Once you have made a decision to sell your property, be it land, a farm or just a house or cottage, one of the first things you need to decide is the method of sale that best suits your situation and your property. The most common, and the one most of us are familiar with, is a sale by private treaty. This is the usual way residential property is advertised for sale with an asking price. Offers are made, negotiated and, if accepted subject to contract, the sale then proceeds, instructing solicitors to an exchange of contracts and completion. This method of sale is common as in many cases a mortgage is needed and a purchaser needs to rely on the sale of their own property. This method is able to accommodate any chain of sales, and the delays necessary to arrange a mortgage and surveys.
However there are other methods of selling that should be considered, especially in the agricultural sector. Auction is probably the most extreme, and is most commonly used when there is a development element where the purchase price is only a relatively small fraction of the cost of the overall project, or where it is vital to achieve a sale quickly. However the vendor would have to accept that by auctioning a property they would miss out on any interest from buyers where lending or a mortgage is needed.
The next method to consider would be a sale by formal tender. This is seen less often for solely residential property, but is more common with sales of bare land or farms where there are known to be neighbours with a special interest. The tender process, especially if there is a single special interest, encourages the very best offer from that party as there is no opportunity for negotiation and they do not know, as they would in the auction room, what others are bidding. Effectively they have to “bid blind” by putting a “sealed offer” in by a deadline. In an auction room a purchaser only needs to make one bid higher than anyone else. However in a formal tender a special purchaser might not want to risk losing out on the opportunity to buy by bidding low. We have seen “sealed offers” from special interest purchasers coming in at 40% higher than the next highest offer, which would not have been able to be achieved in an auction room. The tender method is also probably less stressful for the vendor, more private and can allow days for the vendor to consider the offers and any conditions attached. A formal tender also has the same advantage as an auction in that the “sealed offers” made will include the deposit payment, and a binding contract is entered into as and when the vendor writes to accepts it.
Informal tender follows the same process as formal tender, with the property advertised for between six to eight weeks with a deadline for “sealed offers”, which are all retained by the agent and only opened for the vendor’s inspection after the deadline. However to avoid excluding those that need to borrow money or raise a mortgage, the informal tender process can accommodate this interest by giving extra time to exchange, or offering a delayed completion. Once an offer is accepted the successful bidder is often given a “window of opportunity” within which to exchange contracts, during which time the vendor agrees not to sell to anyone else while the solicitors deal with queries and any finances can be put in place. However this can of course delay exchange, and it has become popular to try and avoid the delays and legal issues that arise with informal tenders following an offer being accepted due to it still being subject to contract. Auctions and formal tenders avoid this uncertainty and therefore vendors now often use an informal tender process, but have a legal pack prepared in advance by their solicitor (as they would for an auction or formal tender). This ensures that legal queries are sorted out well in advance of the tender date, and makes it possible to have an exchange of contracts almost immediately following the offer being accepted. This gives minimal “wriggle room” for the successful bidder to delay an exchange, and it soon flushes out a buyer who cannot proceed, which allows one to move on quickly to sell to another bidder in a better position to proceed. The legal pack also gives the confidence to bidders that the vendor is serious about selling and that they know exactly what they are bidding for and reassurance there are no hidden legal problems.
An example of bare land being sold by informal tender with a legal pack is 52 acres of grassland and woodland copse on the village edge of Tipton St John in the Otter Valley in East Devon. This is being offered by Townsend Chartered Surveyors with a guide of £300,000 with a tender deadline of the 18th December 2015.
