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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1460 – TENDER vs EOI (Expression of Interest)
The mysterious world of high-end property selling tactics revealed! Ever wondered what those "Expression of Interest" or "Tender" labels really mean when you're browsing multi-million dollar listings? We're pulling back the curtain on these powerful but misunderstood sales methods that dominate the premium property market.
Most homeowners never encounter these specialized approaches, but when property values climb above $3-4 million—particularly for development sites, commercial, and industrial properties—these strategic methods can generate extraordinary results. The difference between EOI and Tender isn't just technical jargon; it represents fundamentally different approaches to extracting maximum value from high-stakes property transactions.
Through revealing case studies, we share how one property owner nearly accepted a direct offer of $10.3 million before our team implemented a structured 10-day tender process that ultimately achieved $12 million—an additional $1.7 million in the seller's pocket. We explore the psychological dynamics that make these methods so effective and why your neighbor is probably the worst potential buyer for your development site, despite what conventional wisdom suggests.
For property owners considering selling premium assets, this episode delivers concrete strategies to maximize your result. And for curious property enthusiasts, you'll gain insider knowledge about how the biggest real estate deals actually happen behind closed doors. Hit subscribe to ensure you never miss our insights into Australia's complex property landscape!
ladies and gentlemen, now we're going to talk the bigger end of town. We're going to talk about eoi. We're going to talk about tender. When you see this advertised by real estate agents on properties, what does it mean? Stay tuned, I'm the ringleader, so let's go. Michael Bergio.
Speaker 2:Welcome to Morning Minutes Myself, Michael Bergio, Mark Novak. Episode 1460 Tender versus expressions of interest. What does it mean and what type of properties typically use this? Because I find there are certain properties this is great for and then it's quite often just thrown out there by agents who just don't want to put a price on it and don't know what else to say in the box. So I think it's very important to go through when it should be used, what is it and some key tips, Because I know over the years, Mark, we've done many expression of interest and tenders and there's definitely things we do differently after the 10th, 100th time than we did in the first time and we go that's golden. We need to always use that, always have that condition, have that dialogue. But I think maybe, first of all, maybe let's go through the definitions. What's the difference between an expression of interest or a tender? A lot of people think they're the same things, but there are some big key differences.
Speaker 1:Yep, auction is auction, private treaty is when it's an advertised price. But then you've got this EOI tender process and it's rare. You don't see it out there much with. You don't see it out there at with um. You don't see it out there at all um, I guess for most people. But then when you sort of start getting over sort of three or four million with um, commercial industrial properties and development sites, then you start seeing it appear um, it's very rare that you'll have an auction on a development site where you get all the developers turning up in the one room. They'll do tender.
Speaker 2:Yeah, or expression of interest. So just to run through for anyone watching, an expression of interest is the method of sale, typically when, instead of just submitting a price like you would in a private treaty, you're basically filling out a form and each sale is different. But there's basically questions within that form prices included, how long your settlement is. Is it four weeks? Is it 20 weeks? A lot of time. They're asking where your finance is coming from. This is very important in a development sale to know if you have finance approval, if it's your own money, because sometimes an owner will choose a buyer who is either an all cash buyer or they've got, say, funding from Commonwealth Bank compared to a lower tier funder or overseas, and typically the big difference.
Speaker 1:You don't ask that at auction.
Speaker 2:No, you don't ask that. There's a big difference between the expression of interest and the tender. With the tender you're basically obligated to have the check with your documents, have the signed contract. So it's very similar to an auction where if you're the final highest bidder, you buy the property. The money's there. Expression of interest is a little bit different because there's a lot of times where an owner doesn't want to do auction because they're looking for other terms within the sale. They may be wanting a long settlement. So even if there's two buyers at the same price or one buyer higher, they may pick the lower buyer for the terms within that offer. So an expression of interest is the best method to be able to identify other terms within the offer and then the owner can choose.
Speaker 1:So I remember we had one out towards Worrywood where we had 19 tenders submitted on the property and it was the most in 10 days. So the owners came to us and said oh, we've got an offer of 10.365. Do you think you can get more? We've been dealing with this person for over a year. We're happy to take that. What do you reckon? Here's the person that wants to buy. Can you just deal with them? Happy to pay a commission? We turned around and said look. I turned around and said give us 10 days, let us go crazy with our marketing. 10 days later, 19 tenders.
Speaker 1:We sat at the conference table in the office with grandma they are there and the grandchildren and we laid all of these tenders out on the table, 19 of them. And the thing that the tender allowed is it allowed us to get into the undies of every buyer to understand the guts, the stomach, the head, the shoulders, the whole whole structure of that purchaser. Where you don't get that in the auction, you sort of get this part. You know the top, you know what, you see the person With tender. You've got everything else below as well as that. You know asking. You're entitled to ask the questions. The buyers don't have to give the perspective, tenderers don't have to give the answers, but how they wish to fund it super important. I think you feel refreshed when you see a big bank on there, as opposed to private lending. When you're selling it to someone, you know they're going to fund it easier.
Speaker 1:I think question I love on the tender form is who they, who they are going to use to resell the stock. Now, if you think about the psychology there, you want to make sure the agent's not preferencing the offer maker or the tender maker because they're going to get the listing. So sometimes I see agents shape the deal towards a specific purchaser because they're gonna get to sell all the ten units or the hundred units in the block. And I want to know that when I'm selling, when I'm selling it to someone and I'm the vendor, the seller, I want to know is that agent going to be selling that stock?
Speaker 1:I just want to know another thing that I love that that's in, that's in our tenders that we put together is a deadline and a non-commitment that we will say when will you be available If you are the successful and highest tenderer, when will you execute that contract and pay that check? And we're going to hold you to a deadline as well. So we will hold you to that as well. So when we will hold you to that and if you don't execute on that desired date, we will queue up a second buyer, because there's so much energy in that tender that you don't want to lose that energy yeah, and that's very important and it's often missed and I know we didn't have it in our first ones, which we've learned from, and it's never, no one, it's not a google, it's never written.
Speaker 2:I've never seen anyone else mention this. Until you get to a scenario where you put so much energy in those 10 days to get as many buyers to that listing as you can and people may, and that 10 year, that 10 days, is like the amalgamation of all your 10 or 30 years in the industry of calling because you've got prep time. So people may think, well, it's only 10 days, but you've got prep time for a few days that you're calling thousands of people to introduce them, that this is going live. Now you run the campaign, you get the highest offer maker, so the other 18, a lot of their momentum is gone because they know they haven't been the highest and the big issue, the person who's got the highest, like your normal rule of thumb is to exchange within the five days. But five days goes past, ten days go past and it's sort of like when can you start talking to the second underbidder to exchange without losing credibility and your integrity as the agent and the vendor with the sale? Because it's a very small community, that development world, and if word gets around that you're running an EOI tender campaign and you don't really follow the campaign, then they're not going to submit tenders, they're not going to bother and it doesn't work. So it's very important to uphold the integrity of the method. So once 10 days goes past from when the end of the campaign was, if you still haven't exchanged, the second highest bidder may have bought something else, the third may have bought something else. So it's very important to have that. If you have not exchanged for example, if you have not exchanged within five days, we will pursue the second highest offer maker to exchange immediately. So one from the owner's point of view, you really want that pressure put on the buyer that they could basically lose it without warning, without notice, even though they've had plenty of warning because in the document and they're the ones who have been screwing around. So it's not like they're blindsided and obviously you try and make a call. But the point of it is to have that deadline in there that gives you the authority to exchange with another um purchaser and still uphold the integrity of the sale method moving forward, because we're working for the owner and it's not in the owner's best interest if we just spend a month. I've seen agents spend months after an EOI trying to exchange with that person.
Speaker 2:And a real savvy. What a real savvy? Savvy is probably a polite word to say. Developer can and will, and some do. They drag it on as long as they can until they know all the other underbidders are gone and then they'll reduce their offer. And what are you going to do? They'll? Are you gonna do? They'll thrash it. You can't run the EOI again because you go back to those under bidders and you can't say, oh, we got, we got slow rolls. They go. They don't believe it because they think, well, if you're an agent representing this type of asset, you shouldn't be getting slow rolled. So something's wrong with the site. We're not interested. So it's very important to know this going into an EOI or a tender process.
Speaker 1:And how many times we've had that happen, michael, where what we've done is we've had, when we've said, okay, right, you wanted five days, you've got five days to exchange. We've gone back to the number two tenderer, the second highest tenderer, and we've said, look, if it's not exchanged in five days, we're going to ask you for a signed contract and check how many times they've actually prepared that signed contract and check out of conviction that second buyer and sometimes even put a little bit more money on top as a surprise. The first buyer has had the right amount of time that they asked for in their tender and they didn't perform on executing a signed contract. The second one comes in, it's sold, we have it happen.
Speaker 1:An experienced agent will run a hard tender process like that Very rare, but you've got to be experienced to run that sort of stuff. And another thing is also an experienced agent will run sometimes around two or around three in the tender process. So once we you know, for instance, that one I was talking about with 19, we will sit with the owner and say, here's our top five or here's our top three, and the owner goes, yes, we agree with that. The seller goes, yes, we agree with that. And then they say but I really like these terms or I really like this price. And then we'll say okay, we'll invite these three people into round two and we'll see if we can mold them into your terms, conditions and prices yeah, and that just, and then the vendors got the best, um so much confident that they've got the best price because they've gone back multiple times.
Speaker 2:It's just not. It's not just like a one offer and set and forget. It's as you said. These are because with the tender, you get option, option offers. So it's a lot of the time you rule them out and then you get some that want a two-year settlement. Rule them out and then you, as you said, you're left with your best five and you can really massage that to. And that's the great thing about the eo tender your owner can tell you what they really want as well.
Speaker 2:Yes, best price, but a lot of time it's settlement. Sometimes it's they want a property back in the development. Sometimes they want a buyer who's done a development locally because they're going to live across the road and they want to watch a beautiful building being built and they do care about who buys it. So it just allows extra questions being asked and to make sure, because, as much as people think the development game is just like raining money, it's a tough business. It's a tough business for the developers, it's tough for the owners selling developments because they get told so much crap misled and it's just very tough all around Heartbroken.
Speaker 2:Yeah, very heartbroken the amount of times where I've come across where because a lot of people put developers all in a bucket, like if there's a development company and they're paying some fresh 18 year old to knock doors to find out people who own homes, who doesn't know what a unit is to, to a duplex, to a townhome, that homeowner, if that, oh, maybe you could do five stories here where it clearly says in the planning you only can do two. I've seen those owners live with that for decades. I can do five stories here. A developer told me. But it's like that's not a developer. Within a company that do developments sometimes there are only one developer who is the developer, the rest are workers who don't?
Speaker 2:have that experience. But foot soldiers, the foot soldiers, and it's um, it's, yeah. It's a lot of heartbreak for owners that they take that by face value and they just live with it and it can be.
Speaker 1:I've seen people who thought they were sitting on a gold mine for retirement realize they're not sitting on anything and it's not it's sad, but these properties that like to give an idea the value that tender can add, with that example I gave at the beginning, where the owner was happy to trade it at ten, three, six, five gave us the buyer. The actual buyer made a tender, was one of the nine ten tender, as was probably of the 910 tenderers, was probably in the bottom five in terms of their offer. We ended up selling at $12 million. So we got $1.7 million more than the owner inspected within two weeks, 10 days, and I know I think there was value there. Yes, you do pay your agent, you know 2%, but I think the value is absolutely. Yes, you do pay your agent, you know you know 2%, but I think the value is absolutely enormous that we could run that process.
Speaker 1:And something I've got to stress also, with tender is the person going to get to the finish line? Yeah, so when you're, when you're selling to someone, I've seen these development signs fall over because they want maybe a long settlement or they want um. You know they're not funding it um, or you know through um, the big four banks, you know they don't really have the money, um, and the owner goes great cheering. I sold it on an option uh, on a two years and the buy-in never fulfills and the property falls back in their lap two years later. So that whole tender process allows you and a good agent allows you to compress all of those terms, conditions and make sure that it's actually the most ideal sale for the seller. It's almost like auctioning on the fly. Imagine going into an auction showroom, auction room and then actually stopping the auction and sitting down with the vendor and the buyer and then starting the auction again and sitting down with another buyer and the same vendor. It's quite unique. It's an on-the-fly auction in a way.
Speaker 2:Tender, I love it, I love it and just almost closing off because nearly every development.
Speaker 1:We have talked a lot. We did get a bit excited today.
Speaker 2:I love the topic, I love developments, I love it all and especially when there's just a method that no real other agents are implementing and if they are definitely not. Like this, with the stages and knowing those questions at the end just like a rule. Like I've been doing what real estate 15 years it feels like I'm getting old, yeah, but the amount of time someone's got a development site and they always say I've got this developer, I've got this neighbor I have never had in my long 15 years. I've never had that person buy the property. We've always gotten more money when going to the open market and it gave me a head spin for many years. But I sort of came to the conclusion that your neighbour's almost the worst buyer for the block because they bought their block so long ago at such a lower price when, when they start talking about the new market value, they always can't comprehend paying for that when they know what they paid for theirs.
Speaker 2:I see all the time in commercial leasing the psychology of it, where I remember selling a building where the tenants were paying $50 a square metre in rent. Cheap had been increased in 20 years. The market was $300 per square metre. The new owner said we'll just do it to $200. And none of them would agree. And they all hit the roof. They all moved out saying that's crazy pricing and it's because they had a price in their mind that's so much lower. They just can't come to it. And that's like that worry runs. A perfect example I remember the auction I did in west street brookvale. We have three neighbors and they were all out very early. So it's um, yeah, it's very important to sort of do that expression of interest, do that tender and put it to the marketplace.
Speaker 1:It's always better to sell retail than wholesale when you're the seller.
Speaker 2:Can't sell a secret.
Speaker 1:No Good on you, michael Berger. Guys hope we helped you out today with the difference of tender EOI and what they are in the marketplace. Love ya, see ya.