Demystifying methods of sale

Scroll through any property website when searching for your dream home and you’ll spot a variety of sales methods. If you’re looking to buy, it’s smart to learn as much as you can about the most common methods of sale so you know what to do when the time comes to make an offer. Here’s what you need to know.

The most common methods of selling residential property in New Zealand are ‘by negotiation’ or ‘by advertised price’ and ‘deadline sale’. These all require you to sign a standard Sale and Purchase Agreement, which sets out the price and conditions. Properties can also be sold by auction or by tender.

Sale by negotiation or by advertised price

If you’re interested in a home that’s for sale by negotiation or by advertised price, it’s a good idea to prepare some questions for the real estate agent listing the property. If there is no price indicated, start by asking what the seller’s price expectations are and what other comparable homes have sold for recently. Ask how long the property has been on the market for and if the sellers have rejected any other offers.

Once you have decided on the price you are willing to pay and any conditions, the real estate agent will prepare a Sale and Purchase Agreement that sets out your offer. Seek advice from your lawyer before signing this legally binding contract.

The agent will also advise you if you’re competing with any other buyers. If so, this turns this method into a multi-offer process.

Top tips:

• Take the time to do your research – find out as much about the property as you can and ask your lawyer to help you understand any relevant documents. 
• Don’t tell the agent what your price limit is. Remember that although they are obliged to be open and honest with you, they work for the seller. 
•  The price is not always the only bargaining tool. Your settlement date, any conditions, and the size of your deposit can all influence the seller’s decision. 
• If you are unclear about anything during the negotiation process, talk to your lawyer. 

Deadline sales

If a property is being sold by deadline sale, the seller sets a date and buyers can make an offer at any time before that date. The seller may indicate the price and buyers can offer more or less than that price and negotiate the sale.

Top tips:

• Take the time to do your research – find out as much about the property as you can and ask your lawyer to help you understand any relevant documents. 
• You must submit your offer by the deadline set by the seller. They can choose to accept an offer before the deadline.
• If you are interested in the property, tell the agent (ideally in writing) that you want to be informed if another offer is going to be submitted prior to the deadline date.
• Make sure your offer is as attractive as you can make it.

Buying a property by tender

When a property is for sale by tender, buyers give confidential written offers to the agent before a specified end date. If the property is advertised as ‘for sale by tender (unless sold prior)’, you can make an offer at any time before the tender deadline. The seller can accept an offer at any time. They don’t have to wait for the end date.

Top tips:

• Take the time to do your research – find out as much about the property as you can and ask your lawyer to help you understand any relevant documents. 
• Register your interest with the agent if you intend to make an offer so they can let you know if another offer is received before the end date.
• Your offer must be in writing on a tender document, which is a type of sale and purchase agreement. You can request the tender document from the agent or ask your lawyer or conveyancer to draw this up for you.
• The offer you make is based on what you feel the property is worth to you. You have no way of knowing where other buyers are at on price because your offer is presented in a sealed envelope.
• Think carefully about the price at which you would be willing to walk away. Once the tender has closed and the offers are on the table you may not get another chance.

What about multi-offers?

A multi-offer process happens when more than one buyer makes an offer on a property. A multi-offer process can also be used if a property has failed to sell at auction or in a tender or deadline sale process if a buyer has made an early offer. In these cases, an agent may initiate a multi-offer process where all interested parties are invited to submit their best offer. If you have registered an interest in a property that’s being sold by negotiation, deadline sale or advertised price, an agent may contact you to say that it is now a multi-offer situation. 

Top tips: 

• There must be other legitimate offers in writing for it to be a multi-offer situation.
• Some real estate agencies will ask you to sign a form stating that you understand you have competition and may have no further chance to negotiate with the seller. 
• Your best chance of securing a property in this scenario is to make your terms and conditions (if any) the absolute best they can be. You will only get one chance.

Buying a property at auction 

At an auction, the property is sold to the buyer with the highest bid after the seller’s reserve price is reached. Auctions are unconditional – you can’t change your mind if you win - so you need to learn as much as you can about the property before auction day and have all your finances approved.  Auctions take place in the real estate company’s auction rooms or can be held on-site at the property. 

Top tips:

• Take the time to do your research – find out as much about the property as you can and ask your lawyer to help you understand any relevant documents. 
• You must register your interest in the property in writing to the agent. Make sure you ask the agent to tell you if the auction date is brought forward.
• The agent will give you the auction contract, a guide on how the auction process works and supporting information about the property. Make sure you consult your lawyer or conveyancer and send all the information through to them for consideration. 
• Make the effort to go to other auctions held by the same company marketing the home you are keen on so you get a feel for how they are run.
• If you are not happy with the terms and conditions set out in the sale and purchase agreement included with the auction documents, talk to your lawyer and the real estate agent marketing the property. The lawyer can help draw up a variation to the contract that will be presented to the seller for consideration before the auction.

 

Where to go for more information

Buying a home may be the biggest financial decision you’ll make, so it’s important to educate yourself on the risks and learn how to avoid any problems. Visit settled.govt.nz for more in-depth, independent and guidance information about buying and selling property.