What on earth is a Deadline Sale?
Good question! I constantly get asked about the Deadline Sale process. In this article, I explain how they work and offer you tips for buying or selling a home via Deadline Sale.
What exactly is a Deadline Sale?
The idea of a ‘Deadline Sale’ was created as a way for real estate companies to run a Tender-like process, following their own rules (rather than those of a typical Tender). Depending on the agency involved the property will be marketed with a date ‘to submit offers by’ but in some situations, you may be able to offer prior to the closing date and have your offer considered early by the sellers. Whereas a Tender should technically not sell before the advertised deadline.
It is critical that the rules of the sale process are clearly stated and understood from the outset.
Using a Deadline Sale method where the property can be sold at any time creates confusion over when the property is actually for sale. This can result in situations where a buyer submitting an early offer is forced to wait while other buyers are canvassed for 2-3 days to secure additional offers. This can create stressful situations for buyers and sellers where time frames and expectations are not clear.
What’s the big idea with all these deadlines?
Different forms of deadline marketing have now become commonplace in NZ. Agents have discovered that providing a date to work to for everyone involved makes it easier to manage a large amount of buyer enquiry. It can also help speed up the decision making process for buyers.
Without a deadline in place, and therefore no call to action, houses can sometimes stay on the market for months while buyers wait to see if something better comes along, or wait to see if the asking price comes down.
So, technically, what’s the difference?
In a deadline sale process, offers are submitted on a standard ADLS Sale & Purchase agreement. This is the most common contract template used in NZ, providing some familiarity if you have used this form before. Every detail is negotiable, like payment of deposit terms, settlement date, price, and conditions.
In a Tender, offers are submitted on an ADLS (Auckland District Law Society) Tender form. It’s a similar form but there are slight differences, the main of which being there is no inbuilt Title Requisition clause. So get your solicitor to check the title before you submit your offer.
The Tender document also calls for offers to be submitted with a 10% bank cheque deposit. Like anything though, this is negotiable and buyers will often add a clause stating the deposit ‘will be paid upon this contract becoming unconditional’ or similar. In my experience around 10 – 20% of offers are submitted with a bank cheque.
One reason it seems salespeople started using deadline sales was simply that they didn’t understand the Tender document and didn’t have the systems in place to explain how this works to buyers. At the same time, they still wanted to take advantage of a ‘deadline’ in their marketing. Real estate salespeople are notoriously adept at over-complicating the process of buying a home.
Should you use a Deadline Sale to sell your property?
It’s certainly a better choice than ‘By Negotiation’. Which basically says to a buyer: I’m too scared to tell you what I really want for the house, and I’m not motivated enough to have a deadline. Buyers are attracted by opportunity. A good price, a good location, a smart buy. Using ‘By Negotiation’ generally results in less enquiry in my experience. You are better off marketing with a fixed price or using a process like Tender, Deadline Sale or Auction.
Should you take an offer that comes in before the deadline?
Some owners are tempted by the ability to accept an early offer but if you accept an early offer then how do you know you are getting the best possible price? Also, if you accept an early offer with conditions, and that offer then falls over your whole process is seriously jeopardised.
Why do you think the most successful Auctions on Trademe don’t accept “buy now” offers from interested buyers before the closing time? Smart sellers realise that letting the process run its course usually allows the best chance for a good result.
I personally like using one of the traditional processes, Tender or Auction. I recommend finding a salesperson who has an excellent track record using a fixed-date process. With the wrong agent running the show, the process is likely to be a hash-up no matter which way you go.
You only get one chance at selling your biggest asset so don’t take chances.
While Tenders and Auctions are not the preferred choices for most buyers, when run correctly they give you the best opportunity to achieve a timely sale at a fair market price or premium if possible. They are more likely to be understood by the buyers as they are more prevalent in the market nowadays.
As a Buyer, should I be fearful of Deadline Sales?
It should not stop you from pursuing the property, just watch out for possible confusion involved around time frames. If you are interested in the property make sure you clearly state this to the agent so you can be advised if the deadline for offers is brought forward. You can try to offer early to stop the process but beware of playing your hand too early.
Many owners are simply not emotionally ready to sell if they have only been on the market a few days. They haven’t had time to receive feedback from the market and determine what a fair price expectation would be. It is hard for an owner to accept an offer in isolation after only being on the market for a few days, no matter how good a price you think you are offering.
Take the time available to you
Have a few visits to the property. It’s funny how much more you notice on the 2nd or 3rd look. Would you propose on the first date? Didn’t think so. Don’t commit to a 30-year mortgage after your first visit to a property that only lasted 15 minutes. Seriously, you have probably had longer showers than that and you are going to live there for a long time!
Drive past the property on a Saturday night and check out the area – any raging parties or gang houses nearby? Any properties where people are coming and going every 10 or 15 minutes? Take your time and don’t rush it. This is the best way to avoid buyers remorse later on.
Yes, you may have more competition if you wait a few days, but you are more likely to make a considered decision regarding your future. Most importantly, you are more likely to be dealing with a realistic seller.