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’, however 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. Buyers wait to see if something better comes along. Or they 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, including 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’. 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. As a result, they didn’t have the systems in place to explain to buyers how the Tender process works. 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.
Read: How to win a tender (or Deadline Sale)
Should you use a Deadline Sale to sell your property?
It is 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. The problem is, 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 Tender and Auction is not the preferred choice 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 for 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 is 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 by taking your time 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.
Need help specific to your situation?
Book a one-on-one consultation online.
Related articles:
The smartest way to move
5 things you should never say to a real estate agent
How to avoid losing money when buying and selling
How to win a Tender (or Deadline Sale)
6 tips to help you decide on a price
Stay safe out there!
Andrew Duncan – Real Estate Blogger
Hi andrew,
We’re looking at a property in christchurch, which is under Deadline Sale – We’ve had one look at it, and keen to go back. However, there have been 3 early offers put on the table, which have been rejected (words from the REA). Given it’sa deadline sale, we were keen to do a good portion of due diligence (i.e. eliminate one or two clauses prior to putting our offer in, to make the offer look more attractive).
I spoke to the REA, and advised that if we were to put an offer in, this is what we would be doing, and of course can they advise of the approximate value (not exact numbers), of the offers which have been rejected to get an idea of where we would need to sit, so we can get a good price for the money we are putting into the house.
She refused, stating that disclosing an offer on deadline sale, would be a breach of license and to “give as much money as possible” to ensure sale of the property.
What ar the rules surrounding those early offers? Do they remain on the table come the deadline, or are they destined to sit in the reject pile forever? Furthermore, I would like to know the rules surrounding disclose of buyers offers, if rejected – as my understanding tells me that this is not a breach of license or illegal.
Help.
Hi Ryan, thanks for getting in touch. It would be standard practice not to disclose the amount of any offers – I think this is the right approach, especially if those buyers might still be interested. Most people offering early and trying to bring the deadline forward (to get an answer quicker) so if they offered early and got turned down, there is a good chance they will still be there when the official deadline comes along. It’s a bit of a messy process but all you can do is throw your hat in the ring, base your price off as many recent local sales as you can research and give it your best shot. Take it as a positive that so many other buyers like this house too! It’s good to buy a property that other people want.
Do you have to sell to one of the offers(in the deadline sale)
Or can you put your property back on the market
Sound advise Andrew. Thank you.
regards Steve
thks for explaining that, we are in the market to buy, we have our family home (RV$330k)
Plus Rental RV ($175)
Advice how to negotiate when looking to downsize around the $175/225 bracket here in Levin.
Hi John, thanks for your comment. In your position I would first consider if you can keep both properties as rentals (although the family home might not suit that). Next I would look at selling the family home with a long 3-4 month settlement, before buying your new home. That way you are a cashed up buyer and can make unconditional offers (if you want to) on any house that interests you. Your offers will be much more appealing and it will put you in a stronger negotiating position. You may also be able to use bridging finance for this purpose if need be but the low-risk, safest option is always to sell first.
Hello Andrew
Yes I totally agree with you about deadline Sales. They are confusing and as a recent buyer we did tend to stay away from them. But then that goes for tenders also. We stayed away from these as there is no negotiation with the vendor (I know several other people who stay away from tenders also because of this)
Cheers
Colin
thks for explaining that, we are in the market to buy, we have our family home (RV$330k)
Plus Rental RV ($175)
Advice how to negotiate when looking to downsize around the $175/225 bracket here in Levin.