Before you make an offer
Complete all your checks on the property
Confirm your finance
Get your lawyer involved
Know the different ways you can buy a property
Have your conditions ready if you're not buying by auction
Know what a Sale and Purchase Agreement is
Ways to purchase a home
There are three main ways to buy a house in New Zealand:
- offer and negotiation.
When a house is to be sold by tender, offers (tenders) for the property are made confidentially to the agent by a set date and time. Everyone who’s interested in the property will put in their offer by that set date.
In this type of sale, you'll have the opportunity to make a conditional offer. This means you can specify conditions you need to meet before the contract is unconditional.
The seller picks the offer they like the most (which may not always be the highest offer), reject all the tenders, or enter negotiations with one or more of the bidders. You won’t be able to find out what everyone else offered.
Register your interest with the real estate agent
They’ll give you a copy of the tender document, which will tell you how the tender should be made, and things like the settlement date.
Consider your conditions
In a tender, a high offer with a lot of conditions can sometimes be less appealing than a lower offer with fewer conditions.
Consider whether it’s worth getting some expert checks done ahead of time, so you don’t have to make your offer conditional on them.
Unconditional offers will obviously be the most appealing to the seller, but you’ll need to do all your homework first as you won’t be able to back out if you discover a problem later.
Put together your offer
The real estate agent will help you fill out the tender document. You may need to include a refundable deposit – generally this is a bank cheque or a bank transfer. You’ll pay this to the real estate agent, who’ll hold the money in a trust account until any conditions have been met.
At an auction, everyone interested in the property bids against each other until one bidder is successful. The highest offer wins, as long as the seller’s reserve is met.
If you decide to bid at an auction your offer will be unconditional. So, if you win the auction, you're legally bound to buy the house. This means you'll need to make sure you've done all your checks and due diligence, like getting a builder's report and LIM report, and have your unconditional finance sorted prior to the auction.
Before the auction
No price is set at an auction – so you need to have formed your own view of what the property is worth.
Register your interest with the agent, who’ll give you a copy of the Sale and Purchase Agreement.
Get all your inspections, valuations and reports done. You’ll need to do all your checks before the auction as you can’t put conditions on your bids – talk to your lawyer about which ones to get. Your lawyer will also need to check the terms and conditions of sale.
Arrange your finance with the bank – you’ll need to be ready to go with your deposit if you win the auction.
Decide on your top price – and commit to sticking to it no matter what. If you don’t think you can do it, organise for a friend or family member to bid for you on the day.
Can you buy before the auction?
You may be able to put in an offer before the auction – the agent will be able to tell you. If the seller is open to considering an early offer, they’re under no obligation to accept it.
Be wary if someone suggests you make a generous pre-auction offer. It could mean there’s not much other interest – and you could get the property for a good price on the day.
At the auction
The seller sets a minimum (or ‘reserve’) price before the auction starts. You won’t know what the reserve is until it’s met. The auctioneer will start the bidding, and move up in price increments they’ll specify. Raise your hand to bid. Professional auctioneers are experienced, and shouldn’t misinterpret a twitch or scratch as a bid.
Once the bidding reaches the reserve price, the property is ‘on the market’ and must be sold to the highest bidder. The auctioneer will often signal when this happens. If the bidding doesn’t meet the reserve price, the property is ‘passed in’. If this happens, the highest bidder is given the first chance to negotiate – negotiations here can include conditions as well as price. As the bidding slows, the auctioneer will reduce the increments – taking $1,000 or $500 increases. You can also set a new increment by announcing it when you bid.
If you’re the highest bidder when bidding closes and the reserve has been met, the house is sold to you. The sale is unconditional and legally binding.
Sometimes people wait to bid until later in the auction. This can make the other bidders uncertain, but don’t leave it too late – many auctions are over in as little as five minutes!
Don’t be panicked into bidding either - it’s easy to get caught up in a fast-moving auction and end up paying more than you’d intended . . . or the house is worth. The auctioneer has to give at least two “final bid” notices before the house is sold.
You've won the auction
You’ll need to have your deposit ready. The auctioneer may accept a personal cheque – or a bank transfer – find out before the auction starts.
Settlement is usually 4-6 weeks after the auction. If this doesn’t suit you, you’ll need to negotiate something different with the agent before the auction.
Offer and negotiation
The home is advertised at a set price or price range. You make an offer in writing and then negotiate with the seller until you agree on a price and conditions.
The process is good for buyers as you can put conditions on your offer that will let you check the place out fully before you’re committed to buying it. If one or more people make on offer it turns into a multi offer situation which is similar to a tender.
This is how most homes in New Zealand are sold – especially outside the big cities.
Decide on your offer
Find out as much as you can about the property before you make an offer – how much have similar properties in the area sold for? What’s the valuation? How much money might you need to spend on repairs or renovations? Decide what your first offer is – and what your highest offer will be.
Don’t put forward your best offer straight away, as negotiation is expected and the seller will usually expect you to be able to raise it.
Don’t think you can’t offer what you’re able to pay - even if a listing is “buyer enquiry over”. The agent and seller might be hoping for a certain price, but if you’re brave you could get a bargain!
You’ll also need to decide what conditions you want to put into your offer. You can make your offer conditional on your finance being arranged, or on an acceptable builder’s inspection – or anything else you wish. As with the other ways of buying, fewer conditions make an offer more appealing, so you might want to do some of the leg-work up front.
Submit your offer
The agent will put together a Sale and Purchase Agreement , setting out:
- your offer
- the settlement date (when you’ll take possession of the house)
- the date you need to have your finance arranged
- any conditions
- any chattels (carpets, curtains, etc) that are included in the purchase price.
You can also put in a date when your offer expires – so the seller can’t leave you hanging while they wait for a better offer.
Ask your lawyer to check over the agreement. If they’re happy with it, you’ll sign it and the agent will present it to the seller.
The seller can:
- Accept your offer. They’ll sign the Sale and Purchase Agreement. Once you’ve both signed it, it’s legally binding – depending on any conditions being met.
- Reject your offer. You can then submit another offer if you want to.
- Make a counter-offer. The agent will make the changes to the Sale and Purchase Agreement and present it back to you. You can then accept it or make further changes – you might want to offer a lower price, but take out some conditions to make the offer more attractive.
Negotiation goes on until you reach an agreement on the price and conditions. If you can’t reach an agreement, you can withdraw your offer.
Note: Sellers can also add conditions. It’s not as common, but sometimes they’ll add an ‘escape clause’. This means that if they get a better offer, they can give you a deadline to make your offer unconditional. If you can’t meet the deadline, they’re then free to accept the other offer. Once you’ve reached an agreement and both of you have signed the Sale and Purchase Agreement and initialed all the changes, the agreement is legally binding on both of you.
Once you’ve reached an agreement and both of you have signed the Sale and Purchase Agreement and initialed all the changes, the agreement is legally binding on both of you.
Meet your conditions
Once your offer is agreed and everyone’s signed the Sale and Purchase Agreement, you’ll need to meet any conditions before you can make your offer unconditional.
Setting these conditions protects you – if any of your checks come back unsatisfactory, you can back out of the sale. It also means that if you change your mind about the property, you don’t have to buy it. Because of this, you might want to keep the information you find out during the checks to yourself rather than sharing it with the agent. If you cite an unsatisfactory building report as a reason for not buying the property and the agent knows what was in the report, they could challenge your right to back out.
If the conditions are met in the specified time, your offer goes unconditional – which means you’re legally bound to buy the house.
Once the conditions are met, you’ll pay your deposit to the real estate agent. This can be by bank cheque, personal cheque or bank transfer - the agent will tell you which they accept. Your deposit will be held in a trust account by the agent – you’ll get it back if for any reason the conditions aren’t met and the deal doesn’t go through.
The trust accounts are protected by law – no one can take your money if the real estate company goes broke, and there’s a fidelity fund to cover any missing money.
It’s also worth noting, that if you choose to back out after the offer has gone unconditional, you usually won’t get your deposit back.
Private sales usually follow the same process as offer and negotiation – but all the negotiation is done with the seller instead of a real estate agent, and you’ll pay the deposit to your lawyer. You're more likely to require a valuation of the property report to confirm your finance.
It’s important that you consult your lawyer before signing or committing to anything in a private sale.
What is a Sale and Purchase Agreement?
A Sale and Purchase agreement is a legally binding contract between you and the seller. It outlines your offer, the settlement date, any chattels that are included with the property, and any conditions that must be met before the sale goes ahead.
You should always get your lawyer to check it before signing to ensure you've read and understand the agreement before you sign it.
If you’re buying a property by tender, offer and negotiation, or a private sale you'll have the opportunity to set conditions.
Adding a condition means the condition(s) need to be met before the offer is finalised. If the conditions are met within the specified time, your offer goes unconditional and you’re legally bound to buy the house. If the conditions aren't met then you have options on what to do next. For example, you may be able to have the vendor fix the issue, reduce the price, or you may be able to withdraw your offer.
It's important that the wording of each of condition states that the results be satisfactory to you, then only you can decide if the condition has been satisfied.
Conditions can be just about anything you specify, but the most common ones are:
Finance satisfactory to you
This gives you time to arrange your home loan with the bank. Make sure you specify that it must be ‘satisfactory to you’ – otherwise if you have a loan approved but the interest rate is higher than you can handle, the seller could force you to accept it.
Valuation satisfactory to you
This gives you time to get a registered valuer to tell you the market price of the property – if the valuation doesn’t meet your expectations, you can withdraw your offer.
Building inspection satisfactory to you
Gives you time to get a licensed building surveyor to inspect the property to check for any issues. Ask them to give you an idea of what it might cost to fix anything they find.
If the builder finds any problems, you may also want to get a report from an engineer.
Insurance satisfactory to you
If you haven’t already confirmed that you can get insurance on the property, you may want to add it as a condition.
Conditional on any other report
See the reports and checks you might need.
Subject to due diligence
This can mean almost anything – it’s usually used if you want to make additions or improvements to the house, and you need time to check with the authorities that you’ll be allowed to do the work.
Sellers can also specify conditions. Usually this is an ‘escape clause’. This means that if they get a better offer, they can give you a deadline to make your offer unconditional. If you can’t meet the deadline, they’re then free to accept the other offer.
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*The calculators should be treated as a guide only. They don't take into account all of your individual circumstances and are not financial advice.