How to win a Tender: Before you submit your offer, read this…
Tenders. It’s a Wellington thing. It seems like every nice property is being marketed as a tender these days.
Why is this the case you might ask?
Well, largely due to it being a seller’s market. When houses are selling relatively quickly and most properties are attracting multiple offers, it becomes incredibly hard to accurately predict selling prices. We are constantly being surprised by what some properties end up selling for. If owners choose to market their property without some sort of deadline, they could be costing themselves tens of thousands of dollars by under-selling their home.
So where does this leave you as a buyer? Tenders are hard work, there is no way around that. You get one chance to offer on the property you love and usually no opportunity to negotiate. How tough is that? I have bought 2 homes through Tenders myself and have spent many a long night calling hundreds of disappointed buyers to tell them they have just missed out on the home they had their heart set on by a few thousand dollars, so I know your pain.
Those phone calls never get any easier by the way, even after 11 years. Unfortunately, tenders work for most owners and can generate great results so they will continue to be the selling method of choice for many Wellington homeowners.
How to win a Tender…
You have set your heart on a home, it feels like the one. You can see your unborn children playing in the back lawn. Now it’s time to figure out how you can tip the odds in your favour. Here are 6 tips to help you win your next tender…
1. Don’t let the ‘perceived’ competition scare you off.
Far too many people go to a busy open home and decide they simply don’t have a chance “because there were 30 other people there!” In my experience 30 people usually equates to 1 or 2 offers so don’t count yourselves out just because there were lots of shoes outside the front door. Many of those buyers either aren’t yet ready to buy, can’t afford the house, don’t like it or are just nosy neighbours. Besides, if you don’t try you will never know, right?
2. Don’t be like “The Warehouse” with your pricing.
This is an epic rookie mistake and I see it constantly. If you are trying to buy a home you think is worth approx $400k, do not under any circumstances offer something silly like $399k. I know it feels better to be “in the 300’s” but it could very well end up costing you the house. An offer of $401k looks infinitely better than $399k but is only slightly different (in the scheme of things).
The Warehouse wants to make their products look cheap. You want to do the opposite – you want to make your offer look huge! More importantly, you want to be slightly better than the other buyers who don’t read this tip and end up offering $399k so you can beat them!
3. Pick an uneven number.
Continuing the theme above – I have seen far too many people miss out on a house by a few hundred dollars and it is gut-wrenching when it happens. Never offer an even number (like $400k). Always offer something unusual like $403,750. Even numbers look plucked out of thin air and make it look like you could afford more if you wanted to. Uneven numbers make it look like you are pouring every last cent into this offer to make it work and owners love this! Plus you will beat the other buyer that puts down a plain old even number.
4. Cross out a few lower numbers.
It might sound like a gimmick but this really works. Usually, while waiting for tender day to roll around your offer price goes up. You end up offering more than you originally planned to because you don’t want to miss out. Show the owners this progression on your tender form! It sends a really good message. Your offer should look something like this:
$390,000 $400,000 $401,750
This also greatly reduces the chances of the owner coming back to ask you for money – they can already see you have raked yourself over the coals to get to this price!
5. Attach a handwritten letter.
In all seriousness I have seen owners accept the 2nd highest offer, sometimes forgoing thousands of dollars because one of the buyers attached a hand-written letter to their offer explaining how much they love the home, telling the owner a little bit about themselves and generally pulling at the heartstrings. Owners love this stuff and most genuinely want their home to go to someone who is going to love it as much as they have. Money is not the no.1 driver for many people.
6. Shorten or deal with your conditions before offering.
I can’t advise buyers to remove conditions when they come in to make an offer. However, most winning tenders in this market are unconditional. Motivated buyers who have missed out on other homes are going the extra mile to get themselves in a position to make unconditional offers. To compete with them you are going to have to try and get yourself in the same position.
Yes, it can be expensive talking to a lawyer to get a title search done and getting a building inspection organised before offering certainly isn’t cheap. Buying a house is a big kid’s game though and if you want to have a chance on the premium properties that are out there you will need to spend a bit of money up front and make your offer as clean as possible.
Always remember you are buying a home worth $400k, $500k, $600k (or more). You would never buy a business worth that much without spending some money on due diligence.
If you need to have conditions – put the shortest possible time on them. 5 working days looks a heck of a lot better than 10 working days. Builder inspectors, valuers, solicitors and mortgage brokers will usually come to the party and organise things very quickly if you smile and ask very nicely.
We would love to hear your thoughts – please comment below with any other tips or feedback you would like to share.
Good luck out there!