How to buy a house at auction or by negotiation

Canstar is here to help with some essential tips on buying a home – whether it’s at an auction, or by negotiation.

The house-buying process is somewhere on the same level as other huge life events, such as getting married or preparing to become a parent. These are momentous, life-changing occasions – but they often come with a serious side serving of nerves. Not to mention, house buying is probably going to introduce you to a whole lot of new terms that make you feel like you’ve signed up to learn a foreign language.

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Home auctions: what you need to know before attending


If ever you’ve watched The Block, or any other series involving an auction for that matter, you’d have to admit that the tension is almost palpable – even from the comfort of your living room. So it’s understandable to feel apprehensive before attending an auction yourself. But let’s back up a bit first. Before you even set foot at an auction, make sure you do your research on the property, urges the Real Estate Agents Authority. Pre-auction preparation includes commissioning a building inspection, a title search and a Land Information Memorandum (LIM report). It goes without saying that you’ll also need to suss out any mortgage and finance arrangements, and consult your lawyer in advance.

You can inspect the property, either by appointment or by attending an open home, before the auction takes place. Don’t forget to keep an eye out for signs of a leaky property or structural issues. The agent should give you a copy of the terms of sale, which includes details on the deposit that the successful bidder will have to pay. The information will also include when the balance of the payment has to be made. If you are the successful bidder on the day, you will have to pay this deposit immediately and sign the sale contract.

Before attending an auction you need to register to take part and know what to expect on the day. Auctions move quickly, so it’s a good idea to contact the agent marketing the property to give you a run through of how the auction process works.

Buying a house at auction: what you need to know

Average cost of building a house in New Zealand

Take a big deep breath; it’s come time for the big day, the day of the auction. The seller will have already settled on a reserve price, the lowest price they are willing to accept for the property. Once bidding has passed the reserve price, the property is then sold to the highest bidder. Keep in mind that the auctioneer is working on behalf of the vendor and so is working to get them the best possible price. To throw a bit of a spanner in the works, the seller is actually allowed to bid on the property; this is known as, “vendor bidding

“Vendor bidding is sometimes used by the auctioneer as a way of starting off the bidding or trying to move bidding towards the reserve price,” the authority says.

“A vendor bid can be made by the auctioneer or some other person working on behalf of the seller, such as the real estate agent.

“Bidding for the property will continue until the reserve price is reached or beaten, at which point the highest bidder will be the successful buyer.

“If the reserve price is not reached, the seller can instruct the auctioneer to stop the auction without selling the property.”

If the reserve price has not been met? All is not lost

Don’t get too disheartened if you are the highest bidder but you didn’t hit the reserve price. If you do happen to be the highest bidder, you may be able to negotiate a sale price with the seller’s agent after the auction wraps. In this case, you can discuss new terms and conditions if you wish.

Speaking of negotiation: what if the house isn’t up for auction?

New Zealand’s house price-to-income-ratio increasing

There are many ways to skin a cat, wait, we mean buy a house. If the house isn’t up for auction, then prepare yourself for the negotiation process. First things first, the house will be marketed for a certain price, but that’s more of a guide than an absolute – unlike the reserve price at an auction. The seller will settle on a price to advertise the property for, in conjunction with their agent.

If more than one person makes an offer on the property, then each would-be buyer will have to make a signed written offer – to be checked by their lawyer. The agent working on behalf of the seller will then present all the offers to the seller – who will decide if they want to accept any offers. It’s also possible the seller will instruct the agent to come back to the prospective buyers to negotiate further on conditions or price.

Before you make an offer, include any issues with the property as conditions in the sale, the Government advises. This means the agreement to buy the house won’t be satisfied until these conditions have been met.

Going unconditional and the settlement day

couple toast to their new home

Once you have been approved for a loan, and you and the vendor have agreed to the sale, your offer becomes what’s known as unconditional.

When an offer becomes unconditional, you have to:

  • Contact the bank or get your lawyer to do this on your behalf. The bank will help you organise paying the deposit and will draw up a home loan agreement to send to your lawyer.
  • Talk with your lawyer about the home loan agreement and your obligations and responsibilities.

When the purchase price is made to the vendor (minus the deposit you already paid), and the title is transferred to you, this is known as the settlement day. The bank and the lawyer will do most of the legwork for this part of the process, while you can start getting the bubbly ready!

keys to home

Here’s what the lawyer and the bank will be working on:

  • Your lawyer will check that the vendor is up to date with any utility bills and rates. The lawyer will then send a settlement statement to the bank, which shows the amount left to “settle” the sale. The bank and your lawyer will then liaise to draw down the loan and to transfer the money to the seller’s account.
  • Once the vendor confirms they have received the funds then the lawyer will arrange for you to pick up the keys, or to have them sent to you. The lawyer will then complete the registration of the property title into your name and provide you with a copy for your records.

Then it’s time for that champagne – you’re ready to move in and celebrate!

Call in reinforcements to help you through

Buying a house can really test your patience. Between the time and emotional investment – not to mention financial – the process can really take its toll. If you are able to, it will help to have a support system on side, particularly if you’re buying the property alone. And, while it is easier said than done, try not to feel too heartbroken if you don’t get your dream home first off the bat. Stick with it. After all, the next home of your dreams could be hiding just around the corner.

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