The buying process

There are three main ways to buy a home:

  1. By bidding at auction
  2. By offer and negotiation
  3. By submitting an offer by written tender (by tender) or similarly, by set date of sale
Auctions

Buying by auction

At an auction, everyone interested in the property bids against each other until only one bidder is left. If you buy at auction it’s unconditional (legally binding), so you need to arrange your finance and do all the checks beforehand.

How does the auction work?

  • the auctioneer runs the auction and tells you what amounts they will accept.
  • the seller usually sets a reserve price and tells the auctioneer what it is. If the final bid is over the reserve price, the home is sold and the buyer pays a deposit, usually 10%, to the auctioneer. Settlement (the day you get ownership) is usually set for 20 days later, but can often be negotiated
  • if the reserve isn’t reached, the home is ‘passed in’, meaning it didn’t sell at auction. Often it sells by negotiation straight after the auction. If you're the highest bidder you have the first chance to negotiate and can add conditions to the contract at this stage if you need to.

Before you buy at auction

  • go and watch a couple of auctions to get a feel for how they work
  • register your interest with the agent
  • get a copy of the auction contract
  • do your due diligence with your lawyer (property titles), the council (LIM) and get other reports done (valuation, building inspection etc)
  • arrange your finance with your lender and have your money ready to pay a deposit.
  • decide on your top price

We may be able to help with your deposit

If the money you need to give the agent or auctioneer as your deposit is tied up – perhaps as equity in your current home or in an investment you can’t break yet – talk with us. We may be able to help by lending you the money you need for a short time, or by guaranteeing your deposit.

Making an offer

Making an offer

When you make an offer through your real estate agent, the seller may accept your offer straight away or there may be a negotiation process until both you and the seller are happy with the price and the conditions.

What’s good about this way to buy?

The big plus about buying by offer is that you can take time to think – and you can put in conditions that let you check the place out before you’re fully committed.

Common conditions added to an offer

  • Finance – this gives you time to arrange your loan. Make sure it says “finance on terms satisfactory to you” or you could be forced to borrow on terms you don’t like
  • Title search – so your lawyer can check there are no problems with the title, or restrictions, covenants or easements you need to know about
  • Valuation report – so you can check the market price. Your lender may also require a valuation report as part of the loan agreement
  • LIM report – so you can check what the council knows about the property and make sure there are no problems with things like consents or flooding
  • Building inspection report – so you can check the building is sound and find out about any problems that might cost money
  • Engineer’s report – so you can check any structural or land issues
  • Sale of another home – if you need to sell one home to buy another.

About your sale and purchase agreement

The sale and purchase agreement sets out in writing all the agreed terms and conditions of the purchase. It can vary, but most transactions will use a standard legal contract created by the Real Estate Institute and the Auckland District Law Society. It will include the agreed price, list of chattels, type of title, list of conditions the buyer and seller want fulfilled, date the agreement will become unconditional, settlement date and deposit the buyer must pay. It also covers other things like responsibilities under various laws and what happens if settlement is late – and lets you set out obligations you want the seller to abide by (for example access to the property).

You’ll need to have it checked by your lawyer before you sign it – and each time any of the conditions change during negotiation. The agreement becomes binding once both you and the seller have signed it and initialled all the changes. You can stop negotiating at any time up until then.

Your lender will also need to see the sale and purchase agreement after the deal is done, but talk to them beforehand to check if they have any specific clauses they want added.

Tender or set date of sale

Buying by tender or set date of sale

With a tender or set date of sale method, you make a written bid for the property. It needs to be your best offer, as usually everyone who’s interested in the property puts in their offers at the same time – and you're unlikely to get a chance to negotiate.

The seller may accept the highest offer – or decide to negotiate with the person whose offer they like best. Or they could reject all the offers.

How do you go about it?

  • register your interest with the agent
  • get a copy of the tender or set date of sale document – it tells you how offers must be made, and gives details like the settlement date
  • discuss the tender or set date of sale document with your lawyer and prepare a written offer
  • get a valuation and other reports, like a LIM, first so you know the market value
  • if your offer is accepted you're committed to buying the property, and have a set amount of time to meet all the sale conditions