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.
An auction is an open process where buyers bid against one another to purchase a property. If you are selling a property by auction, you will need a sole agency agreement with an agent, have an agreed marketing plan and establish a reserve price in advance of the auction. When selling your property, there are quite a few different modes of sale you can opt for. When it comes to the choice of selling your home through the auction process, the choice will be largely dependent on the type of property you have. Higher end and luxury properties are often sold through auction due to the nature of New Zealand auctions focusing on the quality of the property, with price being the secondary concern. In this environment, keen bidders can drive the price of the property above market expectations in some cases, with no pressure to sell if the property fetches a lower than expected bid. Another benefit to selling at auction, is that you will attract genuinely interested buyers. In New Zealand, those bidding at auction must do their due diligence before bidding. This means the contract of sale is not subject to inspections or finance – as these must be organized before auction day and ensures only serious buyers will show up to bid.
Auctioning your property is about so much more than simply showing up on auction day. There’s a lot that goes into it before-hand to ensure you achieve the best result possible for your property. Marketing your property well is chief among the things you’ll need to do.
Your agent should walk you through your marketing plan in detail, from the images that’ll be selected and advertised, the copy that will be included, to where the property will be advertised (online, papers, brochures, in office).
Before you go to auction, you should expect to hear from your agent on a daily basis and a face-to-face meeting around once a week. Ideally, you’d receive a written report which summarises all of these activities as well as the interest in your property. Your agent should also be keeping you well-informed of the market, so that you can make the best decision come auction day.
If you’re in the country, the best recommendation is to attend your auction. It’s great to have you there if there are any last minute questions. Some common ones buyers ask are: “Can we vary the deposit amount?” or “Can we vary the settlement date?”
Your auctioneer will also want to confer with you depending on how the auction is going. If bidding stops below your reserve price for example, your auctioneer will want to discuss next steps with you.
The auctioneer should be introduced to your property, much as your agent has been. They should walk through the property, understand the features of the home, and really understand why a buyer would fall in love with it. That way they’ll be able to better represent your home to buyers.
Your auctioneer will also want to know all about the interest the property has received. They’ll ask your real estate agent detailed questions about it. How many inspections have there been? What kind of interest has the home received? Have any valuations been done? Any building/pest inspections? Does the buildings age suggest a dampness or infra red test for water damage be conducted? Is the property fibre ready?
When it comes to marketing your property before auction, the rule seems to be more is more. The success of your auction can be largely dependent on your marketing campaign.
The latest research from Harcourts, showed a direct correlation between the amount spent on marketing versus how much interest was generated for a property, and what price it sold for. On average, properties that sold in the shortest timeframe invested a further $1,913 in marketing than those that did not see a sale in the 45 day period.
Our Harcourts Promise and written marketing plans ensure a smooth marketing campaign and that you recieve feedback on what prices buyers are indicating they are willing to pay for your property.
It’s important for you to understand and be clear on what your reserve price is, and how it’s used during the auction. Your auctioneer should be able to explain this to you in detail. You will need to discuss your reserve price with your auctioneer. They should be working to ensure you get the best price possible for your property.
That being said, try to avoid openly discussing price with others, to reduce the risk of price leaking out into the market. The auction should focus on the product (your home), and price should become secondary. Harcourts CEO, Chris Kennedy believes there are three types of figures to consider before the day:
Remember, at all times during an auction, you’re in control. If a bid is high enough take it. If not, don’t. But the reason for not taking the offer needs to be greater than the reason the home is on the market in the first place.
This is when the property is marketed with a selling price – the amount the seller wants to be paid for his property.
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. Selling by negotiation removes the need for you to set a sale price for your property, instead placing the decision in the hands of buyers. An offer for your property can be received at any time. You then can accept, decline or negotiate with the prospective purchaser.
In this sale method, there is no end date for offers, and potential purchasers make offers based on what they think the property is worth in the current market.
A vendor may want to list their property for sale by negotiation when it’s difficult to estimate the market price of their property.
There are different ways of selling a property by negotiation. One is to market it as buyer enquiry over (BEO) or buyer budget over (BBO) a set price or by providing a pricing guide.
The BEO needs to be realistic, and if the vendor rejects offers over the BEO, you may need to re-evaluate the BEO
If a potential buyer makes a written offer, you need to present it to the vendor. You may want to ask any other interested buyers if they would like to make an offer, although the first offer needs to be presented within a reasonable timeframe. It’s important you check the first offer for a sunset clause to avoid placing your vendor or customers under undue pressure.
If there is more than one written offer, it becomes a multi-offer process. You can find more information about selling a property by multi-offer here.
If there is just one written offer, the vendor can consider the offer and decide what to do:
If the vendor accepts an offer, the buyer and vendor will need to work to meet any conditions included in the sale and purchase agreement. You may need to provide access to the property to help the buyer satisfy their conditions, for example, if the property needs to be inspected by a property inspector.
If the buyer needs more time to satisfy their conditions, the buyer’s lawyer may work with you to arrange this with the vendor. Any changes will need to be signed off on the sale and purchase agreement by both the buyer and vendor.
When all conditions have been met, the lawyer or conveyancer can confirm the sale is unconditional.
The tender process has a set deadline for prospective purchasers to put forward their best offer for your property. After the close off date you have the option to accept, decline or negotiate any offers. Due to this level of flexibility some prospective sellers consider tender as a viable option.
Listing a property for sale by tender is a process where buyers submit written offers to the agency before the specified deadline. The tender process is not defined in legislation – the process is set out in the tender document.
The listing agent and selling agent(s) may work with a number of prospective buyers to help them submit tenders. If the listing or selling agent is working with more than one prospective buyer, they shouldn’t share tender details with anyone other than the vendor.
The branch manager or supervisor will usually present all tenders to the vendor after the deadline. The tender deadline will set out how the offer is made and considered – it is usually submitted in a sealed envelope and is not opened until after the tender deadline. The listing agent may be present for this as well as the vendor’s lawyer or any support person the vendor chooses.
Listing by tender may be useful when:
These are some key points about the tender process:
Tenders can be submitted any time up to the deadline. It is a good idea to let prospective buyers know to put their best offer forward because they are unlikely to have an opportunity to change their offer once it is submitted.
When tenders are submitted, they should be kept in a safe place where they will not usually be opened until after the tender deadline, although the tender document can set out changes to this process, for example:
You should discuss the benefits and drawbacks of accepting offers early or extending the deadline with the vendor.
Buyers who submit a tender offer should be made aware that they cannot usually withdraw their offer until 5 working days after the tender closing date.
When the tender has closed, the offers can be opened with the vendor and your branch manager or supervisor. Once opened, check that the tenders submitted meet the vendor’s requirements and are completed correctly, with the necessary signatures and deposit.
The vendor can accept a tender, reject all of them or negotiate further. The 5-day withdrawal time frame helps to provide the vendor with time to consider the offers, make enquiries and negotiate if necessary.
When the vendor accepts an offer, they will need to sign the sale and purchase agreement and you will notify the successful party. You will also need to contact the unsuccessful parties and return their deposits and documents.
Deadline sale is a sales method where a property is marketed for a set period with an advertised end date.
Offers can be made at any point up to the end date and because vendors can choose to accept an offer at any time, buyers need to be proactive in registering their interest with you.
The marketing should make this clear for interested buyers by stating something like ‘unless sold prior.’
Offers are made on a standard sale and purchase agreement.
A deadline sale offers vendors more flexibility than sale by tender. The vendor can accept an offer at the time that suits them.
They may also choose not to accept any offer until the end date. Offers are made on standard sale and purchase agreements and prospective buyers can include terms in their offer.
The vendor can wait until the end date has been reached, and consider all the offers together, or they can accept an offer at any point during the listing period.
Under rule 10.10 you are obligated to submit all written offers you receive to the vendor.
Rule 10.10 — A licensee must submit to the client all offers concerning the grant, sale, or another disposal of any land or business, provided that such offers are in writing.
You must advise your client about all written offers so the vendor can decide whether to view the offer at the time or wait until the deadline date. You may also want to inform potential buyers about the vendor’s time frames to better manage their expectations.
You cannot withhold an offer from your client.
The vendor is not bound to accept the highest offer.
The vendor drives the process and chooses when they’ll look at the offers, whether they’ll accept any offers, and who they will negotiate with.
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