What is 'by tender’ (silent auctions)? Investment terms explained

While those keen on property are no doubt familiar with auctions, that is public auctions, properties offered "by tender" (increasingly used as interchangeable with the term silent auction) are a different kettle of fish.

Selling a property “by tender” looks to get buyers making closed bids without the knowledge of what other buyers may be offering, hence the 'silent auction' terminology.

In essence, the agent is looking to get each buyers’ best hand on the table first off the bat.

What is it?

Buyers are often provided a tender registration form that registers their interest, or asked to submit a bid straight away. “Bids” are told to be made by a specified time and date, and are made in writing in formal offers.

At this point, the seller looks at the bids. They then may take them back to the bidders and invite them to either confirm their bid or increase their offer, and the seller is at no obligation to sell.

Bell Real Estate says that it benefits the vendor for the following reasons:

1. Significantly raises the profile of your home through a carefully targeted, intensive advertising campaign.
   
   
2. Places a time limit on buyers, encouraging them to make their highest offer.
   
   
3. Creates a similar amount of competition for the property, yet removes the perceived stress that is often associated with auctions.
   
   
4. Provides a more appealing alternative to buyers, as they don't feel they have to compete in public at an auction.

Often, prospective buyers are called before a planned public auction and told that the vendor may be willing to sell prior to the day to the best offer. This is another form of silent auction.

However, some have argued that it puts buyers on the back foot. Encouraged to put their best bid in first, it stops them from knowing what others are willing to pay – which is, of course, more obvious at a public auction where you bid until someone stops. It may also mean that a buyer who is wary about putting in their highest offer first does not do so – and then misses out if the vendor decides they are happy with a bid put in within the first round.

Unlike an auction, however, buyers can put conditions around their offer and there may be a cooling off period attached – you can, therefore, negotiate with your conditions. You will need your legal representative to write up your offer and there may be a required deposit.

Sellers are unable to accept other offers prior to the specified deadline.

realestateview explains that this sale process is actually very formal and complex – so often reserved for premium properties in the residential sector.

For instance, this Greenbank, Queensland offering is currently asking for ‘offers’ or ‘tenders’ by 5pm on 29 August.

It is a relatively infrequently used sales technique for general real estate, though is not uncommon, and even this listing comes with an explanation of the process for buyers who are not up to speed with the process.