What is a real estate auction?
Selling a property at auction is a commonly used method of sale in New Zealand. The property is advertised with a date on which the sale will be held and the location of the auction. All potential purchasers can bid for the property at the auction.
What is the reserve price?
The vendor usually sets the reserve price prior to the auction. The reserve is the minimum figure that the auctioneer is instructed to sell the property for at the auction. Usually the reserve figure remains confidential and is not disclosed to any purchasers.
How do I bid at the auction?
The auctioneer will ask for an opening bid and will then nominate the increments by which the bidding can be raised.
You can bid by either:
• Raising your hand. You can bid by either:
• Calling out your bid.
• Nodding your head when you catch the auctioneer’s eye.
Can I purchase the property before the auction day?
If the property is advertised with (if not sold prior) in the marketing material, the vendor may consider offers for the property before the auction date. If the property is advertised as (will not sell prior) then the property will not be sold before the auction date.
Conditions of the Sale for the auction:
When you bid at an auction you must be in a “cash” position. You will need to complete any due diligence on the property prior to the auction.
Deposit:
A deposit equal to 10% of the purchase price is payable on the day by the purchaser if you are successful. This may be paid by way of: Bank cheque. Personal cheque. (If paying by personal cheque a special clearance on the funds will be sought on the first business day after the auction) Electronic funds transfer immediately after the auction.
Settlement Date:
The vendor will nominate a settlement date on the “Terms & Conditions of Sale for Auction” a copy of this contract is available to all interested purchasers prior to the auction date. Should this settlement date not be suitable for you as a purchaser the vendor’s salesperson may be able to arrange a more suitable date with the vendor. This needs to be negotiated prior to the auction and documentation signed by the vendor in the form of a “side agreement”. This will state the date on which the settlement date will be, and a copy will be given to you before the auction. You are then able to bid at the auction on the basis that your settlement date is different for the standard auction terms of the sale.
Can someone else bid for me if I am unable to attend the auction?
Yes you can nominate someone else to bid on your behalf as long as suitable documentation has been completed before the auction date. Or you may bid by phone on the day which also requires documentation completed before the auction date.
What happens if I am the successful bidder at the auction?
Immediately after the auction, you will be required to sign the contract, and pay the deposit for the property.
What if the property doesn’t sell?
If the reserve price is not reached, the property is passed in to the highest bidder. The highest bidder is then offered the first right to purchase the property immediately after the auction at the vendor’s reserve price. If a sale is not completed immediately following the auction, the property will be offered for sale to all other interested parties.
Legal Advice:
Before signing any agreements, both the buyer and vendor should seek legal advice.
When you bid at an auction you must be in a “cash” position. You will need to complete any due diligence on the property prior to the auction.
Deposit:
A deposit equal to 10% of the purchase price is payable on the day by the purchaser if you are successful. This may be paid by way of: Bank cheque. Personal cheque. (If paying by personal cheque a special clearance on the funds will be sought on the first business day after the auction) Electronic funds transfer immediately after the auction.
Settlement Date:
The vendor will nominate a settlement date on the “Terms & Conditions of Sale for Auction” a copy of this contract is available to all interested purchasers prior to the auction date. Should this settlement date not be suitable for you as a purchaser the vendor’s salesperson may be able to arrange a more suitable date with the vendor. This needs to be negotiated prior to the auction and documentation signed by the vendor in the form of a “side agreement”. This will state the date on which the settlement date will be, and a copy will be given to you before the auction. You are then able to bid at the auction on the basis that your settlement date is different for the standard auction terms of the sale.
Can someone else bid for me if I am unable to attend the auction?
Yes you can nominate someone else to bid on your behalf as long as suitable documentation has been completed before the auction date. Or you may bid by phone on the day which also requires documentation completed before the auction date.
What happens if I am the successful bidder at the auction?
Immediately after the auction, you will be required to sign the contract, and pay the deposit for the property.
What if the property doesn’t sell?
If the reserve price is not reached, the property is passed in to the highest bidder. The highest bidder is then offered the first right to purchase the property immediately after the auction at the vendor’s reserve price. If a sale is not completed immediately following the auction, the property will be offered for sale to all other interested parties.
Legal Advice:
Before signing any agreements, both the buyer and vendor should seek legal advice.
PRICE BY NEGOTIATION
What is price by negotiation?
The property is placed on the market with an asking price, or “by negotiation” with no fixed asking figure. Offers are invited from purchasers who have inspected the property. All contracts relating to land must be in writing, so the offer to the vendor is drawn up by the salesperson on the Real Estate Institute Sale and Purchase agreement.
This offer is signed by the purchaser and usually accompanied by a 10% deposit cheque. The deposit is usually payable to the real estate agents’ trust account. The deposit is normally asked for at the time the purchaser makes the first offer on the property and is a demonstration of the seriousness of the offer.
The offer may be either:
• Conditional - having one or more conditions to be met within a specified period
(eg. subject to a building inspection).
• Unconditional. No conditions are included.
(eg. subject to a building inspection).
• Unconditional. No conditions are included.
The offer is then presented to the vendor for their consideration. If the offer is at an acceptable level, the vendor will sign as acceptance and the sale is concluded. If not at an acceptable level, the offer may be counter-signed by the vendor and sent back to the purchaser for their consideration. This may happen several times until the price and conditions are satisfactory to both parties and a sale is concluded.
At this point, the Sale and Purchase agreement is dated, and the agreements are forwarded to both the vendor’s and the purchaser’s solicitors. It is normal practice for the salesperson to give copies of the completed agreement to the vendor and the purchaser as well. They then have documentation of when the possession date is and of what chattels go with the property.
Settlement/Possession Date:
The process by which a sale and purchase of property takes place. It is commonly conducted through lawyers and involves the payment of the purchase price (less any deposit already paid) in exchange for the Certificate of Title, a Transfer Document, and a release of previous charges over the property. Keys to the property are usually either handed over to the purchaser or his/her lawyer at settlement, or able to be picked up from the salesperson immediately following settlement. Normally, the settlement date and the possession date are the same.
TENDER
What is a real estate tender?
The process is a private and confidential means of purchasing/selling real estate to determine the true market value of the property at that time. The property is put up for sale with an advertised date and time for all offers from purchasers to be presented.
Tender Documentation:
Tender documentation is available to all interested purchasers. This usually consists of either a specific Tender contract, or the standard Sale & Purchase contract attached to specific terms of sale for the tender. Two copies of the forms are required. Purchasers complete the forms, stating the amount that they are offering, settlement date and any
conditions of their purchase, if any.
A deposit by way of bank cheque or electronic funds transfer in favour of the agents trust account is attached to the contract and both copies are put into an envelope and delivered to the location of Tender Box. This is often the office of the Real Estate company offering the property for sale, but it can also be at the office of the vendor’s solicitor or another appropriate location. All offers remain in the tender box until after the time of closing of the tender.
The tender documents are different from a normal Sale and Purchase Agreement and you may wish to seek legal advice before submitting your tender.
Conditional Offers:
Your offer may be conditional; however an unconditional cash tender will be more attractive to the vendor.
After closure of the tender:
After the tenders close the vendor will open and view all offers presented. They then may choose to accept any or none of the tenders, or negotiate with the highest or any tender. The more attractive the offer the more likely the chance of having your tender accepted.
In most cases a decision is reached on the tender day. For this reason, your submitted tender should be your best offer. Don’t rely on the opportunity to negotiate with the vendor after the closure of tenders as you may not get the opportunity. The tender offer must state the purchase price as an exact dollars amount
Can I buy before the tender day?
The property should not be able to be purchased prior to the closing of tenders. However in recent years it is commonly seen that tenders are offered for sale with the words “if not sold prior” which indicates that the vendor would consider an offer prior to the closure of the tender. A Tender is not allowed to be opened before the closing time & date.
Acceptance of a tender:
If the vendor chooses to accept an offer they will then sign the contract submitted by the purchaser. A copy will be given to both purchasers and the originals sent to the parties’ solicitor. The deposit cheque will be banked. The total deposit is usually 10% of the purchase price.
Confidentiality:
All Tenders including the identity of the Tenderers will be kept confidential.
Legal Advice:
Before signing any agreements, both the buyer and vendor should seek legal advice.
SET SALE
Set sale is a date by which the vendor is accepting offers on their property. Offers are made on a confidential basis by private treaty.
The buyers must make an offer for the property in the usual way (as per Price by Negotiation details above) but they must understand that they are in a multiple offer situation.