How do I submit an offer on a house?

When buying a home it is important to remain rational and to do your homework. A house is worth the maximum that someone is prepared to pay for it. The more information you have, the better position you will be in to make the right decision.

When buying your first residential property or investment property it is no different. Take time to check out all the options, fees and obligations.


Making an offer


There are a number of methods of selling a house. Whichever way the house you want is being sold, this will affect the process you will have to go through to purchase that particular house. All offers to buy / sell property in NZ need to be in writing on a Sale & Purchase Agreement. Real Estate Sales agents and Lawyers are authorized to arrange S&P agreements.


Buying by Offer and Negotiation


This used to be the most common way to buy a house. When you have found the house you want, you make an offer to the vendor with the price you want to pay and any conditions you want to add (see later for details on these). The offer is presented to the vendor and is either accepted, rejected if it does not fit the vendors expectations, or a counter offer will be made. When this happens the agreement will be returned with items changed (usually the price and/or any of the other conditions such as settlement date). You then decide to accept it, reject it or make a counter offer of your own. This continues until one party accepts or rejects the offer.

Key Difference: Your offer is negotiated back and forth until agreed between you and the vendor and  it can be subject to conditions. 

Unfortunately this process of hands on negotiation has been replaced – Tender is now most common (in Wellington).  Probably driven by the licensee of Real Estate agencies being required to comply with new regulations.


Buying by Auction


Vendors sell via auction where there is high demand and short supply of property. Hence why Auctions are more common in Auckland than elsewhere.

Purchasing a house at auction is very different to any other method. When you bid at an auction and are successful you cannot negotiate further, it is unconditional at this point. You are buying ‘as is’. So unlike other methods you must do all your due diligence before the auction.

It is very important when you go to an auction that you have everything sorted out first, such as 

  • Registering your interest with the person running the event (usually a real estate agent)
  • Getting a registered valuation and any other reports that are needed done before the auction (ask your FoxPlan adviser to recommend the right company to do the reports for you)
    • Have your FoxPlan adviser organise a pre approval of finance for you so you know the maximum you can borrow
    • Using the valuation, your budget and your pre approval to decide the maximum you want to pay for the house
    • Have your auction deposit (ie. down payment) ready to pay if you win the Auction – normally 10% of the purchase price.


How does an auction work?


A reserve price is set by the vendor (being the minimum they want for the house), which only the Auctioneer knows. If the highest bid is more than the reserve, the property is sold and a deposit is paid to the vendor. If the house does not reach the reserve then the vendor may enter into negotiations (as in method 1) with any of the bidders (usually the highest bidder initially).

Key Difference: You are openly bidding against others on a specified date and time and place with the best bid winning, with no conditions (i.e. buy ‘as is’). 


Tenders – Open & Closed


Tenders are now the most common way of selling a house (in Wellington).

There are two types of Tenders: open and closed. An open tender is when the real estate agent can tell you what the other tenders are. With a closed tender they can’t tell you what the other tenderers are offering.

When you are buying a house through tender you need to make a written bid for the property (by submitting a sale and purchase agreement to the Real Estate Agent). There will be a date (Tender date) by which all offers need to be made, so make sure you talk to the agent about when that is.

The offers will be presented to the vendor and they will decide to accept any of them, reject all of them, or make a counter offer to one of them.  As they are comparing your offer to others, you need to make sure you are thorough with the price you decide on, and any other conditions you want. The vendor is not obliged to take the highest price, and if a lesser offer has less or different conditions it may be more appealing to them.

Key Difference: All buyers are to put their best offer forward by a set date (tender date) –with NO prior negotiation, and may have condtions attached on date. Vendor chooses the best offer.

The tender process

  • Register your interest with the real estate agent
  • Get a copy of the tender document which will outline how your tender should be made.
  • Get your lawyer to look over the tender document before you submit it.
  • Decide on the price you want to pay and any conditions you want on the offer.
  • If you want to strengthen your offer you may want to complete reports before the tender day.
  • Submit your tender. You may need to pay a deposit when you submit your tender. It will be refunded if your tender is not successful.


FoxPlan Tip


When borrowing to buy a house, the lender will lend against either the price or valuation, which ever is the lower. If the valuation is higher than the price then you have no problems, but if the price is higher then you will need to find the difference in the price and value yourself which may affect your deposit.  So you need to make sure that you don’t offer too much, because if the value is not as high as your price you may have issues.


The views and opinions expressed in this newsletter are not intended to be a personalised service for an individual retail client. The views and opinions are general in nature, may not be relevant to an individual's circumstances, and constitute class service only. Before making any investment, insurance or other financial decisions, you should consult a professional financial adviser of FoxPlan LimitedA disclosure statement is available on request, and free of charge. 


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