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How are properties sold?
Congratulations! You’ve found a house you want to buy. But how you go about trying to buy it depends on how it is being sold. There are three main ways used to sell a property in New Zealand:
1. Private treaty
Private treaties, or private sales allow prospective buyers to make offers on the property while it is listed for sale on the market. This option gives buyers and sellers the flexibility to negotiate price and purchase conditions. The owner’s real estate agent acts as a negotiator between the two parties.
There is no deadline with a private treaty sale. There is typically a “cooling off” period after an offer has been accepted, during which the buyer should conduct due diligence before proceeding settlement. This can include property inspections, reviewing legal documents and obtaining financing.
Property sales by auction are common in New Zealand. Potential buyers register their interest before the auction day and then publicly gather to bid on the property. When the auctioneer’s hammer falls, the highest bidder is committed to sign a contract on the day.
Most sellers will have set a reserve price, which is the lowest price they’re willing to accept for the property. If no bids are made at or over the reserve price, the property may be passed in. Interested buyers may have an opportunity to negotiate a sale with the owner if this happens.
Properties sold by auction have no cooling-off period unlike private treaty sales, and you can’t negotiate the conditions of sale.
3. Tender and expressions of interest
A tender, or expression of interest, is like a silent auction or bidding approach, in which the real estate agent will set a due date from the time the property is listed. By that date, any interested parties are asked to submit their best offer, often with any conditions requested (e.g. the length of the settlement period). The real estate agent and home owner then review the offers.
This article will deal with making an offer on a property, which is usually the way a sale by private treaty negotiation begins.
How do you make an offer on a house?
You make an offer on a property via the real estate agent (or directly to the owner if it’s a private sale). There are three ways that are typically used to make an offer on a property:
You tell the agent what you would be willing to pay for the property, including, if you wish, details about the deposit, settlement date, conditions, etc.
Where you submit an offer in writing, either an email or document prepared by yourself, or via filling out a template offered by the real estate agent. If you wish, you could provide details about the deposit, settlement date, conditions, etc.
Contract of sale
You can also fill out and sign a formal contract of sale, which must include certain details such as your offer, deposit and when it would be paid, settlement date and conditions. It will be legally binding when the vendor also signs it (although there could be a cooling off period, during which you may be able to change your mind) and you pay the deposit. It could be a wise idea to consult a suitably qualified lawyer.
What do I need to include in my offer?
What you include in your offer depends on the type of offer you make (as listed above). However, in general, you’ll need to know:
- The price you want to offer
- How much of a deposit you’d like to offer and when to pay it
- Settlement date and time
- Additional conditions (e.g. building and pest inspection, or other checks/work) to be done before you’ll consider the contract unconditional
- The contact details of your conveyancing lawyer
- Details of your mortgage lender
If you are making a verbal or written offer, you only need to disclose the information that you feel is appropriate. However, if you are signing a contract of sale, there is specific information that you are required to provide, such as the details or your home loan lender (if you have one).
What to consider when making an offer
1. Think about consulting a lawyer
Before you make an offer, you may wish to first consult with a conveyancing lawyer who can outline your rights and obligations. A conveyancing lawyer specialises in the legal aspects of buying and selling a property, and may also help you negotiate a deal that works for you.
The New Zealand Real Estate Authority recommends finding a conveyancing lawyer before you sign anything. An offer placed on a property can become a legally binding contract if it’s accepted, so engaging a lawyer early in the process can help mitigate any miscommunication surrounding the agreement.
For example, your lawyer may suggest including a clause that highlights that you’ll not proceed with the sale should the property fail a building inspection, or if any problems show up on its LIM report.
→ Related article: What Is a LIM report and Do I Need One?
They could also seek to ensure any fixtures or furnishings you expect to remain with the house are included in the contract, such as the dishwasher and light fittings.
How to find a conveyancing lawyer
Also ask family and friends, real estate agents or mortgage brokers to see who they recommend.
Once you have some names, draw up a list of questions and contact each one to see who you feel most comfortable with.
2. Decision time: how much should you offer?
Here are five key steps to work out how much you should offer:
Learn about the market
Look at recent sales of comparable properties in the area – with the same number of bedrooms, bathrooms and parking spaces. It’s also a good idea to look at the recent sale trends in property in the area – are prices going up, down, or are they stable?
Learn about the property
For example, how long it has been on the market.
Learn about the vendor
Ask the real estate agent why the current owners are selling
Know what you can afford
Set an upper limit (and stick to it!) and be prepared to negotiate
Know your competition
Ask if there are any other interested buyers who have put in offers. If so, you can ask how much but they might not disclose this.
If you decide to offer less than the asking price, discuss your reasons with the real estate agent. If prices in the area are going down, offer proof of the most recent sales.
3. Work out your conditions of sale
When you make an offer on a home, you can usually choose whether it is conditional or unconditional.
Generally, this will depend on your circumstances and the property you are purchasing, as well as whether you make your offer privately or at auction. Unconditional offers can be a more desirable option for vendors as they can result in a quicker, more seamless sale, but conditional sales can give the buyer more flexibility and security.
A conditional sale is exactly as the name suggests – a sale with conditions attached.
These could include the buyer’s finance being subject to approval, or building and pest inspections still to be conducted.
Including these sorts of clauses within a conditional contract of sale can provide more security to the buyer, particularly if certain checks have not yet been carried out or if certain maintenance needs to be completed before settlement.
There could also be less risk involved for the buyer should they wish to withdraw their offer, as a clause can be written to provide seven, 14 or 21 days to finalise their decision about the purchase.
Some potential cons of a conditional sale for the buyer include the fact that it may not be as appealing to a vendor should another similar but unconditional offer be made at the same time, which would likely be a faster transaction. Particular conditions or demands deemed more costly or challenging by the vendor could also lead them to accept a different offer.
An unconditional sale means that the buyer is willing to accept the property in its current state.
In this scenario, ideally the buyer should have already secured approval for a home loan, as they may need to have a deposit ready for immediate finalisation of the sale.
It’s generally a good idea to consult with a conveyancing lawyer and a registered builder or building inspector before opting for an unconditional sale, as there may be unforeseen issues with the property that could cause you problems down the track.
Keep in mind that an unconditional sale provides less flexibility to the buyer, who is unable to back out of the contract.
This could mean, for example, that if the buyer’s home loan application is not approved after their unconditional offer has been accepted, they may forfeit their deposit if they can’t secure the required finance.
What happens after you make an offer?
What happens next depends on what the vendor thinks of your offer.
If they like what you are offering, they may accept it without negotiation. If you haven’t done so, you’ll be required to fill out a formal contract of sale and pay the deposit. Once all parties have signed the contracted, it becomes legally binding.
Next, there are certain things that need to happen before settlement can occur, such as obtaining home loan approval and conveyancing checks.
If the vendor decides that they like your offer, but want to negotiate, you may hear back from the real estate agent with feedback or a counter-offer.
They may want more money, or less conditions, or both. It’s up to you to then decide if you agree with their changes, want to negotiate further, or pull out of the process.
The vendors may decide that they do not want to negotiate with you, in which case they will have rejected your offer. You could then choose to pull out of the process, or change your offer and ask for it to be reconsidered.
About the reviewer of this page
This report was reviewed by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.