Found your dream home and ready to make an offer? Making an offer can feel a little daunting, but understanding the process can make all the difference. Here’s a step-by-step guide to help you confidently make an offer on a house in NZ.
1. Confirm your finances before making an offer
Having pre-approval for a mortgage is the crucial first step. It sets your budget and shows the vendor you are a serious buyer. If you haven’t obtained a pre-approval with a bank yet, talk to a mortgage adviser to get this sorted first before making an offer.
If you already have a pre-approval, send the Sale & Purchase Agreement to your mortgage adviser. They can validate the property with the bank to ensure it meets the bank’s criteria (e.g. no unconsented works, type of property, and whether it needs lots of repairs and maintenance). This step is important to avoid a scenario where your offer is accepted, but the bank rejects your property.
2. Talk to your lawyer
Inform your lawyer that you’re interested in making an offer on a property and send them the Sale & Purchase Agreement so they can review it. They can help you understand the property and the terms before you make the offer. Your lawyer will also advice you on the types of conditions to include in your offer.
Conditional vs. Unconditional Offers
A conditional offer includes specific terms to be met before the sale is finalized. Common conditions include:
- Satisfactory Building Report: Get a professional builder to check for any issues in the property. If there are issues, it’s up to you to deem it acceptable. If it’s a big issue, you can negotiate further with the vendor on price to satisfy this condition.
- Finance: Allows time to secure a specific loan amount. If you already have a pre-approval with the bank, you’ll only need 5 working days. Otherwise, if you don’t have a pre-approval, you need a minimum of 10 working days.
- Insurance: Ensures the property can be insured, especially important in earthquake or flood-prone areas. We can introduce you to an insurance adviser who can advise and arrange insurance for you. Without insurance, the bank may not approve the property.
- Sale of Another Property: If you need to sell your current home first, then you can add this condition. You can choose how precise you want to be e.g., with a minimum sale price and deadline date or it could be general, e.g., just the sale of the house. The more precise it is, the more control you have but the less attractive it is to the vendor.
- Due Diligence Clause: Inserting a well-worded due diligence clause will cover all your bases during the due diligence period. Talk to your lawyer for the precise wording.
An unconditional offer has no conditions and commits you to purchasing the property. While it’s attractive to vendors, it poses a risk to buyers, as you cannot back out if issues arise later.
3. Making the Offer
How to make an attractive offer:
An offer consists of price and conditions. There are a few things to consider when making an offer as conditions to have value. The simpler and less conditions there are, the more attractive it is to the vendor. So, it’s important to have your finance sorted well before you start placing an offer, as finance is usually the main issue.
- Get your finances sorted: Finance is usually the main issue for buyers. So, it’s important to get your finances approved before you start placing an offer. It shows that you are a serious buyer and it gives you the competitive advantage over other buyers.
- Settlement Time Frame: Talk to the real estate agent to understand the vendor’s preferred timeline. Being flexible can appeal to the vendor as the vendor may be in the position to have a shorter or longer settlement depending on their situation.
- Price: You are the market, so place an offer that you think is fair. Use resources like homes.co.nz to research recent sales in the area and determine a fair offer price. You’d want to find comparable properties, so look at the number of bedrooms, size of the property and proximity to amenities to determine its comparability.
- Pre-Auction Offers: If it’s an auction, you can make a pre-auction offer, which is almost always a cash offer and is unconditional. You need to have everything in order because if you win the auction you may need to pay the deposit within three working days.
If conditions aren’t met within the agreed timeframe, you can renegotiate or walk away.
4. Negotiation and Acceptance
Once the offer is submitted, the vendor can accept, reject, or counter your offer. If a counteroffer is made, you can choose to accept it, make another counteroffer, or walk away. This back-and-forth negotiation can continue until both parties agree on the terms.
5. Finalizing the Purchase
Once the offer is accepted, both parties sign the Sale and Purchase Agreement, making the offer legally binding. The next steps include paying the agreed deposit amount, usually to the vendor’s lawyer’s trust account, and preparing for settlement.
On settlement day, the remaining balance is paid, and ownership is transferred to you.
If you’re ready to make an offer or need some personalized advice, talk to one of our Twine advisers today. We’re here to guide you through every step of the home-buying process.
