To auction or tender?

There are a few things to consider when in the process of selling property by auction or tender.

Farmer Freddy was enjoying his wine before dinner when Sam, his neighbour, popped in for a quick chat.

"Freddy, I want to sell one of my farms. I do not know whether to auction it or to put it out to tender. I'm keen to sell it as quickly as possible," explained Sam.

"Well", saysFreddy, "I think we need Pebbles' advice here".

As Pebbles walks into the kitchen after work, Freddy calls out to her to come and join them for a chardonnay.

"So, Pebbles, how long does it take to arrange an auction or complete a tender process?" asks Sam.

"Auctions and tenders, are both ways for a buyer to make you an offer. Both involve about a four-week timeframe, during which you advertise the date of the auction or the tender closing date - and have the particulars and conditions of sale by auction or tender available for buyers who want to make an offer.

"With an auction, you will know on the day of the auction which offer - if any - is successful, but with a tender process you may have a week or more to decide which tender to accept.

"Then there is usually three or four weeks until the buyer pays you," explains Pebbles.

"Which method should I use?" asks Sam.

"Well", if it were me, I would speak to a real estate agent and get some advice on the most appropriate method of sale, taking into account the property, the market, and the time of the year and other variables," explains Pebbles.

"Is there anything else I need to do to prepare to sell my farm?" asks Sam.

Pebbles explains there are a few things that need to be considered when preparing particulars and conditions of sale by auction or tender. These include:

  • Whether the GST provisions meet your GST circumstances.
  • Whether values should be allocated to the house and the area surrounding the house, plant and equipment, and trees.
  • Given that contracts made by auction or tender frequently exclude seller's warranties and any rights for the purchaser to cancel, you may wish to obtain a LIM Report so the agent can provide copies to prospective purchasers in advance of the auction or tender closing date.
  • Risk and insurance issues, particularly in relation to natural disasters such as earthquakes and flooding.
  • Sellers may wish to provide copies of the title documentation prior to the auction and tender closing date so the purchaser can carry out their investigations on the title.

"Once you decide whether you want to sell by auction or tender, then I suggest that you meet with both your accountant and lawyer so that they can check you are covered from an accounting and legal point of view," says Pebbles.

"Well, there is certainly a lot to think about and a fair bit of information to get together before I can go any further," says Sam.

"Thanks Pebbles, you have been a great help."


The content of this document is necessarily general and readers should seek specific advice on particular matters and not rely solely on this document.
If you would like more information on any of the topics in this document, please contact your usual Auld Brewer Mazengarb & McEwen adviser.
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