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How to sell property through ‘expressions of interest’
By Zarah Mae Torrazo
01 April 2022
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1 minute read
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What does it mean to sell a property through an expression of interest (EOI)? Here’s what you need to know.
Every property is different. So it’s no surprise that when it comes to selling real estate, there are many ways to do it.
In Australia, there are three popular ways to sell real estate: auction, private treaty sale, or expression of interest.
Understanding the different selling methods, which each have their own pros and cons, depending on the market and trends, then deciding on the best method of sale is important in order for vendors to secure the best sale price for their property.
In this article, we will take a closer look at what selling through an expression of interest (EOI) means and discuss the advantages and disadvantages it can offer.
What is an expression of interest?
In a sale by expression of interest, potential buyers are invited to put in their best and final offer in writing to purchase a property, on/or before a fixed date and time.
Typically, EOI sale campaigns run for four to six weeks. During this period, potential buyers can view or inspect the property by appointment or at an open home and decide whether they’re interested and how much they’re willing to pay.
If a potential buyer is genuinely interested in buying the property and wants to progress further, they will be required to submit a contract of sale. This document includes the name of the buyer, their highest price, and the conditions of the offer (i.e. finance, settlement date and inclusions).
After the EOI campaign ends, any offers that have been submitted will then be reviewed by the vendor for consideration to determine the winning bidder.
If an acceptable offer is not found by the vendor, such as when the reserve price (the minimum price a seller is willing to accept from a buyer) is not met, the property can be placed on the market as a private treaty sale or an EOI campaign may be rolled out again.
In some cases, the top bidders could be given a chance to continue bidding until a price is deemed acceptable by both parties.
How is an expression of interest different from an auction or private treaty?
When looking at how an EOI is conducted, this selling method can be viewed as one that combines the features of selling by private treaty with some elements of a sale by auction.
The main similarity to these selling methods is that buyers can put in an offer or bid for the property to increase their likelihood of securing it.
But unlike in an auction, EOI bids are not disclosed to other buyers, only to the seller and their agent. This is why it is sometimes called a “silent auction”.
Another difference is that while auctions have an auction day and the schedule for bidding is in real-time and open knowledge, bidding parties in an EOI sale will only be informed if they have won and not necessarily find out the other offers.
Meanwhile, unlike a private treaty, bids made through an EOI are generally not accepted until the set deadline to give all interested parties the opportunity to make their best offer. But take note that this is not always the case, as the circumstances of a sale can greatly differ from one another.
What types of properties are best suited to this selling method?
This selling method is often used for very prestigious or unique properties.
For example, if a high-list celebrity is looking to settle down away from the public view in a new home, they may choose to buy through this method as it offers the confidentiality they seek.
One major downside to this is that there may not be a large market of potential purchasers. This usually means EOI inspections are also usually arranged for interested parties rather than via an open house.
But in recent times, it has been gaining traction among Australian sellers due to the initial market uncertainty caused by the global pandemic. Additionally, the government restrictions on physical auctions and other social-distancing measures mean a sale by expressions of interest can provide an effective alternative to an auction.
What are the pros of selling through EOI?
Some of the advantages of this selling include:
- Easily determine market value. Sellers can see the true market value of a property because buyers are expected to do their own 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 other bids.
- Offers flexibility. A sale by EOI provides greater flexibility compared to other methods such as auctions, as buyers can put in an offer based on their own circumstances and not due to outside factors and conditions.
- Sellers are not obliged to take the highest bid. As a seller, you are not necessarily required to say yes to the highest offer; you have greater mediacy powers compared to when selling through an auction. You can factor in non-price terms such as settlement date and the buyer’s finance into consideration.
- Good offers. Properties sold by EOI can often get a solid offer, even where there is only one interested party – something that is sometimes hard to achieve during auctions.
- Competitive bids. If you have an interested buyer who is looking to get ahead of other potential purchasers, you may receive an offer that is significantly higher than others – something that doesn’t usually happen in auctions when a second bidder is usually required to push up prices.
- Properties can be put up for sale again. If you don’t get an offer that’s acceptable, sellers are allowed to sell the property by another method and get another go at it.
- Offers confidentiality for buyers. This selling method can give some buyers the confidentiality they want when purchasing a property, particularly a potential. This can be an important consideration for buyers in the premium property market.
What are the disadvantages of selling through an EOI?
Some of the disadvantages of selling by expressions of interest include:
- Sellers may not get the best price. In some instances, a sale by expressions of interest can be less effective than an auction at driving up the sales price as prospective buyers are unaware of other offers.
- Longer time on the market. The EOI sales process can take longer than a sale by private treaty. This can be longer if you don’t get an acceptable bid early and eventually choose to sell by private treaty.
- Lack of information may discourage buyers. Some buyers can be put off by the lack of a formal sale price, especially if little comparable property has been sold. Because of this, sale by EOI is often less effective when there’s a lot of similar stock on the local market.
Should you sell your property by expressions of interest?
Whether or not you should sell your property by expressions of interest will depend on several factors, such as its potential market value and whether there is similar property available on the market right now. It also depends on your own financial goals and expectations.
Before selling your property, it’s advised to discuss potential sale strategies with your real estate agent or seller’s agent to decide which approach will deliver the best results.
If you like to know more about other selling methods, you can read our article Auction v private treaty: How should you sell your property?
Preparing for an upcoming auction? To help you strategise, check out our related articles: Going to an auction? Here are tips on how to win and 8 steps to win at auction.
Disclaimer: The information provided is for guidance and informational purposes only and does not replace independent investment or financial advice, which we strongly recommend.
Smart Property Investment provides Australian property investors with must-have insight, strategies and real-life experiences to help guide successful buying and selling decisions in the Australian property market.
Tune in to our podcasts covering a variety of topics related to the real estate market. You can also follow Smart Property Investment on social media: Facebook, Twitter and LinkedIn.
RELATED TERMS
Real estate
Real estate is a type of real property that refers to any land and its permanent improvement or structures that come with it, whether natural or man-made.
Real estate
Real estate is a type of real property that refers to any land and its permanent improvement or structures that come with it, whether natural or man-made.
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