Kevin Turner Interviews Allie Coutts from Madeleine Hicks Real Estate About the Tender Process

Kevin: Last weekend's show, we were talking about the benefits of an auction. I had an email during the week from Madeleine Hicks' office. Madeleine, of course, no stranger to our show, has been on with us from time to time talking about the tender process. I thought that might make an interesting comparison between auction and tender, so joining me to talk about that, Allie Coutts, who is with Madeleine Hicks, of course. Allie, you have just done some recent tenders, I understand.
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Allie Coutts:

Yes, we've been doing them for a few years now, since we've done a lot training on them. We've really seen the benefit to our vendors in following the tender process.
Kevin: Yeah, of course, tenders aren't all that common in residential, very common in commercial, of course. So what are the benefits as you see it for sellers in doing a tender, say over an auction?
Allie Coutts:

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Firstly for an auction, you need at least two bidders that are actively engaged, and the highest bidder only needs to pay a little bit above whatever the underbidder has sent. Even though they may have had more money in their pocket or had seen greater values to the property, so that can be a bit tense for vendors who are waiting and watching all that activity.
 

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With tender, it doesn't matter if there's only one interested party. That interested party, because they don't know what others are offering, must write down the figure that they are actually prepared to pay or where they really see value for the property.
Kevin: Do you find that buyers generally understand the tender process or do they have to be educated by you, because really they're going into a fairly blind situation, aren't they?` At least with an auction, the buyer can actually see how much interest there is there.
Allie Coutts:

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[00:02:30]

Yes, true. I guess the only indicator for the buyer is the attendance at the open home, but yes, we do spend a great deal of time with buyers and educating. We have information packs that we share with them very readily, and also talk through the process. It's in the buyers best interest, too. It's actually worked quite nicely with first time buyers because I give them the tender pack, which includes the contract and encourage them to sit with their nearest and dear one, and then convey it to lawyers or their advisors to complete the contract and include the figure that they are able to do. It's actually done in the privacy of their own home, usually. Then they just submit their tender into the box, and if it's them that's selected then it's happy days.
Kevin: Well and good.
Allie Coutts: Yeah.
Kevin:

[00:03:00]

I guess there's another advantage with tender as well, that's one of the reasons why it's so popular with commercial properties or major development sites is that it doesn't have to be cash unconditional, which is what happens at an auction. It can actually have some conditions with it, can't it?
Allie Coutts:

 

 

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Correct. Correct. Certainly, we encourage the unconditional, but there again, that's in the hands of the buyer as to what conditions they require. Then in the calm environment of the sellers home, they open up the tenders on a given time and date. They look through and compare figures, offers, and conditions or non-conditions and then make their choice accordingly.
Kevin: What happens in that process when you're sitting down with the owner and you're opening up all those tenders, if there's one there that's almost at the point where the seller will take it, do you have the ability then to go back and renegotiate with one or more of those tenders?
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Allie Coutts:

 

Yes. It's actually ... We're working for the vendor, and so we will follow their instructions, but that is absolutely up to them. They don't have to accept any of them. They're under no pressure to do so. Usually they're on the market though because they're ready to move, so invariably, they will. In a couple of cases, the tenders that have been submitted were far below what the vendor was seeking, and so at that point, we just put a price on the property and continued to market it as normal.

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We also run our tenders shorter than a typical auction campaign of four weeks. We generally run them for three, and in some cases where there's been great interest or where we know there will be a great deal of interest, we've even brought it down to four weeks. Again, that's actually up to vendors. If there's a particular buyer that is very keen to submit their offer early and to know prior to the due date, then they can do so, but it's not ... They can't put in multiple attempts.
Kevin: No, of course not.
Allie Coutts: But that is also an option that tenders can close early.
Kevin: There's an interesting insight for you into the world of tender. Helping us there, Allie Coutts, from Madeleine Hicks Real Estate. Allie, thank you very much for your time.
Allie Coutts: It's a pleasure, Kevin. Thank you.
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