Buying guide
How to
make an offer
Found a property you like? Here is how to get ready to make an offer and what happens next.
Before you make any offer
Talk to your lawyer before you sign anything
Have your lawyer review the sale and purchase agreement before you sign. An accepted offer can become a binding contract, so it pays to understand the terms and conditions first. It helps to have a property lawyer ready before you find a home you want to buy. You do not need mortgage pre-approval to make an offer, but speak with a mortgage adviser first so you understand your budget and what the lender may need to approve your finance.
Making an offer, step by step
1Find a property you like
Check that the asking price fits the budget you have discussed with your mortgage adviser.
2Talk to the real estate agent
Let the agent know you are interested and ask how their offer process works.
3Request the draft S&P
Ask the agent for a draft sale and purchase agreement and any available property documents.
4Send it to your lawyer
Ask your lawyer to review the agreement, advise on the property and recommend suitable conditions. Tell them if you plan to use KiwiSaver.
5Check the finance timeframe
Ask your mortgage adviser how many working days you should allow for the finance condition. Pass this on to your lawyer.
6Tell the agent you are ready
Once you have had the right advice and are comfortable with the terms, let the agent know you are ready to make an offer.
Real estate agencies can have different processes for presenting and signing offers. Your agent will guide you through their process. Your lawyer should review the agreement before you sign.
How an offer works
1
The sale and purchase agreement
What it is
Every offer in New Zealand is made on a standard document called a sale and purchase agreement (also called an S&P). This is a legally binding contract that sets out the purchase price, settlement date, deposit amount, chattels, and any conditions attached to your offer.
What you decide
Before signing, you decide on the price you are offering, the settlement date, the deposit amount, any chattels you want included (such as whiteware or curtains), and any conditions you want to attach to the offer.
2
Setting your price
How to decide
Look at recent sales of similar properties in the area. Sites like OneRoof and homes.co.nz publish sales history. Your offer should reflect what you genuinely believe the property is worth and what you are willing to pay.
Knowing your ceiling
Decide on your maximum price before making an offer, particularly at auction or in a multi-offer situation. Your mortgage adviser can help you understand your budget, potential borrowing and what repayments might look like at different price points. Decide on your ceiling before emotions take over.
3
Understanding the two deposits
Two separate deposits
You may hear people talk about two deposits. Your mortgage deposit is the amount you contribute towards the purchase, which might come from savings, KiwiSaver, gifted money or equity. The sale and purchase agreement deposit is an amount paid under the contract, usually to the agency trust account. It counts towards the purchase price rather than being an extra cost. Your lawyer can explain when it is due under your agreement.
How much is the S&P deposit?
The sale and purchase agreement deposit is typically 10% of the purchase price. However, this is negotiable. If you have less than 10% available, you can negotiate a lower deposit amount with the vendor. This is common and most vendors will agree to a reduced deposit if the overall offer is strong. Your lawyer can help you negotiate this.
When it is paid
The S&P deposit is paid once all conditions are satisfied and your offer becomes unconditional. It is held until settlement, at which point it is applied toward the purchase price. If you are buying at auction, the deposit is due on the day.
4
Settlement date
What it is
Settlement is the day the purchase price is paid and ownership transfers to you. The date is agreed between the buyer and seller and recorded in the sale and purchase agreement.
How long typically
Settlement dates are often four to eight weeks after the offer is accepted, though they can be shorter or longer by agreement. A shorter settlement may appeal to a vendor wanting to move quickly.
Using it strategically
A settlement date that works well for the seller can sometimes make your offer more appealing, even when another buyer offers a similar price. It is worth asking the agent what settlement date the vendor prefers.
Getting your conditions right
Have your lawyer check the agreement before you sign.
Your lawyer should review the sale and purchase agreement and advise you on which conditions to include and how they should be worded. Before you make an offer, speak with your mortgage adviser too. They will tell you how many working days to allow for your finance condition so there is enough time for the lender to assess the property and confirm finance. Make sure your lawyer includes the agreed timeframe in the contract.
Unconditional offers carry significant risk.
Once the agreement is unconditional, you are legally committed to the purchase. If you cannot complete the sale for any reason, you risk losing your deposit and facing legal action from the vendor. Never go unconditional until your finance is confirmed and your due diligence is complete.
What happens after you submit your offer
Vendor accepts
The vendor signs the agreement and your offer is accepted. You then work through any conditions within the agreed timeframes. Once all conditions are satisfied, the agreement becomes unconditional and the sale is binding.
Vendor counter-offers
The vendor may change the price, settlement date, or other terms and sign back to you as a counter-offer. You can accept the counter-offer, make your own counter back, or walk away. This back-and-forth continues until both parties agree or negotiations break down.
Vendor declines
The seller may decline your offer, especially if they are considering another offer or your price does not meet their expectations. Your offer lapses and you are free to move on. Nothing is signed and there is no obligation on either party.
Multi-offer situation
If several buyers are interested, the agent may run a multi-offer process. Ask the agent how that process will work and when offers are due. The seller can choose an offer based on price, conditions and settlement date, not just the highest number. You may not get another chance to negotiate.
Ready to make your first offer?
Talk with a mortgage adviser about your budget before you make an offer. We can help you understand the finance steps and timeframes.This guide is for general information purposes only and does not constitute legal or financial advice. Always have your lawyer review the sale and purchase agreement before signing. For mortgage advice tailored to your situation, speak with a Traction adviser for advice tailored to your circumstances.
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