Every property is different. So it’s no surprise that when it comes to selling real estate, there are plenty of ways to do it.
In Australia, there are three popular ways to sell property: auctionprivate sale or expression of interest.
Understanding the different selling methods, which each have their advantages and disadvantages, depending on the market and trends, and then deciding on the best selling method is important so that sellers obtain the best selling price for their property.
In this article, we are going to take a closer look at what is the sale by expression of interest (expression of interest) means and discuss the advantages and disadvantages it can offer.
What is an expression of interest?
In an expression of interest sale, potential buyers are invited to submit their best and last offer to purchase a property in writing, on or before a set date and time.
Typically, EOI sales campaigns last four to six weeks. During this period, potential buyers can visit or inspect the property by appointment or during a free visit and decide if they are interested and how much they are willing to pay.
If a potential buyer is genuinely interested in purchasing the property and wants to go further, they will need to submit a sales contract. This document includes the name of the buyer, their highest price, and the terms of the offer (i.e. financing, settlement date, and inclusions).
After the end of the EOI campaign, all bids submitted will then be reviewed by the supplier to determine the winning bidder.
If an acceptable offer is not found by the seller, for example when the reserve price (the minimum price a seller is willing to accept from a buyer) is not reached, the property may be put on the market in the form of over-the-counter or over-the-counter sales. The EOI campaign can be deployed again.
In some cases, the highest bidders may have the option of continuing to bid until a price is deemed acceptable by both parties.
How is an expression of interest different from an auction or a private treaty?
When considering how an expression of interest is conducted, this method of sale can be viewed as a method that combines the characteristics of private sale with some elements of an auction.
The main similarity with these selling methods is that buyers can bid or bid for the property to increase their chances of getting it.
But unlike an auction, EOI bids are not disclosed to other buyers, only to the seller and his agent. This is why it is sometimes referred to as a silent auction.
Another difference is that although the auction has a bidding day and the auction schedule is real-time and open, bidders in an EOI sale will only be notified if they have won and will not necessarily find out the other offers.
Meanwhile, unlike a private treaty, offers made through an expression of interest are generally not accepted before the set deadline to give all interested parties an opportunity to make their best offer. But note that this is not always the case, as the circumstances of a sale can be very different from each other.
What types of goods are best suited to this mode of sale?
This method of sale is often used for very prestigious or unique properties.
For example, if a high-profile celebrity is looking to move away from public view into a new home, they may choose to buy through this method because it offers the privacy they seek.
A major downside to this is that there may not be a large market of potential buyers. This usually means that EOI inspections are also usually held for interested parties rather than via an open day.
But lately it has been gaining traction among Australian sellers due to initial market uncertainty caused by the global pandemic. Additionally, government restrictions on physical auctions and other social distancing measures mean that a sale by expression of interest can be an effective alternative to an auction.
What are the benefits of selling through expression of interest?
Some of the benefits of this sale include:
- Easily determine market value. Sellers can see the true market value of a property, as buyers are expected to do their due diligence so they can put their best foot forward or miss the chance to secure the property if their offer pales in comparison to the other offers.
- Offers flexibility. A sale by EOI offers greater flexibility compared to other methods such as auctions, as buyers can bid based on their own circumstances and not due to external factors and conditions.
- Sellers are not obligated to take the highest bid. As a seller, you don’t have to say yes to the highest bid; you have greater powers of mediation than during the auction. You can consider non-price terms such as settlement date and buyer’s finances.
- Good offers. Properties sold by EOI can often get a strong offer, even when there is only one interested party, which is sometimes difficult to obtain at auction.
- Competitive offers. If you have an interested buyer looking to get ahead of other potential buyers, you may receive a significantly higher bid than the others – something that usually doesn’t happen in auctions when a second bidder is usually bound to up the ante. price.
- Goods can be relisted. If you don’t get an acceptable offer, sellers are allowed to sell the property by another method and start over.
- Offers privacy to buyers. This method of sale can give some buyers the confidentiality they want when buying a property, especially a potential one. This can be an important consideration for buyers in the high-end real estate market.
What are the disadvantages of selling through an EOI?
Some of the disadvantages of selling by expression of interest include:
- Sellers may not get the best price. In some cases, a sale by expression of interest may be less effective than an auction in driving up the sale price because potential buyers are unaware of other offers.
- More time on the market. The EOI sale process can take longer than a private sale. It may take longer if you don’t get an acceptable offer early and eventually choose to sell over-the-counter.
- Lack of information can discourage buyers. Some buyers may be put off by the lack of a formal sale price, especially if few comparable properties have been sold. Because of this, selling by EOI is often less effective when there are many similar stocks in the local market.
Should you sell your property by expression of interest?
Whether or not you sell your property by expression of interest will depend on several factors, such as its potential market value and whether there is currently a similar property available on the market. It also depends on your own financial goals and expectations.
Before selling your property, it is advisable to discuss potential selling strategies with your realtor or seller’s agent to decide which approach will yield the best results.
If you want to know more about other selling methods, you can read our article Auction against mutual agreement: how to sell your property?
Are you preparing for an upcoming auction? To help you strategize, check out our related articles: Go to an auction? Here are some tips for winning and 8 steps to winning at auction.
Disclaimer: The information provided is for guidance and informational purposes only and is not a substitute for independent investment or financing advice, which we strongly recommend.
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