Pre-contract
This stage is the research and viewing stage and you need to understand what the ‘median price’ is. A median price is simply a set of purchase prices sorted by value and then taking the figure in the middle of the series. For example:
100K 200K 150K 400K 285K
sorted as:
100K 150K 200K 285K 400K
The middle figure is 200K (that is the median price).
When considering median prices, it is essential to realise that these really represent a typical property in the most popular 50% of the market in question. This can help to establish which properties in that area are the most available at present.
If another area e.g. central city, has a lower median, it’s not necessarily cheaper to buy there, it just means most of the available properties in that area are in that specific price range.
Drafting the offer
This is one time when mistakes can be costly, so you need to work closely with our consultants, as we have the expertise to ensure it goes smoothly.
We will check the following issues to make sure your contract purchasing real estate in New Zealand runs smoothly:
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You must have the intention to purchase that specific land
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Your written offer must be accepted and you must pay money for it.
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You must be 20 or over and not under the influence of drugs and alcohol and you and the other party must have genuine consent over all the terms and conditions in the offer.
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Your objective for buying the property must be lawful.
An offer on real estate must be in writing and signed by the parties to indicate their willingness to enter into a contract. All the negotiations take place on paper. Nothing is done verbally.
The Contract Form Sales and Purchase Agreement: The offer form is also the contract form once all the parties agree on the conditions and sign it. The Real Estate Institute and the Law Society have approved this form and so there are no surprises – everyone knows what to expect. Once you have signed the offer, I will give you a copy – usually of the most important pages, as the vendor still has to sign it. Any offer can be accepted, rejected, revoked or a counter offer made.
Once the vendor signs the offer in acceptance, a full copy will be sent to you, the vendor and your solicitor.
The deposit on the property is usually paid immediately when making the offer. If the offer is made by fax and you’re still overseas we can negotiate a suitable time for payment of the deposit but it is up to the vendor whether they accept or reject it.
The deposit is paid into the real estate agent’s trust account and must be held for at least 10 days to comply with legislation unless the parties agree to an early release of the deposit. It will, however, be held in our Trust account until the contract is unconditional.
If for some reason and for no fault of your own, the contract cannot go unconditional, then the deposit will be paid back to you.
Once the contract is unconditional the deposit money will be paid to the vendor’s solicitor once it has been cleared by the bank.
Negotiating the offer
Vendors pay commission to real estate consultants, to negotiate and act on their behalf. If you want your interests protected, and to negotiate the best deal for you, then you can enter into an agency agreement with our company.
This is one area where you can check out the skills of the consultant. Ask them to explain to you their plan of action when negotiating a deal. You will be surprised at the answers!
Report Back
Offer acceptance
Acceptance of your offer is when the other party accepts and sign your offer without any amendments or further conditions to it.
Offer amendments
If the vendor amends your offer, then legally, your offer is dead and the vendor is making a new offer to sell to you.
If the vendor inserts a “cash out” or “roll over” clause, this will give them the option to accept another offer with a higher price or with fewer conditions only before your offer is unconditional. This is not the same as ‘gazumping’ because you have a legally binding contract but subject to conditions. It is usually only inserted when your offer is subject to the sale of your property.
You still have the initiative, you can go unconditional on your contract and the vendor can do nothing about it even if the back-up offer is much higher than yours.
If for some reason you cannot go unconditional and your solicitor advises the vendor of this, only then can the vendor consider the back-offer buyers to complete that contract.
Offer rejection
The vendor can also reject the offer, but this doesn’t mean it’s all off. It usually means your offer is so far below the vendor’s expectations it’s not worth considering. It’s then up to you to make a better offer, or walk away.
Post acceptance
At this point, we organise all the other professionals to inspect the property. However, unless you say otherwise, we don’t see their reports, but we do ask the company to email a copy to you. If there is anything that should be addressed we can work as a team to solve the problem. The solicitor will phone or email you and it’s your choice to go ahead or not, given the findings in the reports. Your solicitor will inform the vendor’s solicitor of your decision and usually when all the terms and conditions are met, the contract is unconditional. The deposit is then paid to the vendor’s solicitor.
If the property you’re buying is vacant or owner-occupied you have one final inspection before settlement. If the inspection reveals the owner has to do some work to the property then you have another inspection to check that the work has been done.
If there is a tenant in the property, you don’t have an automatic right for a final inspection. Consent will be necessary from the tenant and since you are not yet the owner, the vendor will have to arrange this for you.
A back-up offer is a second offer signed by another purchaser. So, if the conditions of the first contract can’t be met then the vendor must give the first buyers the opportunity to go unconditional. Only if they can’t meet the conditions, can the vendor cancel the first contract and continue with the second, back-up offer. Again, this is not gazumping.
The vendor is bound to the first contract until the buyers say they can’t proceed and whether it will go ahead is in the buyers’ hands. If, for instance, they can’t get the finance they hoped for, they will have to choose to pay a larger deposit or give notice to the vendor that they can’t continue with the deal. Only then can the vendor take up the second offer.
Paying the final balance
This is the day when you have to pay the full amount. It is called settlement in New Zealand. It’s also the possession date unless you have agreed otherwise. Only after you’ve paid can you have the keys.
Escrow is not a concept used in New Zealand. The deposit on the property is paid into the real estate consultant’s trust account and property settlement takes place in the solicitor’s office. Once it’s done, the title will be registered into your name. Neither you, nor I, will be present.
You need to settle before 4pm on a Friday as any time after that is considered a “last minute” settlement, which can cost you - penalty interest is charged for a last minute settlement, late settlement, partial settlement and deferred settlement.
Breach of contract is regarded as very serious in New Zealand. If you are in breach you will have to pay damages and your deposit could be forfeited to the vendor.
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