Auction, Tender or Private Treaty best for development site sale ?

R

rabbit

Guest
Just wondering if anyone has thoughts on the best way of selling a smallish development site in a large town. There are pros and cons of auction, tender and private treaty I suppose. I am just wondering if estate agents try to steer their clients towards private treaty because it may be easiest for them and / or more likely to result in a sale. If an auction or tender fails to get attractive bid(s) the vendor may sometimes tell the auctioneer he/she no longer wishes to sell with that auctuoneer, so the auctioneer loses their comission ? Or am I being over cynical ?
In other words, which is best for the vendor, not necessarily for the auctioneer ?
 

Private treaty in current market, auction is currently a high risk strategy, big win or large loss in perception if do not sell. things are starting to get nervous out there particulary outside the big cities
 
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Tender is usually only used where the vendors criteria for selling is not just about money, but where they want some control over the development. Auction only works where there are at least two and preferably more very interested parties.
 
Is tender not useful when each prospective purchaser can calculate what the property is worth to them e.g. tendering for a business asset/property and can tender a purchase price which they think exceeds other bidders bids and still allows them to profit from the property.
 
Hi there,
I am also interested in the opinions given here and would like to know how will the costs vary between these methods and what commissions etc would one expect to pay for each (Co. Monaghan)?
 
Why would you go for tender?
Well you can fix a set date for bids, you have a fixed term. It's confidential so it can hype the market up a bit more as you don't know who you're bidding against in a private tender situation. For a period of 6 weeks normally you have extreme hype and then once the tender is finished, hopefully you have a purchaser who will close within a set period.
For a tender, you need a good solicitor who will prepare contracts - which most likely will be requested in advance by prospective purchasers. This means you can set a closing date if you want to get rid of the property within a set time.
What makes it different to an auction?
It's a confidential and closed bidding scenario. For the vendor, it means that they can pick and choose the best bid, which might not necessarily be the top one. Factors which would influence the decision would include ability to finance and suitability for the site.
Why would you go for a private treaty sale for a development site?
To test the market in the case of a development site. Normally an estate agent would offer it to the market by private treaty & then bring it to "best bids" scenario which is treated almost the same as private tender mentioned above. Tenders can intimidate some purchasers and this allows for an all inclusive marketing campaign to net the most interest and then bring the most interested parties to bid against one another in a private situation.
Fees?
No idea whatsoever - but if you do agree fees, agree an incentivised fee. That way the Estate Agent will work for you, and themselves much harder!

NB
I'm not an estate agent, this is just my interpretation!
 
mo3art said:
if you do agree fees, agree an incentivised fee. That way the Estate Agent will work for you, and themselves much harder!
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Thanks for that. Just one question. Auctioneers / estate agents usually work for a percentage commission eg 1 % or whatever. Therefore they already have an incentivised fee, albeit some people think perhaps some auctioneers would prefer to close a sale, get the commission and move on to the next punter than try to get the extra few bob for the property ( and risk losing the sale / his commission altogether ).
I thought of offering the auctioneer slightly less % commission ( eg in the above example 0.75% ) up to target price for the property, but extra % commission ( eg 1.5% ) if it goes well above target etc. Anyone try this ?
 

The voice of reason - spot on and well analysed
 
rabbit said:
I thought of offering the auctioneer slightly less % commission ( eg in the above example 0.75% ) up to target price for the property, but extra % commission ( eg 1.5% ) if it goes well above target etc. Anyone try this ?
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This can really depend on the market value of the property. If the property is worth under the 1 million mark, I would set the bottom level of the fees at a min of 1%, and then increase in .1% increments per extra 100K acheived.

For property over €5 million I would set the bottom level at .75% and then increase the increments per quarter million at a rate of 0.1%.

For property worth well over that, you can set the bottom level at as little 0.5%.

This gives them an added personal incentive to work harder for you - it does work.
 
Thanks for that. Are you in the property / auctuoneering business if you do not mind me asking ...ie did you find it worked as a seller ?

The property is in the 1.5 million to 2 million category and the auctioneer has already quoted 1 %. plus vat , plus the advertising / marketing / brochures expenses.
 
I would say at the 1% mark that you are getting a good rate. Just to note that a good rate does not always equate to good value from an auctioneer in the case of a development site. You should also research the profile of the auctioneer in the area, recent deals, contacts etc. It makes all the difference.
In answer to your question, I'm not directly involved in property or estate agency. Just somebody with an interest!
 
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