The slowing property market and new auction rules have boosted the popularity of sale by set date. We explain how it works and what it means for buyers and sellers.

So you want to sell but are unsure about whether to auction or sell by private treaty? While auctions remain popular in many capital cities, a new form of property sale is offering vendors a third option: sale by set date

Part auction, part tender, sale by set date is touted as offering vendors many of the benefits of an auction (concentrated interest, competition and a finite selling period) but in a format more typical of sale by private treaty

However, the system also has its detractors, who argue it is little more than a blind tender process that could see unprepared purchasers paying more than they should.

How it works

Under the sale by set date system, the estate agent sets a price range and invites purchasers to submit a formal expression of interest stating their best price. According to the Real Estate Institute of Victoria, the selling range should be no more than 15%. When marketing the property, the agent is not allowed to quote a figure below the minimum sale price the agent has quoted to the vendor.

Having advertised the property, the agent then collects expressions of interest in sealed envelopes within a set period (usually four weeks). At the close of the sale period, the agent refers the offers to the vendor who can choose to accept the highest offer, open negotiations or re-list the property for another set period. In most cases, however, buyers get one shot: do your sums wrong and you miss out.

Who wins

Leading Melbourne Buyers' Agent, Janet Spencer, of Buyer Solutions said the sale by set date system is akin to a tender.

"It is really a selling method designed to put mental pressure on the buyer in a similar fashion to an auction," she said.

Ms Spencer said that while the system could deliver good results for vendors, the same was not always true for buyers.

"I believe it is a system that has more advantages for the vendor and fewer for the buyer. For buyers, it is a matter of slowing down, thinking carefully about the quoted price range, doing their research and making sure they have all the facts at hand."

She cautioned purchasers against relying too much on the quoted selling range.

"The quoted range should not exceed more than 15 per cent of the property’s value," she said. "The major pitfall for many buyers is that they focus on the quoting range and do not do their research. When I provide my opinion of what to pay for a property, I research a target property’s current market value as well as what the buyer may be expected to pay in order to determine the amount to offer.

"A disadvantage for buyers with the sale by set date system is that they are making decisions in the absence of visible competition. Also, they may only get one chance at making an offer, so they had better get it right. Fear of missing out often makes them put in a premium offer," Ms Spencer said.