Different methods of buying and selling property
There are several methods of buying and selling property in New Zealand. It is important that you understand the particular process for the property you are buying or selling. Practices also vary between agencies so make sure you confirm details with them.
Buying and selling by auction
An auction is an open process where buyers bid against one another to purchase a property.
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Buying and selling at an advertised price
This is when the property is marketed with a selling price – the amount the seller wants to be paid for it.
The amount the property will be marketed for
This is decided by the seller in discussion with the agent, taking into account the seller’s views and the agent’s appraisal of the property’s value. The seller will also agree a marketing plan with the agent.
If more than one person makes an offer:
Then each prospective buyer will be asked to make a signed written offer. They should have this checked by their lawyer. The agent will then present all offers to the seller who will weigh up which, if any, they want to accept. The seller may also choose to instruct the agent to negotiate further on conditions or price.
Selling by buyer enquiry over (BEO) or buyer budget over (BBO) or pricing guide
There are several different ways of selling a property by negotiation. One is to market it as buyer enquiry over (BEO) or buyer budget over (BBO) a certain amount (such as ‘BEO $350,000’) or by giving a pricing guide. These give an indication of the lowest price the seller hopes to achieve for the property. The seller will then negotiate with prospective buyers through the agent. Prospective buyers can still make an offer below the advertised guide prices
Selling by negotiation without a guide price
This is a marketing approach an agent may suggest when it is hard to estimate the price a property is likely to sell for. Prospective buyers make offers based on their perception of the market value of the property and the seller will negotiate with them on price, through the agent.
Buying and selling by tender
When a property is being sold by tender prospective buyers submit confidential written offers for the property to the agent. Buying or selling by tender is when prospective buyers prepare and submit confidential written offers for a property to the agent for the seller’s consideration. There is no reserve price (the lowest price the seller is willing to accept) but there may be a price guide. Buyers can offer less than this.
If you wish to submit a tender
Ask the agent for a copy of the tender documents. Read them carefully, including conditions or amended clauses. You will be asked to fill in a sale and purchase agreement and submit it before the close of the tender. Get your lawyer to check it before you sign. It’s a legally binding contract and you cannot simply change your mind after it has been signed. There will be a deadline for tenders to be submitted, usually to the real estate agency offices.
- Your offer
- A deposit cheque (usually five to ten per cent of the offer price) – the cheque will be returned if your tender is not successful
- Settlement dates
- Any conditions you are attaching to the offer
- Marketing materials must make it clear if the property can be sold before the tender
- Prospective buyers can register interest with the agent and ask to be informed if someone else makes an offer before the tender date. They then have the option of making an offer too.
- Following the tender deadline
- The agent will provide all tenders to the seller who can weigh up offers and conditions and decide which, if any, they want to accept. The seller can reject all tenders.
- Once a tender is accepted
- The buyer is now in contract with the seller and can work through any conditions towards settlement.
- If a tender is rejected
- The prospective buyer (the tenderer) is under no legal obligation and free to pursue other purchase options.
- The seller can seek, through the agent, to negotiate with any unsuccessful tenderer with the aim of reaching agreement on a sale/purchase. It is up to the tenderer if they wish to do this.