Vendors often look for guidance on the questions of ‘why’, ‘when’ and ‘how much’.
However, the method of sale can easily be overlooked, despite the fact it can have quite an effect on the eventual outcome.
Methods of sale must not only take in to consideration the type of property being offered, but also the prevailing market conditions and the likely response of would-be buyers.
Get this wrong and the process could not only take longer than it should, but it might even significantly hinder a sale.
So what options are available?
This the most common form of concluding a sale and one used for all types of properties. It affords the seller and their advisors the greatest degree of flexibility and time.
A sale by Private Treaty involves the open marketing of a property, with offers from interested parties invited at any time.
The vendor may choose to enter negotiations early in the marketing period, or indeed wait to compare offers between interested parties.
On the acceptance of an offer, the transaction proceeds subject to contract. Private Treaty is especially useful for lotted sales or where buyers need to make arrangements ahead of making an offer.
Flexibility also means that a sale like this can be eventually concluded by a ‘Best’ or ‘Best and final’ offers scenario, or a bidding situation over the telephone.
This method of sale provides a useful bridge between the flexibility of Private Treaty and the binding structure of a formal tender.
In the process known as ‘For Sale by Informal Tender’ a property is openly marketed for a period of time, with a date set for the receipt of written offers on a tender form.
The vendor may then compare all received offers on a ‘like for like’ basis.
The vendor is not bound to accept the highest, or indeed any of the offers, and also retains the flexibility to enter further negotiations with an interested party to conclude the sale if so desired.
The offer is not legally binding and the transaction progresses subject to contract.
This method of sale encourages would-be purchasers to commit to a sale, and to conclude within a predetermined timescale as set out at the start of the tender process. But it also maintains a degree flexibility with regard to timescales and further negotiations.
This method of sale is similar to that of an informal tender, however the differences are key.
In a formal tender scenario, as with an informal tender, the sale is advertised with a deadline by which all prospective purchasers must submit written bids.
A legal pack is available for prospective purchasers to undertake due diligence ahead of the tender date.
Each tender form received from prospective purchasers includes a legally binding contract for sale, with an accompanying deposit.
Once the favoured bid has been accepted by the vendor, the deposit is accepted and the contracts for sale are exchanged.
This ensures both parties are legally committed to the contract and must complete the sale on the specified date.
Failure to complete incurs the usual forfeiture of deposit and additional fees may be incurred.
This method of sale is not as commonly seen in recent years due to its complex nature and the rigid structure of the formal tender process.
However, the benefit of this method of sale is the rate of progression of matters due to the legally binding format.
With a sale by auction, a property is openly marketed as ‘For sale by auction’, rather than at a fixed price.
It is common for viewing days to be held to accommodate interested parties, with a legal pack available for prospective purchasers prior to the date of auction.
Interested parties will attend a formal auction, conducted by an auctioneer, at which the individual who bids highest during the auction will purchase the property.
The successful bidder is legally bound to purchase the property on the fall of the hammer and will usually pay a cleared deposit on the day of the auction. The purchase of a property at auction incurs commission fees for both buyers and sellers, and both parties must complete the purchase on the stated completion date –most commonly four weeks after the auction date.
A purchaser must have arranged any finance and undertaken due diligence prior to the auction, as once the hammer falls it is too late.
The term ‘Dutch auction’ is often misused, and used in conversation, where buyers might feel they are being used against one another to unnecessarily inflate a sale value.
In fact, a true Dutch auction is where a property or item is for sale by auction, and the auctioneer starts the opening price higher than where they expect the sale to be agreed.
He or she will then reduce the bid value decrementally until a bidder in the room raises a hand to buy at that price.
It is essentially, a reverse auction and is not commonly used for sales of property.