buyers you want too much for your property or you are not motivated enough to sell. Any experienced Sales Consultant will tell you that the words ‘By Negotiation’ will generally result in less enquiry than properties that are marketed by Tender, Auction or Deadline Sale.
Accepting early offers
It can be tempting to accept an early offer. However, without exposing your property to as many buyers as possible how will you know you are achieving the best possible price?
If you do accept an early offer because your situation favours it, we strongly advise that you don't enter into a contract with conditions. Conditions have the potential to make an offer fall through. This could jeopardise the entire marketing campaign and can stigmatise a property in any market.
Whilst Tender and Auction are not loved by buyers, these sales methods are commonplace in the sale and purchase of real estate these days. When run correctly tender and auction are the best way to achieve both a timely sale and a fair or premium price in the market.
Should I buy through Deadline Sale?
As a buyer, the most important thing to note is when the deadline will close. If you have a genuine interest in a property let the sales consultant know so you can be kept in the loop.
You may feel tempted to put in an early offer to avoid competing with others.
However, a number of owners are not mentally prepared to sell if you present an offer very early on in the process, even if the offer is significant. Owners need time to receive feedback - both positive and negative - on their property. They also need time to digest price feedback. What the market determines is a fair price could be very different from their initial expectations.