When it comes to selling a property – whether that be large or small, semi detached, terraced, ‘doer-upper’ or a farm, there are different methods of sale which are available to you. Choosing the right method of sale can make all the difference in achieving a successful outcome for your property.
Harriet Rogers, Senior Farms & Land Sales Coordinator explains the difference between the common methods available. At Luscombe Maye, it is our role to guide vendors through this decision and help offer advice through this process prior to marketing.
Common methods of selling a property
Private Treaty Sales
A seller puts their property on the market with a fixed asking price. Both buyer and seller negotiate privately through an estate agent until a sale price and terms are agreed. Following agreement, this then proceeds to solicitors, and the conveyancing process begins between both sets of solicitors, aiming to reach exchange (where a 10% deposit is paid) and a date is then agreed for completion.
Sale by Auction
A property is offered for sale by auction on a given date but is marketed on the open market for a period before this date, commonly for a period of 6-8 weeks. The legal work is done upfront prior to marketing – an auction pack is prepared by the seller’s solicitor to include a contract, searches, and pre contract enquiries. The property is sold to the highest bidder, subject to meeting its reserve price (which must be within 10% of the Guide Price, either above or below, this being a legal requirement).
On the fall of the hammer, contracts are exchanged with a pre agreed completion date (standard being 28 days later) but can be set to a longer fixed period from the outset if required.
Sale by Tender (or sealed bids)
There are two types of tender sales – Formal & Informal. A Tender is a sealed bid, whereby an offer is submitted in a sealed envelope to the agent and opened on a set deadline date – a ‘blind’ best & final offer.
The most important part of a tender (sealed bid) sale is that the Guide Price for the property needs to be set at an attractive level (e.g sometimes even 25% less than the price hoping to be achieved) to gain as much interest as possible and create competitive tension, to drive the end price achieved up. It can be difficult to have confidence in this method of sale, but unless the price is attractive, the method is not as successful.
Informal Tender
Informal Tender usually starts with a 6–8 week marketing campaign, at the end of which is a deadline date for tenders (sealed bids) to be submitted. On this deadline date, all tenders are opened with the vendor and the offers submitted are considered. The vendor is not bound to accept any offer, and they do not have to accept the highest offer. If an offer is accepted, a contract is negotiated and both parties instruct solicitors. The conveyancing process then begins, to proceed to exchange of contracts (whereby a 10% deposit is paid) and a date is then agreed for completion; exactly like the conveyancing process for a Private Treaty sale.
Formal Tender
Formal Tender follows the same initial process as Informal Tender above, but instead the legal work is prepared in advance by the seller’s solicitor. A contract, searches and pre contract enquiries form part of a legal (tender) pack for prospective purchasers to view in the 6–8 week marketing period.
The main difference to Informal tender is that a submitted tender at the deadline date is accompanied by the purchaser’s signed contract and a 10% deposit (of their offer price). If a tender is accepted by the seller, this then constitutes exchange of contracts straight away. Completion then follows thereafter on a set date, (commonly 28 days later), but this is up to the vendor and can be extended to allow a longer timeframe between exchange and completion to put less pressure on the purchaser.
With Formal Tender, everything is presented to the buyer up front in advance of getting to the point of accepting an offer, which works very well for a no nonsense approach to selling a property.
Choosing the right method of sale for your property is not a one size fits all decision. It is important to discuss your property, your motivation for selling (timeframes), market conditions and buyer behaviour when choosing a method of sale.
If you’re considering selling your property – whether it is residential, rural or commercial and you want expert advice on which method suits you best, please contact your local office today.
