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Ways to buy a house
There are a number of different ways to buy your new home – by auction, negotiation or tender for example. Whatever you choose, it's worth knowing how each of these sale and purchase methods work. Here’s a quick guide that may help. It’s just a starting point so please get advice from the appropriate professionals before taking the next step.
01
Offer and negotiation through an agent
Usually this involves making an offer on a sale and purchase agreement, and then negotiating through the real estate agent acting for the seller, until a price is agreed.
The great thing about the offer and negotiation method is that you can make your offer subject to conditions. This is called a conditional offer. Typical conditions might be receiving a satisfactory builder’s report on the house, or satisfactory LIM report and/or organising finance.
A solicitor is the best person to advise you on the appropriate conditions to include for your circumstances, so please consult with them before signing any agreement.
02
Private sale – negotiating directly with the seller
In a private sale you negotiate directly with the seller to buy your new home – no real estate agents are involved. It pays to be cautious and consult your solicitor on every move you make, to ensure all parties are meeting their legal obligations.
When you’re buying directly from a seller, make sure you sign a standard Sale and Purchase Agreement, which outlines the obligations and responsibilities you both have. If the seller doesn’t have a sale and purchase agreement, your solicitor should be able to prepare one or you can purchase one from the Auckland District Law Society. Either way, you should always consult with your solicitor before signing anything. Find out more about sale and purchase agreements.
03
Some Do's and Don'ts for negotiations
Do's
- Have an understanding of what the property is worth. Be prepared to negotiate – you never know, you might get lucky with a lower price.
- Know your price limit, and stick with it.
- Be flexible with certain conditions, like settlement date or deposit amount, to make the deal more attractive.
- Do your research about the property to increase your bargaining power.
Don'ts
- Don't feel pressured into rushing things. Be prepared to walk away if the negotiations reach your top price.
- Don't necessarily tell the agent or seller your top price.
- Don't sign anything you don't understand. Check with your solicitor.
Remember, the real estate agent is working for the seller – they will try to negotiate the highest price possible.
04
Buying a property through an auction
Auctions are held at a specific time and place. To be a successful bidder you will need to outbid any other potential buyers without going above your price limit.
If you’re the successful bidder, your offer is unconditional so you have to buy the property. This means it's a good idea to have your finance in place. Typically you will need to pay a deposit (generally 10%) on auction day.
When buying at auction you'll need to do your homework beforehand. Here are just some of the things you should look to have sorted before auction day:
- Your finance. Get an ASB home loan pre-approval, so you know how much you have to spend on auction day.
- Do your research. Check out the property thoroughly. You might like to consider getting a builder’s report or moisture test, and ask your solicitor to check reports like the LIM, certificate of title and pre-contract disclosure statement.
- Auction details. Find out which items will stay with the property and are included in the price (e.g. chattels) and what the settlement date is.
- Your deposit. Make sure you have access to the money for the deposit- you'll usually need to pay it on auction day.
05
Buying a property through tender
With a closed tender, anyone interested in a property has the opportunity to put in a written offer (the ‘tender’) by a certain date and time (the ‘deadline’). All tenders are then presented to the seller at the same time, on the deadline.
It’s then up to the seller to decide if they want to accept any of the tenders. They could reject all of them, or choose one or two tenders to negotiate with.
Here are some tips for buying through a tender:
- Give it your best shot. You only get one chance so it’s important to put your best price in as you may not get a chance to negotiate.
- Sort your finances early. Having access to the funds to buy the property gives you better bargaining power. Talk with us about a home loan pre-approval.
- Do your homework first. If your offer is accepted and is unconditional, you are legally bound to purchase the property so it’s a good idea to have done all your research before putting in a tender.
- Involve your solicitor. Make sure your solicitor checks the tender documents as well as reports like the LIM, certificate of title and pre-contract disclosure statement, if any.
- Have the deposit ready. You'll need to have the available funds ready to transfer once your offer is unconditional. This can be done via FastNet Classic, the ASB Mobile Banking app or call 0800 803 804 for assistance.
06
Buying a house and land package
When you buy a house and land package, you enter into a contract to build a house for a fixed price. This is also known as a turn-key contract.
You will typically have to pay a 10% deposit at the point of signing the contract and pay the balance at completion of the build process. This will depend on your agreement with the building company.
The agreement will normally require the house to be fully completed with code of compliance certificate issued and be ready for you to move into. Items right down to the clothesline and letterbox may need to be in place.
In most instances new construction loans are exempt from LVR restrictions so if you have a deposit of less than 20% a turn-key purchase could be the right option for you.
07
Protecting your home, no matter how you buy it
Going through the process of buying a house can be long and challenging but the end result is an asset worth protecting. With ASB, you'll need to insure your house before you draw down your loan. Check out the comprehensive cover you can get through ASB and get in touch if you have any questions.
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The availability of insurance cover is subject to your application being approved. Terms, conditions and exclusions apply. For full details, refer to the Policy Document which is available from ASB Bank Limited. This insurance is underwritten by IAG New Zealand Ltd. See further information regarding IAG’s financial strength rating. A minimum premium applies for all policies. Even if your policy qualifies for one or more discounts the total of these discounts cannot cause your premium to be less than the required minimum.
