Deadline Sales & Deadline Private Treaties – Real Estate Jargon
Some of the jargon used in the sale of real estate can be confusing to house purchasers. We will be putting up a series of blogs explaining some of the terminology that is used. You will often see a sale described as “Deadline Sale” or “Deadline Private Treaty”. Vendors essentially have three basic methods by which they can sell their homes:
- By auction – an auction date with prospective purchasers bidding for the property, with the highest bidder (over the reserve price) becoming the purchaser.
- By tender – where offers are submitted in writing by prospective buyers prior to a deadline.
- By private agreement between the vendor and the purchaser.
In later blogs we will discuss some of the terminology used for auctions and tenders but this blog concentrates on a subcategory of sales by private agreement often called “Deadline Sale”. You will be familiar with the traditional sales process whereby a property is offered for sale and agents introduce prospective purchasers to the property from which offers may result. The process is open-ended and one or more offers may be received with negotiations progressing through the agent culminating in a concluded agreement. There is no fixed time and agreements can be included with a prospective purchaser either immediately or may take many months.
What is a deadline private treaty?
A deadline sale or deadline private treaty is similar to the tender process. A property is offered for sale with no fixed price. Prospective purchasers are required to submit their offers by a deadline date. Unlike the tender process, vendors usually reserve the right to accept an offer and sell prior to the deadline.
When the deadline comes around all offers are considered together by the vendor. The vendor is not committed to selling but the expectation, without commitment, is that the best offer will either be accepted or that negotiations will take place between the person or persons making the best offer or offers.
What are the advantages of Deadline sales?
So why do some vendors prefer deadline sales over tender? Deadline sales are less restrictive in that the vendor does not prescribe the terms and conditions to apply to the sale. It is not uncommon in tenders for vendors to limit the provisions contained in the standard ADLS tender document. In the deadline sale prospective purchasers are able to include whatever terms they wish on their offer for example settlement date, amount of deposit and conditions to be satisfied. Typically they use a standard ADLS Agreement for Sale and Purchase form. The tender process typically also provides for a 10% deposit to accompany tenders which can be seen by some vendors as an unnecessary obstacle to soliciting offers.
Deadline sales add an imperative to the process. They are saying put your best foot forward. You are not going to get the opportunity to go in low and hope to negotiate the vendor down. If you go in below your best price you could well be eliminated from the process at an early stage. The time deadline adds an element of urgency and encourages purchasers to minimise the conditions they require to improve the attractiveness of their offer. It can also encourage pre-deadline offers at the upper end of vendor’s expectations as the prospective purchaser tries to beat the market. In a competitive market this can work well for a vendor. After considering offers received, it is still open to the vendor to negotiate with one or more of the offering parties.
As the process is a private one, unlike an auction, unless as a sales tactic the agent discloses activity prospective purchasers need to act on assumptions as to the extent of their competition.
The correct tactic for selling your home is very much dependant on individual circumstances, market conditions and regional trends. From a vendor’s perspective deadline sales are sometimes but not always the best means of selling. When selling a property you need to take good advice from those who know best, that is your real estate agent.