Making an offer

When you’re buying a house, a little preparation can save you a lot of money. Before you make an offer make sure you do as much research as possible about both the local market and the property itself. That will help ensure what you’re prepared to pay is not too high (or too low). It will also help you decide if you should include any conditions.

Research the market

Location is a big factor in the value of a home, so before you buy a house in a particular area get a feel for what’s happening in the local market. Find out what similar homes in the area have sold for recently, and how long they have taken to sell. Your real estate agent should be able to help, or you can buy a local sales report from Quotable Value.

When you have your home loan conditionally pre-approved with us, you also receive two free eValuer reports. An eValuer report provides you with an instant automated estimate of a property’s market value, plus recent comparable property sales in the area.

Research the property

Find out as much as you can about the property. Things to think about include:

• what condition is the property in
• are there any obvious issues that could affect the price, or potentially deter you from buying the house
• is the home likely to need repairs or renovation in the near future?

Once you’ve found a property you’re serious about, you may also want to get your own reports on the property, including:

• a Land Information Memorandum (LIM) from the local council, which contains all the information the council knows about the property including any special features you should be aware of such as flooding, sinking or possible contamination
• a valuation report, which provides an opinion from a registered valuer on the current market value of the property
• a building inspection report which provides an opinion on the condition of the property and any issues.

There are three main ways to buy a house in New Zealand:

• Offer and negotiation
• Tenders
• Auctions

Offer and negotiation

A property for sale by offer and negotiation will sometimes be advertised with a price or invitation for offers over a certain amount, however may not include any price indication at all.

The vendor may accept your offer, or they may want to negotiate on the price or conditions. The real estate agent will act as the go-between, trying to help you and the vendor reach agreement.

Tender

Buying a house by tender means everyone interested in the property submits a written offer (tender), usually at the same time. Once the vendor has received all the tenders, they decide whether or not to accept any offer. If they don’t, they may choose to negotiate with one of the bidders.  A vendor will indicate when their property is for sale by tender.

Auction

An auction is where you bid against other people until only one bidder is left. The vendor sets a reserve price that only they, the auctioneer and the real estate agent know. Once bidding reaches the reserve price, the vendor must sell the property to the highest bidder. If the reserve price isn't met, the property is "passed in" and the vendor may choose to negotiate with the highest bidder. When you make a bid at auction your offer is unconditional, so if you win the auction you’re legally bound to buy the house. That means you need to do all your research (such as getting a builders’ report) before the auction. You also need to be sure you have the finance available – so it’s a good idea to get your home loan pre-approved before you bid at an auction.

When you’re buying a house by offer and negotiation or by tender, you can make a conditional offer. This means you can add specific conditions to your offer which must be met. Conditions can be anything you like - a common one is ‘subject to a satisfactory valuation report’). If the conditions aren’t met you can withdraw your offer. If the conditions are met, however, your offer becomes unconditional – which means you’re legally obliged to buy the house.

It’s a good idea to have your lawyer review any sale and purchase agreement or tender document first – they can advise you on suitable conditions you may want to include.

Adding conditions to your offer gives you the reassurance of knowing you can withdraw your offer if you discover an issue with the property at a later stage – for example, in a building report. On the other hand, the fewer conditions you have the more attractive your offer will be the more chance it has of being accepted as there may be more chance of the deal going through.