Methods To Buy Property In New Zealand
When you want to buy property in New Zealand it is normally by one of the following three methods.
Advertised or Negotiated Price –
The seller typically after a discussion and appraisal by a local real estate agent and/or a property market evaluation will determine a price to advertise the property at. After the seller decides on the price they want to advertise the property a marketing plan is made. This includes how much to spend and where to advertise the property.
More than one offer – If more than one offer to buy property is made by prospective buyers, each one will be asked to make a signed written offer. They should consult with their lawyer before submitting their offer.
The seller will then consider any offers and can either accept one or instruct their agent to negotiate further on price and/or conditions.
Different Negotiated Price Approaches –
Buyer Inquiry Over (BEO), or Buyer Budget Over (BBO) –
Both are similar where a price is stated as the minimum, as a guide to potential buyers. This prices indicates what the lowest price the buyer wants to accept, although buyers can make an offer below this price to see how negotiable the seller is. Where a number of potential buyers want to buy the property it may go higher than the BEO or BBO with negotiation.
No Price Listed –
There may be a reluctance to list a price where there is doubt as to the market value. So the agent tries to get offers and then negotiates.
Auctions are a common way to sell houses particularly in areas where there is high demand in a rising market which can make it hard to gauge the market value. Or where the vendor wants a quick unconditional sale. There’s usually no mention of anticipated price.
Marketing period – The vendor will typically get feedback from the potential buyers who inspect the property to indicate where they will set the reserve (The minimum amount they will immediately accept). Most vendors don’t mention what their reserve is. And often set it on the day of the auction. The date and time is of the auction is pre-set before the advertising campaign starts.
“Unless sold prior” – Some times there is a proviso included in advertising with the wording “unless sold prior”. Exactly what the specific rules around making an offer prior to auction varies with different real estate companies. So if you see the term “unless sold prior” and you are very keen to secure the property you would have to discuss exactly what their rules are on making a pre-auction offer. It’s a good idea to register your interest with the agent in case someone else makes a pre-auction offer, the agent will then usually notify interested parties so they have an opportunity to make an offer. There is a risk if you make a pre-auction offer then it may be treated as the reserve offer and other interested parties may have an opportunity to submit their offer, so it may become a sort of pre-auction auction bidding up the price. There is a chance that the seller may accept the offer. But if it’s close the auction date there’s little advantage to the seller of an early sale.
Auction day – You have to register with the agency before making a bid. Ask the agent to explain anything you’re unsure about.
You do not have to be present at the auction location to buy property, you can arrange to make a bid by phone or have someone bid on your behalf.
Vendor bids – Some times during the auction, the auctioneer or someone operating on behalf of the seller may make a bid on behalf of the seller. This is termed vendor bidding.
Vendor bidding to buy property is only permitted if all three of the following conditions are met:
1. The property has a reserve price.
2. The reserve price has not been reached.
3. The auctioneer has to make it clear that it’s a vendor bid by saying something like “This is a vendor bid”. Jargon such as “The bid is with me”, is not acceptable and would there fore breach the Real Estate Agent Authorities Rules.
Auction sales and purchases are unconditional –
A buyer cannot attach conditions to an auction purchase. Once a bid is accepted and the auctioneers hammer has fallen the sale will be unconditional and has to go through.
Before bidding –
You need to do all your research about the property. This should include a:
Building inspection – This is best done by a qualified building inspector, who will provide you with a building report.
Property title search – Is a search of the property title records held by Land Information New Zealand. It includes the legal owner of the property, legal description, and the rights and restrictions associated with the property. These may include: Mortgage easement or any covenants. Your lawyer can do this for you or you can do it for yourself at http://www.linz.govt.nz/land/land-records/order-title
Also if the property is listed by a real estate agent, they should have a copy of the property title. If the real estate agent notices any restrictions that may affect the buyer they must pass on this information to the potential buyer. So it’s best to ask he real estate agent if there’s any restriction on the property you’re interested in buying.
Land Information Memorandum (LIM) – This is a comprehensive report provided by the local council that contains relevant information about the property. They charge a fee that can normally be found on the local council website.
Buying or selling by tender is where prospective buyers submit a confidential written offer for a property to the agent who in turn shows the seller all the offers that have been submitted for consideration. There is no minimum (reserve) price stated that the seller is willing to accept. There may be a guide, but prospective buyers can offer less for consideration.
The marketing material must include if the property can be sold before the tender. Then prospective buyers can register their interest with the agent and request to be informed if someone else makes an offer before the tender close date. Then they will usually have the option to make an offer as well.
Submitting a tender to buy property –
If you want to submit a tender ask the agent for a copy of the tender documents. Read the whole document carefully. If you have any queries contact the agent to clarify them. You will need to fill in a sale and purchase agreement and submit it before the tender closing date. There will be a deadline date and address for tenders to be submitted to. Typically the agents office. It’s a legally binding contract so get your lawyer to read it and consult with them before signing and submitting it.
The tender sale and purchase agreement includes:
- Your offer.
- Settlement dates.
- A deposit cheque which is usually five to ten percent of the offer price. If your tender is unsuccessful your cheque will be returned to you.
- Any conditions you are attaching with your offer.
After the tender close date –
The agent gives all the tenders to the seller who considers all the offers and conditions and makes a decision on which offer they accept or reject. The seller can reject all offers if they want to.
If a tender is rejected the tenderer (prospective buyer) is under no legal obligation and can pursue other opportunities.
If the seller wants to they can negotiate through the agent with any tenderer to see if they can reach a mutually acceptable sale and purchase agreement.
Accepted tender –
If the seller accepts an offer to buy property, they have a contract with the buyer and work through any conditions towards a settlement.
Go Back to the start of Buying A House Guide
House Buying Guide page order:
1. Pros And Cons Of Owning Versus Renting.
8. Understanding Purchase Methods. This Page.