Types of Real Estate Sales Methods

There are several different methods of buying and selling property in New Zealand. The most common real estate sale and purchase methods at Cowdy & Co. are:

  • Deadline Sale/Sale by Tender
  • Auction
  • Negotiable Over a Set Price/Negotiable/Asking Price

It’s important to understand the different types of real estate sale and purchase methods – they each have their own rules and regulations to be followed.

Deadline Sale/Sale by Tender

A “Deadline Sale” is very similar to a “Tender” in that the property is offered for sale with no set price and with a deadline upon which offers need to be submitted (e.g. 3-4 weeks). The difference between a Deadline Sale and Tender is in the conditions of the process.

A Tender is often a more rigid legal process where usually Tenders cannot be opened until the Tender Date. The Sale by Tender method is most often used to sell commercial property and rural real estate (including farms) however, can also be used in the sale of residential property.

An information pack will be provided (for both Deadline Sales and Sale by Tender methods) to interested parties that is sufficient for you to forward to your professional advisor for approval. The information pack generally includes copies of:

  • The Vendor’s proposed Sale & Purchase Agreement (Purchasers are able to make changes to the agreement to suit their circumstances or to help swing things in their favour).
  • A LIM – a report generated by the regional authority e.g. Christchurch City Council.
  • Title or deeds.
  • Details of any earthquake repairs and associated documentation (specific to Canterbury due to the earthquakes).
  • The present owner’s insurance details – Purchasers often will use the same insurance company as it makes for a more seamless transition (specific to Canterbury due to the earthquakes).

Prospective Purchasers can ask the Sales Consultant for an indicative price range. All offers are private and are not disclosed to other buyers.

As offers can be accepted before the Deadline or Tender date, depending on the terms of the sale, it is important for serious Purchasers to register their interest. This will ensure they get an opportunity of also submitting an early offer if the situation arises.

The Vendor is not obliged to accept any offer and they have 3 working days from the deadline, within which to make a decision.

Auction

Buying property by “Auction” is where a property is offered publicly at a set time and place for prospective Purchasers to bid. Bidding is done openly and the highest bidder buys the property, as long as it meets the owner’s reserve price (a price they are willing to accept), which is set prior to the Auction. The reserve price is not disclosed to bidders before the Auction. However, it is common during the Auction for the Auctioneer to declare the property is now “on the market”, meaning that it has exceeded the reserve.

As the highest bidder (above the reserve), you are usually considered an unconditional buyer immediately, and may be required to pay the pre-agreed deposit (usually 10% of the purchase price).

Prior to an Auction you will be provided with an information pack that you can send to your professional advisor. The information pack generally includes copies of:

  • The Vendor’s proposed terms and conditions of the Auction Agreement. Purchasers can, prior to the Auction, request (in writing) a variation to the proposed terms and conditions e.g. a varied settlement date. This is called a “Side Agreement”.
  • A LIM – a report generated by the regional authority e.g. Christchurch City Council.
  • Title or deeds.
  • Details of any earthquake repairs and associated documentation (specific to Canterbury due to the earthquakes).
  • The present owner’s insurance details. Purchasers often will use the same insurance company as it makes for a more seamless transition (specific to Canterbury due to the earthquakes).

Before the Auction, you will be able to view the property by private viewing appointment or without an appointment, at an Open Home.

Properties can be sold prior to the original Auction date, either by bringing the Auction date forward or by the Vendors simply accepting an offer. Therefore it’s extremely important for serious Purchasers to register their interest. This will ensure you also get an opportunity to compete for the property purchase if the situation arises.

Buyers should get a Property Check carried out which will give you a written condition report about the property. It’s also advised you engage a registered Property Valuer to provide a valuation report. In a strong market it’s not uncommon for a property to sell in excess of a registered Valuer’s opinion.

If you cannot attend the Auction on the day, it is possible to have an authorised representative present to bid for you. They will either liaise with you over the phone during the Auction (phone bid), or have a written authority to bid up to a certain price, set by you. This could be a Sales Consultant, lawyer or acquaintance with a signed authority to act on your behalf, which we can provide prior to the Auction.

Mortgagee Sale by Auction/Tender

“Standard Auctions” should not be confused with “Mortgagee Sale Auctions/Tenders”, where the Mortgagee (lender) of the mortgage is offering the property for sale and not the owner. This occurs when a Mortgagor (borrower) fails to meet their obligations under a mortgage contract. To recover the debt incurred by the Mortgagor failing to stick to the contract terms, the Mortgagee may exercise their rights to “Power of Sale”.

It is absolutely essential that professional advice is sought before the Auction as the Mortgagee has security only over the land, buildings and fixtures but not chattels. The interpretation between fixtures and chattels can be open to dispute. For more information on fixtures and chattels see our blog

An information pack will be provided which will include the Auction conditions, title and possibly a LIM depending on the instructions by the Mortagee’s lawyer.

It is possible for the Mortgagee to withdraw the property from the market at any time before the Auction e.g. if the Mortgagor refinances or comes to an arrangement that is satisfactory to the Mortgagee.

Auction checklist

  • Information pack
  • Property check
  • Valuation

Setting a selling price range

Together with the Sales Consultant, the Vendor will set the price based on several factors such as:

  • Comparable properties recently sold and for sale in the area.
  • Rating valuations (RV): the value of the property set in order to determine the local council rates. It is important to note that this is not a true property value and can vary considerably to the true market value of a property. Purchasers should not rely on the RV to determine their offering price.
  • Land value.
  • What the Vendor originally paid for the property.
  • Improvements, maintenance and repairs made.

A Sales Consultant will handle the offers that all prospective buyers make in the form of a signed Sale & Purchase Agreement.  It is their job to present the offers to the Vendor, who will then make a decision on the property’s sale. Your offer can be made conditional on factors like mortgage finance, title searches, and building reports. When all the terms of the sale (including the purchase price, possession date and any other conditions) have been agreed to by the Purchaser and the Vendor, a contract will be signed.

Looking for a property? Browse our listings here or get in touch with our team today. 

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