There are three main ways to buy a house in New Zealand – offer and negotiation, tender, and auction. However if you’re making a purchase, you’ll need to:
- involve a lawyer
- get checks and reports done to check that the property is in good condition – and that you’re able to buy it!
- decide on the conditions of your offer.
Getting a lawyer
There’s a range of legal procedures to be completed when you buy a house. Your lawyer will check contracts, make sure the property’s title is in order, transfer the property to your name (conveyancing), arrange valuations and reports, and register your mortgage on the property title.
Your friends or family might be able to recommend a lawyer who specialises in property or conveyancing - or you can find one online or in the Yellow Pages.Find a property lawyer (NZ Law Society)
Your lawyer will also:
- make sure you understand your rights
- advise you on the different ways you can own the property
- advise you on what you need in your Sale and Purchase Agreement
They can also help you to make a Will and Power of Attorney, and with arrangements for your loan and insurance. Your bank may require you to have these things sorted as a condition of your mortgage - if they do, they’ll let you know.
Lawyer’s fees vary, so ask around and get an estimate. You can expect to pay up to $1500 in legal fees, plus $200-$300 in costs for things like land transfer fees.
Checks and reports
You’ll need to check out the condition of a property before you commit to buying it. If you’re buying by offer and negotiation, you can make these checks and reports conditions of your offer, and do them while you’re negotiating. If you’re buying at auction or tender, you’ll want to have some or all of them done beforehand.
Things do to before you make your offer (or go in to bid)
Talk to the bank
Preapprovals are usually conditional on the bank approving the house you want to buy – so you’ll need to check the bank is happy with your choice. You may also need to cash up savings to pay your deposit (since you’ll need to have this ready to go with your offer).
Check the title
The Certificate of Title is the legal document that records the boundaries of the land and any restrictions on its use – it’ll tell you if you’ll actually own your driveway, and if the grass verge by your house is owned by the council or a neighbour. The title will also tell you if you’re likely to have problems adding a deck or extension later.
- How do I get this? Your lawyer should do this as part of the conveyancing process. If you’re buying by auction, the agent will provide you with copies of the LIM and Certificate of Title when you register your interest.
- How much will it cost? It should be included in your conveyancing bill – but check this with your lawyer.
Talk to the council
Check with the town planning department to see what zone the house is in, and whether there’re any changes or developments planned in the area.
- How do I do this? Call your local council or check their website – many of the councils have zoning maps available online.
- How much will it cost? It’s often free – but it’ll depend on your council.
Check the LIM (Land Information Memorandum)
A LIM contains lots of information about building consents that have been issued, erosion or subsidence, roads and flooding or any contamination of the land.
Note: the LIM may be missing specific details but as your lawyer will check the title, these should be picked up.
- How do I do this? LIMs are available through your local council. You can request it yourself or your lawyer can get it for you. If you’re buying by auction, the agent will provide you with copies of the LIM and Certificate of Title when you register your interest.
- How much will it cost? $150-$300 – it’s more expensive in the bigger cities.
Check the valuation
All homes have a Ratable Valuation (RV) – homes can sell above or below it, but it’s a quick way to get a fix on whether the asking price is fair. Ratable Values are generated by a company called QV.
- How do I do this? You can find out the RV of a property from your local council (usually online) but if you want a more comprehensive report, check out QV
- How much will it cost? The council will usually provide basic information free on their website. Property reports from QV start at $9.95 – depending on how much information you want.
Get a full valuation
A full valuation, like a ratable valuation, takes into account the land and the house on it – but also looks at the type of house, improvements that have been made to it and current market conditions. It gives you a market value that people should be prepared to pay for the property – it’s often higher than the RV.
You may decide that you don’t need a full valuation – but sometimes we may require you to get one as part of the process. We’ll discuss any requirements with you.
Get a builder’s inspection
A builder’s report will check things like whether the house is structurally sound, if the wiring is in good condition and if there’s any risk of leaks. You’ll need to find a builder or a building inspection company to carry this out for you.
- How do I do this? The Department of Building and Housing has a list of registered building certifiers on its website – dbh.govt.nz.
- How much will it cost? It varies depending on the home and the amount of detail you want – but they start around $350.
Note: It’s the real estate agent’s job to make sure the people carrying out the checks and reports have access to the property to do them. It’s in their best interest to be as helpful as possible (their commission depends on selling the house) – often they’ll be able to recommend a valuer, lawyer or inspection company they trust, or you can put them in touch with the person you’ve chosen and they’ll organise it among themselves.
In a tender, no price is set. If you’re interested, you’ll submit an offer in writing. The seller picks the offer they like the most (which may not always be the highest offer). They can either accept the offer – in which case it becomes legally binding – or they can negotiate with the bidder. You won’t be able to find out what anyone 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.
Submit your offer
In a closed tender, all the offers have to be submitted by a set date and time, and the seller won’t consider any of them before then. In an open tender, there’s no time limit.
You may be able to put in an offer before the tender closing date – often tenders are advertised as 'if not sold prior'. However, just because the seller will consider your early offer doesn’t mean they have any obligation to accept it. If someone makes an offer that’s acceptable to the seller, everyone else who’s registered their interest gets a chance to make an offer too.
The seller opens all the offers
The seller doesn’t have to accept the highest offer – or any of them at all.
If your offer is accepted, it’s legally binding and you’ll have a set amount of time to meet all the conditions.
Everyone interested in the property bids for it at the same time. The highest offer wins, as long as the seller’s reserve is met. Bids are binding, so you need to have done all your homework and arranged your unconditional finance in advance.
Auctions can drive up the price of a property as people are competing against each other directly to buy the house. They can be used if a house is unusual or hard to value – maybe it has a spectacular view or an interesting feature that might draw people to compete for it.
Auctions can also be used when the seller wants to sell by a set date. They’re more common in larger cities, especially Auckland.
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 layer 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.
Congratulations! What now?
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.
This is how most homes in New Zealand are sold – especially outside the big cities.
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. The offer and negotiation process also gives you time to think.
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. Banks are also more likely to require a valuation report to confirm your finance if you buy privately.
It’s very important that you consult your lawyer before signing or committing to anything in a private sale.
If you’re buying by offer and negotiation, you have the opportunity to set conditions before the actual sale takes place. You can set as many conditions as you like, but more conditions make it more likely the deal could fall through.
If the conditions are met in the specified time, your offer goes unconditional – which means you’re legally bound to buy the house. If the conditions aren’t met – for example, if you’d listed a ‘satisfactory LIM report’ as a condition, and the LIM comes back showing problems with the property – you can withdraw your offer.
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.
Conditional on any other report
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.
You can also include conditions that require the seller to do something to the property by a certain date, like paint the house or repair something that’s broken.
These conditions don’t usually prevent the sale taking place, but they do allow you to delay settlement until they’re met – or claim damages if they’re not.
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.