Purchasing a property should be an exciting time, whether it’s your first home or an
investment property. However, before you are able to take ownership of your new property
you must navigate the buying and selling process. There are several methods of buying
property in New Zealand including auction, tender, private sale or buying at the advertised
price. A good understanding of each of these will help prospective buyers decide which
method suits their buying strategy.
According to TradeMe, purchasing at a public auction or through a private tender offer are
generally the two most common methods a property will be bought and sold in New
Zealand. Each method has a unique set of procedures and steps that need to be properly
understood and followed before you can take ownership of your new property.
Buying by tender
A tender offer is a fully confidential offer that is presented to the owner or real estate agent
of the property you intend to buy. This formal offer needs to be presented in writing by
completing a tender document by the deadline. It’s a requirement that the tender
document must adhere to New Zealand Real Estate contract law.
Once you have submitted the tender offer, the real estate agent will hold on to it until the
owners are able to decide upon which of the offers is most acceptable. The highest offer is
not always the winning bid. It’s important to understand, that once the offer is submitted
it’s a legally binding contract that cannot be reneged on by either party.
Before you submit and commit to a tender offer, it’s important that you understand what is
required from you as the potential buyer and what you will need to provide. It’s critical that
you get your lawyer or trusted adviser to help you with the process of filling out and
submitting the offer. With the offer, you will need to include any conditions that you may
require be fulfilled before purchasing the property (i.e. building inspection). However,
submitting an offer that has conditions may decrease the attractiveness of your offer to the
vendor. It’s also a requirement that you have the deposit available upon acceptance of your
offer, this is generally 20% of the selling price. It is highly recommended that you get a pre-
approval before you submit your offer, so you have a better understanding of
what you can afford.
Buying at auction
Auctions are a public form of bidding and negotiating on a property against other potential
buyers. It can be a good way to determine the true market value of a house or even a
suburb but as we have seen in recent years, it can also drive the market value up
significantly if the potential buyer is willing to pay. After all, a house is only worth what
someone is willing to pay for it.
Buying a property at auction can be an intense and stressful way to purchase your new
home but if you are aware of the procedures it can greatly improve your chances of being
successful. Having prior or expert knowledge of the bidding process is critical to ensuring
you will get the most out of the process.
The process will begin with the auctioneer providing a brief description about the property
and its key selling points. Following this, the auctioneer will then start the bidding process
by nominating a starting price and then open it up to the floor for further bids. This process
will continue until one of two things happen: firstly, the reserve price is met; this is the
minimum amount the owners will sell the property for. Secondly, there are no more bids
and the property will be sold to the highest bidder.
Once the auction has come to a close, the highest bidder becomes the rightful owner of the
property. They will generally be required to sign the contract and pay the deposit on site or
at a negotiated time. As the purchase is legally binding at the final tap of the hammer, it is
essential that you have the full deposit and a pre-approval in place.
Buying a house by tender offer or at auction are two vastly different methods of purchasing
a home, both with their individual pro’s and con’s. It is extremely important that you
understand your own position before committing to either of these purchasing processes. If
you need advice or any help throughout the process it is always a good idea to discuss your
options with your mortgage adviser or lawyer. We have helped hundreds of first-time
buyers purchase their first home through the tender and auction process so are more than
qualified to answer any questions. Just give us a call and we’ll be happy to help.
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