Disclaimer:
The information on this website is for general guidance only and does not constitute financial or investment advice. Always do your own research and seek personalised advice from a qualified financial adviser or mortgage adviser before making financial decisions. All investments carry risk and past performance is not indicative of future results.
Key Takeaways
- Know your budget and confirm finance before offering, especially before an auction.
- Include appropriate conditions and realistic timeframes in your agreement.
- Line up a lawyer or conveyancer and any inspector early so you can move carefully when needed.
- Understand the sale method before making an offer.
- Account for extra costs beyond the purchase price.
Making an offer on a house is both exciting and nerve-racking. The price, conditions and timing need to fit the property, the sale method, your finance position and the advice you receive before signing.
After all, buying your first home may be the biggest purchase you have made. These six steps can help you work through the offer process in a more structured way:
Step 1: Know Your Finances
Determine Your Budget
First, understand your financial position and set a realistic budget for the house you want to buy. Your offer needs to fit your deposit, lending position, settlement costs and any conditions you still need to satisfy.
Pre-approved Finance
Before making an offer, it can be useful to have a conditional pre-approved home-loan limit from your bank or lender. Fees, validity periods and conditions vary by lender, and pre-approval does not replace final approval for the specific property.
Note: Auction purchases are usually unconditional. If you need a home loan, confirm your finance and complete due diligence before auction day, because the lender may need property-specific information even if you already have pre-approval.
TIP: A licensed mortgage adviser may help you compare loan options. Ask which lenders they work with, how they are paid, what fees could apply, and why a particular loan is being recommended.
Government Help
If you intend to use KiwiSaver first-home withdrawal, First Home Loan or another government-supported pathway, check the current eligibility, documents and processing timeframes before relying on that support in an offer.
Additional Costs
Buying and moving to a new home can involve costs beyond the purchase price. These may include lawyer or conveyancer fees, council LIM reports, building inspections, valuations, finance costs, moving costs, reconnection fees, insurance, rates, maintenance and body corporate costs if the property is in a complex. Some due-diligence costs can still be payable even if you do not end up buying the property.
Step 2: Engage the Professionals
Find a lawyer or conveyancer before you start looking at properties, because buying can move fast when you find something you like. Get independent legal advice before you sign a sale and purchase agreement; once you and the seller have signed, it is a legally binding contract and can be difficult to change.
Consider lining up a property inspector: a qualified inspector can report on the condition of the property. Selecting an inspector or engineer early can make it easier to arrange an inspection within the timeframe in your offer.
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Step 3: Understand the Process
Sale & Purchase Agreement
You must sign a written sale and purchase agreement when you buy a property. To ensure that you have a good understanding of the document you are about to sign, review our guide to the key clauses.
TIP: Before you sign the agreement, ask your lawyer or conveyancer to review it. They can help check whether the conditions and timeframes reflect what you need before the agreement becomes binding.
Method of Sale
Before you can make an offer, you'll need to know the method of sale being used for that home. Most property sales in New Zealand are by advertised price, deadline sale or negotiation but homes can also be sold by other methods such as auction or tender.
Step 4: Do Your Market Research
Assess the market: In a seller's market (high demand, low inventory), you may need to make a more competitive offer. In a buyer's market (low demand, high inventory), you might have more room to negotiate.
Check out recent sales: Look at recent sales of similar properties in the neighbourhood to determine a fair market value for the house you are interested in. Also take into account the condition of the house, if it needs significant repairs or updates, as you may want to factor those costs into your offer.
Property Research Tools:
- Estimated property value
- Rating Value
- Previous market sales
- Recent comparable sales
- Market insights for the suburb
- Property details including the capital, land and improvement value
- The title detail
Step 5: Submit Your Offer
The agent or agency will usually prepare the offer paperwork using a sale and purchase agreement and present it to the seller. Get legal advice before signing, because the agreement becomes legally binding once the buyer and seller have agreed and signed.
How Much to Offer
Knowing how much to offer is always a tricky question. A very low offer may affect how the seller responds, while a higher offer can reduce your room to negotiate. Consider recent comparable sales, property condition, the sale method and your budget before deciding what to offer.
Include Any Conditions
Attaching conditions means the agreement is conditional until those conditions are satisfied or waived within the agreed timeframe. Common buyer conditions include finance, building inspection, LIM, valuation, insurance and due diligence conditions. Once the offer has been submitted, the seller can accept it, reject it or make a counteroffer.
Step 6: Be Prepared to Negotiate
Negotiation: Think through your maximum price, preferred settlement date and which conditions you can realistically meet before responding to counteroffers.
Multiple-Offer Situation Tips:
- Be flexible on settlement date
- Be prepped with your finances
- Show commitment to working through your conditions
- Use realistic timeframes you can actually meet
Once all conditions are satisfied or waived, the agreement becomes unconditional and you move toward settlement. Settlement is when funds are transferred and ownership changes hands.
Learn More: Negotiation Strategies for First Home Buyers
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Frequently Asked Questions
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Have a question about this?
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