🏠 First Home Buyer Series : Part Nine

Understanding sale methods

As you’re looking at property listings, you will notice a few different real estate terms being used.

Most homes in New Zealand are sold by:

  • asking price
  • deadline sale
  • negotiation
  • auction
  • or by tender

You may often end up in a multi-offer situation. But what do these all mean for the buyer?

 

  • Asking Price – The seller sets an asking price or price range and buyers can choose to offer more or less than that price and negotiate the sale. There is no end date for offers. Buyers can still attach conditions to their offer. For example, an expiry date for the offer, making the offer subject to a property inspection report, a valuation or approved finance, or on condition of selling another property. Sellers can attach terms and conditions to the sale. For example, the settlement date and which chattels will be included.
  • Auction – Auctions bids are open so you know what everyone else is bidding. If you haven’t been to one before, it’s a good idea to attend so you can see how they work. A property auction is a fast-paced, public sale. The property is sold to the buyer with the highest bid after the seller’s reserve price is reached. The reserve price will not be revealed. Potential buyers should register their interest with the agent and ask to be informed if another buyer makes an offer before the auction date. If you win an auction, you are committed to purchase the property and you must pay the deposit on the auction day. Auctions are unconditional, so you need to learn as much as you can about the property before you go to auction, which may incur costs.
  • Deadline Sale – A deadline sale is where a property is marketed for a set period of time with an advertised end date. A deadline sale may be advertised using the terms ‘deadline treaty’ or ‘deadline sale’. The seller sets a date and buyers can make an offer at any time before that date. Buyers can attach conditions to their offer such as an offer expiry date, making the offer subject to a property inspection report, a valuation or approved finance or selling another property. Sellers can also attach terms and conditions to the sale, for example, the settlement date and which chattels will be included. 
  • Multi-Offer – A multi-offer situation happens when more than one buyer makes a written offer on a property. The multi-offer process is intended to provide all interested buyers with a fair opportunity to submit their best offer for a property they wish to purchase. An agent can’t say you are in a multi-offer process if there are no other offers in writing. In a multi-offer situation, the seller can choose the offer they want to proceed with from a number of offers. If you are in a multi-offer process, you need to put your best foot forward because you may not have another opportunity to revise your offer. Some real estate agencies may hold on to the first offer they receive while they check for other interested parties, effectively resulting in a multi-offer process.
  • Negotiation – A seller may choose to sell by negotiation when it’s difficult to estimate the market price of a property. In this method, potential purchasers make offers based on what they think the property is worth in the current market. There is no end date for offers. Buyers can attach conditions to their offer. For example, an expiry date for the offer, making the offer subject to a property inspection report, a valuation or approved finance, or on condition of selling another property. Sellers can attach terms and conditions to the sale. For example, the settlement date and which chattels will be included.
  • Tender – Similar to a deadline sale, buyers give confidential written offers to the agent before a specified end date. The property can be sold before the tender end date if the seller decides to accept offers earlier. The seller may indicate a price and buyers can offer more or less than that price and see if the seller is open to negotiation, or the listing may have no asking price and potential purchasers make offers based on what they think the property is worth in the current market. Buyers can attach conditions to their offer. For example, an expiry date for the offer, making the offer subject to a property inspection report, a valuation or approved finance, or on condition of selling another property. Sellers can attach terms and conditions to the sale. For example, the settlement date and which chattels will be included. The agent collects all the offers and presents them to the seller. The seller has up to 5 working days to decide which offer, if any, they will accept.

So it’s not surprising many buyers get flustered with the purchase process. That’s why it is important to have a team of experts on your side to guide you through.

Stay tuned next week for our final post in our First Home Buyer series… Moving Day!