This guide is intended to help those interested in buying a house to understand what’s involved in different real estate methods of sale.
When you are looking at buying a house there are different sales methods that a real estate agent can use on behalf of the vendor. Real estate methods of sale can vary between real estate companies and agents, and the property may be listed for sale at an advertised price, by an auction, or by tender.
Buying a house at an advertised price
When marketing a property at an advertised price, the vendor may have obtained a valuation from a registered valuer to support their asking price, or they may have discussed the marketing of their property with a real estate agent.
Whether the vendor is relying on a registered valuer or a real estate agent, the property will have been appraised and the vendor will have been provided with statistics of recent sales in their area. A vendor does not have to accept a valuation and may choose to market their property at where they believe their property sits on the current market.
As a purchaser you will be able to negotiate the price with the vendor directly if you are purchasing the property privately. Or if you are using a real estate agent, then you will negotiate the price with the vendor via the real estate agent.
Buying a house at auction
With a property auction, the vendor will have a price in mind that they will accept for the sale of their property. The lowest price is referred to as the reserve price. The reserve price in a property auction is confidential to the vendor.
If you are buying a house at an auction, you cannot attach any conditions to the agreement. At the fall of the hammer the agreement is unconditional and the deposit must be paid. That means prior to the auction day you will need to have completed all your due diligence including:
- Have your solicitor check the terms and conditions of the auction;
- Obtaining an unconditional loan offer from a lending institution of your choice
- Approving the LIM report obtained from the local Council;
- Arrange for a Builder’s Report and any specialist reports;
- Your solicitor will complete a search of the Certificate of Title of the property together with any interests registered on the title from records held at Land Information New Zealand.
On the day of the auction you will need to register with the agent to take part in the bidding process. An auction is fast moving and can be very stressful. There may be any number of houses being auctioned on the day. The auctioneer will read out the terms and conditions of the auction and then open the floor to any bids.
For more detailed information about property actions, see our Guide to Buying a House at Auction.
Buying a house by tender
When buying a house by tender, the purchaser submits a confidential written offer for the vendor to consider. There is no reserve price set by the vendor. The price is the lowest price the vendor is willing to accept.
The vendor’s agent will have a copy of the tender documents. They will contain the vendor’s terms and conditions of sale. Your offer will need to be submitted before the close of the tender process. The time, date and where the documents are to be submitted will be included in the tender documents. You will need to have your solicitor check the documents before you submit your tender as this is a legally binding contract.
When you submit your offer you will include:
- An agreement for sale and purchase which will contain the settlement date and
any conditions of your offer; and
- A deposit cheque (usually 10% of the purchase price). If your tender is not
successful the deposit cheque will be returned to you.
The vendor will be given all tenders for them to consider. The vendor is not obliged to accept any offer and can negotiate with any unsuccessful tenderer.
Buying a house is usually one of the biggest financial decisions you will ever make. An agreement should not be entered into without being fully informed of the process. Legal advice is always recommended.
Christine Harding is a Legal Executive at Henderson Reeves lawyers. Her specialist areas are commercial, subdivisions, trusts and complex property transactions including farms. You can contact her on 09 430 4343.