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Property Sale Types

By Will Parfitt
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Q: I’ve seen properties for sale by private treaty, formal tender and informal tender, auction – what’s the difference?

 

A: All of these methods are offered by estate agents. Most properties are sold by Private Treaty, whereby a property is advertised at an asking price on the open market and when an offer is made, a sale price can be negotiated and agreed. At this point, the property becomes Sold Subject to Contract while the legal searches are carried out and contracts drawn up. When everything is in order and the sale/purchase can proceed, the contracts are signed and exchanged, the deposit paid and a completion date set. This process works to an unspecified timeframe and either party can withdraw from their sale or purchase up to the point of exchange of contracts – this is the contentious part of the current home buying/selling process in England & Wales. The transaction is legally binding at the point of exchange of contracts, and then the settlement of outstanding funds and handover of keys mark the transfer of ownership and completion.

 

Sale by Informal Tender is less common and is used if there are – or there are expected to be – several interested buyers. The property is advertised as normal on the open market. Prospective buyers are asked to submit a sealed bid (or ‘tender’), usually within a specific timeframe and then the vendor and their agent selects either the highest bid or the one from the most suitable buyer, whichever is the more important factor under the vendor’s circumstances. The property then becomes Sold Subject to Contract and the transaction proceeds in the same way as a Private Treaty sale/purchase.

Sale by auction, a popular choice for sellers with no chain and looking to complete by a specific date and do not want the risk of the sale not proceeding once agreed. Auction works by preparing a legal pack which provides prospective buyers with all of the legal and title information they need to buy the property, this can be viewed pre auction. After a period of marketing the auction commences as an open auction so potential bidders can see each others bids, once the property clears its reserve price it will be selling. Once the "hammer falls" the winning bidder (the highest) will immediately exchange contracts, hand over 10% deposit and will have 28 days to complete the transaction. 

 

The more unusual method is sale by Formal Tender, which combines the processes of both informal tender and auction. The legal pack is prepared before marketing and the property is marketed openly for a set amount of time, during which, bids are invited. Unlike Informal Tender, interested parties sign a contract and provide deposit details when placing their bid (or ‘tender’), and unlike Public Auction, all bids are confidential. The highest or most suitable tender is selected and upon acceptance the deposit is paid and contracts are immediately exchanged, legally binding both the buyer and seller to the transaction. With the legal work, deposit and contracts already in place, completion is set for a date usually within 28 days.

 

Your estate agent will be able to advise which is the most appropriate method for your property and your circumstances. If you’d like to discuss anything property-related, give us a call!

About the Author...

Having been in estate agency for over 20 years specialising in sales, lettings, mortgage services, new homes, land and auctions there is no situation that we can not deal with. Outside of work I lo...
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