Making an offer

Making an offer on a house is both an exciting and nerve-racking time! What's the right amount to offer? Is it too much or too little? What conditions should you include? Finding the right balance between a competitive offer and one that fits your budget is crucial, and should be carefully considered. After all, buying your first home will likely be the biggest, and most expensive, purchase you’ll ever make.

Here’s 6 steps to help guide you through the process:

Step 1: Know your finances

• Determine your budget: First and foremost, it’s imperative that you understand your financial situation and set a realistic budget for the house you want to buy. Your offer should always align with your financial capabilities.
• Pre-approved finance: Before making an offer, it's advisable to have a conditional pre-approved home loan limit from your bank or lender. Conditional pre-approval is usually free and lasts for 3 months. This shows sellers that you are a serious and qualified buyer.  Note: you must have conditional pre-approval if you are taking out a home loan to purchase a property at auction.

• Government help: If you intend to access KiwiSaver first-home withdrawal, First Home Loan, First Home Grant, Kāinga Whenua loan, or KiwiBuild, ensure you know the details and timeframes to successfully process your application.
• Additional Costs: Buying and moving to a new home comes with additional costs that you will need to factor into your budget, such as:
  • Lawyer or conveyancer fees.
  • Building inspection reports including a council LIM report and a building inspection report.
  • Any bridging finance costs.
  • Moving costs including reconnecting services.
  • On-going costs like maintenance, rates, insurance and body corporate fees if your home is in a complex.

Note: You’ll need to pay any legal fees and inspection costs even if you’re not successful in buying a property you’re considering.

Step 2: Engage the professionals

• Find a lawyer or conveyancer before you start looking at properties … buying can move fast when you find something you like. Before you sign a Sale and Purchase Agreement, seek independent legal advice - once an offer has been signed by you and accepted by the vendor it is very difficult to alter the agreement. See Sale And Purchase Agreement: 7 Tips To Check Off Before You Sign
• Engage a property inspector: A qualified property inspector will tell you about the condition of the property. It’s a good idea to select a property inspector and/or engineer at an early stage of your home buying process so you are ready to arrange an inspection when you find a property you want to buy.

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 check out this Guide to Sales and Purchase Agreements.

Before you sign the agreement it is strongly recommended that you ask your solicitor to review the agreement – that way you ensure that all the conditions you require are included in the agreement, as well as the correct timeframes.

• 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. 
  
  Find out what you need to do to prepare, depending on the method of sale:
  
  

  Buying at auction	A property auction is a fast-paced, public sale. The property is sold to the buyer with the highest bid after the seller’s reserve price is reached.
  Buying by tender	When a property is for sale by tender, buyers give confidential written offers to the agent before a specified end date.
  Buying by negotiation	In this sale method, there is no end date for offers, and potential purchasers make offers based on what they think the property is worth in the current market.
  Buying by deadline	Deadline sale is where a property is marketed for a set period with an advertised end date.
  Understanding a multi-offer process	A multi-offer process happens when more than one buyer makes a written offer on a property.

  Source: www.settled.govt.nz..

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: Using online property tools such as Homes.co.nz, QV, and OneRoof can help you find information such as:
  • 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, land and dwelling square meters, rooms and building details.
  • The title detail

A registered valuation will provide an accurate view of a property’s market value.  This may also be a condition of obtaining a mortgage.

• Consult with a real estate agent: Real estate agents can provide insights into local market conditions and help you determine a reasonable offer based on recent sales in the area. Note: However friendly and helpful the agent is, remember they are representing the seller. The agent must not mislead buyers, but you should not rely only on the agent for advice or assistance.
• Consult your mortgage adviser: Your mortgage adviser usually has access to the same property valuation data that Banks use to determine whether a registered valuation is required, or not.  

Step 5: Submit your offer

Your real estate agent will help you draft a formal offer (Sale & Purchase agreement), and submit the offer to the seller.

• How much to offer: Knowing how much to offer is always a tricky question. Some say you should start really low as you can always go higher, however, while you want to get a good deal, submitting an excessively low offer may offend the seller and hinder the negotiation process. Consider making a reasonable offer based on market conditions.
• Include any conditions, if any: Attaching conditions means that your offer isn’t finalised until these conditions are met, usually within a set timeframe. Common buyer conditions include:
  • A satisfactory building report
  • Finance satisfactory to you
  • An appraisal condition
  • An insurance condition
  • Due diligence condition

Once the offer has been submitted to the seller, they can accept the offer, reject it, or make a counteroffer.

Step 6: Be prepared to negotiate

• Negotiation: Have a strategy for negotiations and be prepared for counteroffers. Decide in advance how much you are willing to negotiate.
• Multiple-offer situation: If you find yourself in a multiple-offer situation, you’re going to want to find ways to make yours the most attractive. It’s important not to get carried away in the heat of the moment, especially where budget is concerned, but here are a few common concessions buyers can make to get their offer over the line:
  • Be flexible on settlement date
  • Be prepped with your finances
  • Show commitment to working through your conditions
  • Keep your timeframes as short as possible

Once all conditions are met, you'll move on to the closing process. This involves signing the necessary paperwork, transferring funds, and officially taking ownership of the property.

Book A Chat With Our First Home Buyer Adviser

Do you need help with a plan for homeownership or pre-approval? 
Book a free 15-minute chat with our First Home Buyer specialist, Dustin.

DISCLAIMER: The content provided is for informational purposes only and should not be considered as professional advice. While we strive to ensure the accuracy and reliability of the information presented, we make no representations or warranties, express or implied, regarding the completeness, suitability, or availability of this information. Any reliance you place on such information is strictly at your own risk. We disclaim any responsibility for any loss or damage resulting from the use of the provided information. It is advisable and recommended you seek professional advice relevant to your specific circumstances before making any decisions based on the information provided.