There are three main styles of bidding that are often used in Australian real estate. These are sale by auction, private treaty and expression of interest. Each requires a different approach by the buyer (or buyers) to ensure their bid is submitted correctly for the seller to review and ideally increasing their likelihood of securing the property.
I spoke with mortgage broker Marcus Roberts from Brighter Finance to find out more about expressions of interest and how they work for buyers.
What is an expression of interest in real estate?
An expression of interest is like a silent auction or bidding approach, in which the real estate agent will set a due date from the time the property is listed. By that date, any interested parties are asked to submit their best offer, often with any conditions requested (e.g. the length of the settlement period). The real estate agent and home owner then review the offers.
This approach is often used for very prestigious or unique properties, as there may not be a large market of potential purchasers and inspections may be arranged for interested parties, rather than via an open house.
If the reserve is not met (the minimum price a seller is willing to accept from a buyer), the top bidders could be given an opportunity to continue bidding until a value is agreed on.
How is an expression of interest different to an auction or private treaty?
Unlike an auction, the expression of interest bids are not necessarily known to other parties. The only parties that will see the bids are usually the agent and the vendor. Rather than having an auction day and time when bidding is in real-time and open knowledge, the bidding parties will only know if they have won, and not necessarily find out the other offers.
Unlike a private treaty, bids made through an expression of interest are generally not accepted until the specified time and date to give all interested parties the opportunity to make their best offer. However, this is not always the case.
How can a buyer make an expression of interest?
A buyer would make their offer in writing, alongside any conditions or requirements for the offer. This may include being subject to finance or a specific settlement period. Different states may have different nuances, and it is important to understand such nuances for the state you’re purchasing in. Speak to the real estate agent responsible for the property you are interested in to find out more about the process they follow for submissions of expressions of interest.
What are some pros and cons of buying through an expression of interest?
Some buyers like to remain confidential, and by submitting an offer in this manner, the full details are not widely disclosed. The pressure of attending and bidding at an auction is removed, as buyers are able to submit their best bid, rather than negotiate through the back and forth of a bidding war.
Conversely, some bidders may not feel comfortable bidding when there is no price guide, due to the fear of overpaying. When a property market is rapidly moving, the time between placing your offer and the due date may put off some buyers who could otherwise be attending auctions or making offers elsewhere.
Key considerations when making an expression of interest
Put your best offer, alongside any required conditions, in writing before the due date. Do your due diligence and as much research as you can, given there’s not a price guide to work from, and understand you may not have the same open information you would as if you were attending an auction.
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