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House Buying Negotiating Tactics

There are plenty of house buying negotiating tactics out there - In New Zealand we love a bargain and we love to negotiate. The vendor of any house for sale will not hesitate to counter-sign an offer if it is not to their liking – so don’t be afraid to start house buying negotiations with a lower offer than you are prepared to pay.

There are exceptions to the ‘go in low’ theory and that is when you are involved in a tender, or ‘best offer’ situation – here you need to put your best offer forward.

Negotiating tactics come into their own when you are in a one on one negotiating situation with the vendor. So here are a few guidelines.

Don’t be influenced by the advertised price, or what the real estate agent is indicating, or even the RV - plan to pay what you feel the house is worth - using your experience of what you have seen to guide you (we have some suggestions on how to work out a houses market value) and offer accordingly.




Now, there is low and there is LOW. Don’t go too low - offer something that you would be pleased to get it at, but you feel is still fair, or at least in the ballpark. Sometimes negotiations can stall right from the beginning when an offer is just too low, and there is a feeling that no agreement will ever be reached.

If timing is something you want to use to your advantage - have a think about using a sunset clause.

Once you get that first counter-sign, you will have your first indication of what the vendor will accept. You may be partying on the inside as you are actually happy to pay this, but let’s just see if we can get them a bit lower. The meet in the middle technique in this situation is usually a good one - and often expected.

It is not always money that changes on a counter-signed agreement or that is up for negotiation - sometimes settlement date is a big issue and being flexible with this is as good as cash to some vendors. Find out if this is the case and use it in your negotiations.

Take time to think about it if the sale and purchase agreement comes back counter-signed you don’t have to respond straight away – give it a few hours or even sleep on it.

If the negotiations stall and you are still more then 10% away from the vendor’s price, then it is unlikely to happen. But once you in the 5% realm, then it would take some very stubborn people to let the negotiations fail.

If negotiations do fail and weeks later the house is still staying stubbornly on the market – if you are still interested – re submit you same last offer – the vendor may now be prepared to meet the market.

Need more help on making an offer – check out the Propertytoolbox house buying guide.

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Am I a Cash Buyer – Can I Make a Cash Offer?

Cash buyers and cash offers are two very different things but these terms are quite often used in the house buying process so it is a good idea to know what they mean. A ‘cash buyer’ is a buyer with the ability to make a ‘cash offer’. House buyers often refer to themselves as ‘cash buyers’ when they:
  1. Have ‘cash’ i.e. have money in the bank and don’t need to get a mortgage, or
  2. Have pre-approval from their bank for lending and will not need to sell an existing house in order to buy a new one (i.e. will not need a house sale condition).
But! Many ‘cash buyers’ will never end up making a cash offer… So what is a ‘cash offer’? If you make an offer with no conditions (an unconditional offer) then you are making a ‘cash offer’. It is not recommended that you make a cash offer unless you have completed all your due diligence regarding a house (i.e. know what you are getting into!). Due diligence can include, but is not limited to, a property valuation, building inspection, LIM, and making sure you have finance approved for that particular house for the price you are offering  i.e. all the stuff that you would normally have as a condition… Once a cash offer is accepted you have ‘gone unconditional’, skipping the period between ‘under offer’ and ‘gone unconditional’ that exists when a conditional offer is accepted. If you make a cash offer and it is accepted you have now bought a house and on the possession/settlement date you will be required to have the funds to complete the purchase. So you may be a cash buyer – but will you ever make a cash offer? That is for you to decide… Need to find out more about financing and making an offer – check out our Mortgages and Money section and the Propertytoolbox House Buying Guide.

For Sale By Auction – Before The Auction

So the house is ‘for sale by Auction’ - this puts a lot of new home buyers off – but get to know the process and you will be able to make good decisions about buying at auction. This article is here to help you with thinking about buying a house at auction and what you need to do before you go to the auction to bid.

Buying at Auction

Houses for sale by auction are rarely advertised with a price – this is often the reason for the Auction – the price of the property is hard to determine – and the seller of the property has decided that there will be enough unconditional interest in the property to make an auction a good option for selling & determining a market value. So you need to work out the price for yourself – you are ‘the market’ after all!




Sometimes a vendor is only after an unconditional sale, quickly, and an auction is seen as a way to achieve this – so don’t assume that if a house is for sale by auction that there is going to be lots of people interested or that you are going to have to pay a premium – you may be the only one who turns up on the day...

The Marketing Campaign - Before the Auction

A house for sale by auction is usually marketed over 2 – 4 weeks with the auction date included on all the marketing information for the property. If you want to buy a house for sale by auction you (usually) need to bid. You do not have to be at the auction in person, you can organise to bid over the phone, or you can send someone to bid on your behalf.

Sometimes, in the fine print, a vendor is open to offers before an auction, be aware of this and make sure you register your interest in the property with the real estate agent so that if any pre-auction offers come in – you get a chance to put in your offer too. A good real estate agent will never turn down to opportunity to create a competitive offer situation!

Buying at Auction is an Unconditional Offer

When you buy at auction you are buying unconditionally. This means that if you are the highest bidder, and the reserve is met, you have effectively made a cash offer that has been accepted and this is legally binding. If you are unable to make a cash offer, don’t give up, if a property does not sell at auction, conditional offers will usually then be considered.

Therefore, if you are planning on buying at auction, you need to make sure that all your conditions have been satisfied before you bid. Get your property valuation, building inspection, and your LIM, confirm your finance, get your lawyer to check the title and make sure you have done your personal inspections and research into the property.

Get Familiar With the Auction Process

Attend a couple of auctions as a spectator before your auction - find out who the auctioneer is going to be at your auction and check out their stlye - some are a lot more understandable then others, and most have different techniques for handling vendor bids.

Let's Do it! Buying at Auction

By the time you are standing (or sitting) in front of that auctioneer you have probably already spent a fair bit of money on the house. It is very important to not let that affect your bidding.

You need to set a budget and stick to it! Easier said then done when you already have an emotional and financial investment in the house. Perhaps someone bidding on your behalf is a better way to go...

Buying at Auction - Before the Auction
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The Propertytoolbox Home Buyers Guide

So now you are ready to bid – good luck! The full run down of Auction is in our House Buying Guide article ‘For Sale By Auction’.




House Sale and Purchase Agreement – Checklist

You are putting an offer in on a house, the sale and purchase agreement has been drawn up (usually by the real estate agent) it is time to sign - for your own peace of mind check that the sale and purchase agreement is correct.


Your Sale and Purchase Agreement Checklist

  • Date - is the agreement dated correctly (at the top).
  • Purchaser – The name(s) of the person(s) purchasing the house.
  • Property - The Address, Estate, and Legal Description of the property – these should be the same as on the title document which can be provided (and checked) by your lawyer.
  • The price you want to pay for the house – what you are offering - both numerically and in words.
  • Deposit - The deposit amount - these are funds that you must have available to pay if/when the contract becomes unconditional.
  • Possession - Check that this date (the date you want to take over ownership of the property) is correct.
  • Conditions - Check these are correct and agreeable to you.
  • Tenancies – Check to see if there are any
  • Futher Terms of Sale - These are also referred to as 'Conditions'. Check that any conditions you require are present, are worded correctly, and are agreeable to you.
  • Schedule 1 (Chattels) - Are these what you expect to be included - is anything crossed off or excluded.
  • Check that all the pages of the agreement are present
  • Check that no clauses in the agreement have been crossed out  - if they have - find out the reasons and the implications.
  • Check that all the pages and amendments have been initialled.

Who is the Purchaser on the Sale and Purchase Agreement?

Be careful when checking the name of the purchaser(s). You need to correctly name all of the people who will be owners of the property. These names can be people, company’s or trusts.

If you are unsure who the purchaser of the property is going to be – you can add ‘or nominee’ after the purchasers name (i.e. John Smith or Nominee) – this gives you scope to change the name.

It really is best to know exactly who/what is going to be purchasing the property when filling in the sale and purchase agreement. Remember any change to the contract – even a change to the name is considered countersigning.

Adding Conditions to Your Sale and Purchase Agreement

There can be conditions added to the sale and purchase agreement in both the 'Conditions' section on the first page and the Further Terms of Sale section later on in the document.

The 'Conditions' section provides a structure to the way in which the conditions are dealt with in the body of the agreement. Any conditions that are specified in the 'Further Terms of Sale' section can be drafted to meet your requirements - which is often preferable.

Tenancies Noted on the Sale and Purchase Agreement

Tenancies can be an issue – if the property is tenanted check to see what the tenants lease agreement is. If they have a fixed term tenancy they have a legal right to live in the house until the end of the fixed term.

If it is a periodic tenancy – 42 days notice needs to be given to the tenants (if you, or your family) are going to move in. For more info on tenancies check out the tenancy services website.

Check With Your Property Lawyer

It is always best, and we highly recommend, sending your sale and purchase agreement to your lawyer to look over before you sign. Especially if there is some unusual conditions, sections crossed out or anything you are unsure about or have questions about - run them past your property lawyer.

Are You Ready to Sign?

When you have finished checking have one final think - have you done all you possibly can to assure yourself that you know what you are signing?

Are you feeling pressured? Don’t worry about taking a bit more time to do some more checks and research. Don’t sign until you are assured that you know what you are committing to.

Sale and Purchase Agreement Checklist
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The Propertytoolbox Home Buyers Guide

For all you need to know about making an offer on a house – check out the Propertytoolbox house buying guide.




Making An Offer – The Highlights

Making an offer on a house is quite often done too quickly and not enough is known about the kind of commitment you are about to make.

An offer on a house quickly turns into a legally binding contract – you need to be aware of this – you will not be able to get out of a contract once it goes unconditional – so make sure you know what you are doing when you make an offer!

Making an Offer - the Highlights

In the Propertytoolbox Blog we have often delved into the subject of making an offer - here are our highlights:

1. Tendering on a House

We had a lot to say on this subject so we created a 3 part series on the tendering process. Firstly we covered off ‘Making a tender on a house - What is a tender' then we went into detail on 'Making a tender on a house - Putting in your tender’ and then we did the after match analysis in ‘Making a tender on a house - After your tender has been made’. Reading this series will let you in on the mysteries of the tendering process.




2. The Sunset Clause

A sunset clause is a condition that can be included by you or by the vendor in a sale and purchase agreement. They are not commonly used, but can be useful. In this article ‘Sunset clauses – What are they?’ we go over why and when you may want to use a sunset clause – and why the vendor may have included a sunset clause.

3. All About Countersigning

Countersigning is common – a very large proportion of house purchase negotiations involve haggling on price and conditions – and therefore will involve countersigning – especially in today’s market. This is actually one of the most common questions we get here at Propertytoolbox. So find out all about it in our ‘What is countersigning’ article.

The Propertytoolbox Home Buyers Guide

For more tips, tricks and advice – read on in our Home Buyers Guide. And if you are about to make that offer – head straight to our ‘making an offer on a house’ section.




Before Making an Offer – 2010 Blog Highlights

Making an offer on a house is a big step! The first time you make an offer can be quite nerve wracking! Here are some of this years best articles from the Propertytoolbox Blog that have tips, tricks and advice for you before you make that offer.

1. Take Your Time!

This is the best advice we can give – take your time, don’t be rushed. This is probably the biggest financial decision of your life so don’t hurry into it. We talk more about this in ‘Sleep On It!’ – which is part of our 10 key rules before you make that offer. And we delve a little bit deeper in the blog article ‘I Want To Buy A House - Take Your Time’.

2. Thinking About Getting The Experts In…

Should you get a building report, a valuation and a council LIM before you make an offer? This can be a tough one to decide. We talk about the pros and cons of getting these reports before making an offer in the article ‘Should I Get a Building Inspection, a Valuation and a LIM Before Making an Offer’ it could help you decide.

3. Question The Agent

The real estate agent will know stuff about the house, and if you ask they are obliged to tell you. So make sure to ask! This can be a helpful short cut to finding out information about the house that could affect your offer. Depending on the agent they can be a real mine of information – make the most of this. Here are the Propertytoolbox recommendations on what to ask in ‘Questions to Ask the Agent’.

4.  Ten Things To Look At When Viewing A House

Make sure you make the most of your house viewings. Right from the beginning, if you find yourself interested, start taking note of the things that really matter to you, things that will affect price, and that may be a deal breaker – no point wasting time! We have a top 10 things to look at blog article that gives you a place to start in ‘House Viewing Checklist – 10 Quick Visual Checks’.

There is a whole lot more good advice if you are thinking about making an offer on a house in the Propertytoolbox house buying guide – make sure to check out the I've found a house and making an offer sections.

Sunset Clauses – What Are They?

A sunset clause is a clause that you include with any other conditions (like a property valuation, building inspection, or a LIM) in your sale and purchase agreement when buying a house. It is a clause that puts an ‘Expiry Date’ on the offer.

Why Use a Sunset Clause

There are a number of reason sunset clauses are put into sale and purchase agreements - the most common being to put pressure on the vendor to make a decision about your offer, or to ensure you can continue to house hunt, and put offers on houses, if an offer you have submitted is not accepted or rejected within a reasonable timeframe i.e. about 2 days.




If you don’t have a sunset clause your offer remains current until accepted or rejected by the vendor. This can be painful as you may miss out on other opportunities – or you could find yourself having multiple offers accepted if you continue to make offers on other houses assuming old offers were rejected.

When to Use a Sunset Clause

Putting a sunset clause on a sale and purchase agreement is not often done but is a good idea when you want an answer to your offer quickly for whatever reason and especially in tender situations – where your offer may be kept ‘on hold’ until negotiations with someone else are finalised.

How Long Should a Sunset Clause Be?

A good amount of time to make a sunset clause for is approximately 2 working days – with the clause expiring at 4pm on the second day – allowing for paperwork to be processed before close of business if the offer is accepted at the last minute.

If you are making an offer late in the week, try to make sure the sunset clause expires before the open home crowd descends on your potential home on the Sunday – you may not want the competition!

Leveraging the Sunset Clause

The sunset clause gives you some degree of control over the timing of the offer acceptance or negotiations. If the sale and purchase agreement expires – it is not the end - you can always offer again, or extend the sunset clause on the same (or amended) agreement if you want.

If the agreement is accepted after the sunset clause expires, the offer has expired, and no legally binding agreement has been entered into. In this case it is up to you whether or not you want to proceed. You can choose to accept the original agreement or you can resubmit the offer with some changes suitable to you.

Vendors and Sunset Clauses

Sometimes the vendor may put a sunset clause in the sale and purchase agreement – if this is the case – it really pays to get your lawyer to look over it and to explain the implications of the clause.

Sunset Clauses - Get Your Property Lawyers Advice

Don’t forget - like any clause you put in your sale and purchase agreements – whether it is being put in by you or the vendor – get it checked over by your property lawyer!

Sunset Clause All The Details
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The Propertytoolbox Home Buyers Guide

After some more great home buying advice – don’t forget to check out our home buying guide!



House Buying Traps – A Property Lawyers View

There are many things to be aware of when buying a home, it really can be a minefield! One person to carefully listen to the advice of is your property lawyer. They have been through the house buying and selling process with many clients and have lots of great advice - and coming from the legal corner - it is always good advice to pay attention to!

Thanks to the team at Homelegal we have a property lawyers view of 'traps for home buyers'. Read and beware!

Traps

1. Misunderstanding the type of property

There are various types of property including fee simple, crosslease, unit title, company share and leaseholds. Each has advantages and disadvantages that you should be aware of prior to purchasing. Misunderstanding the type of property you are purchasing or the interests in the land may result in an unexpected impact on your enjoyment and use of the property.

2. Misunderstanding the agent's role

Always remember the real estate agent is trying to sell the property at the best possible price for the vendor (the person selling the property). Don't show all your cards to the agent at the outset and don't disclose your financial limit to them.

3. Signing agreement under pressure

Putting in an offer can be exciting. Don't feel compelled to sign an Agreement straightaway. Once an Agreement is signed it is a legally binding contract. Make sure you understand what it is you are signing. Get your lawyer to look over it.  If you are unable to make contact with your lawyer get the agent to include a solicitor's approval clause.

4. Insufficient conditions

You have an obligation of good faith to the vendor. You can't use a finance clause, for example, to get out of an agreement if you have simply changed your mind. Carefully consider the reports you wish to obtain on the property before you sign e.g. builder's report, valuation report or LIM report. If any of these reports do not meet the standard you require you are able to cancel the Agreement. However as soon as the conditions relating to the reports are formally confirmed the Agreement is binding on you.

5. Deemed consent conditions

Avoid conditions that are deemed to be satisfied unless you notify the vendor. These are dangerous. If you don't confirm or notify the vendor that the condition is not satisfied they are deemed to be satisfied.

These house buying traps were provided by the team at Homelegal. Looking for more home buying advice? Check out our home buying guide, or to find out just what a lawyer is doing for you during the house buying process our Settlement section has a lot of interesting info.

I Want To Buy A House – Take Your Time…

You have just seen the perfect house, you have looked at so many, you have missed out before, the real estate agent is asking when they can come around with the paperwork! It is all a bit of a rush... if you feel you can - take your time - sleep on it!

10 key rules 1-img At least take the time to make a few checks. First double check your 'not negotiable' list – this list is not a wish list it is an ‘absolutely must have list’ - it is the list where you have worked out what you need in a new home. If the house doesn’t tick every box then it is either the wrong house for you or your list needs some work! We have some tips on how to make a ‘not negotiable’ list here.

Another good thing to think about at this point is what you want to achieve with this house purchase, what did you picture when you thought about a new home? Did you see your kids going to a great local school? Did you see weekends gardening? Did you imagine an office room or a spare room for guests? Did you imagine yourself renovating, maintaining or putting your stamp on a house? Did you see your family somewhere safe and warm? And how much did you want to spend?

It is a big decision, and it could be an expensive mistake if you get it wrong. So after sleeping on it and applying some rational though - you could be surprised at how your feelings have either firmed or wavered.

So take your time to make your decision, could this house be your home? If it is the right house for you it will still be available, and if it is not, there really will be another!

‘Sleep on it!’ Is the 1st of the Propertytoolbox ‘10 Key Rules before you make that offer’ – check out the other nine!

Want some more helpful advice for the house hunt? The house buying guide has it all!

And if you want a helpful tool for deciding just what it is you want in a house - the Propertytoolbox house visiting checklist is a good place to get some ideas.

Making a Tender on a House – After the Tender Has Been Made

Last post we talked about how to put in a tender, and before that we explained just what a tender is. This post is all about ‘after the tender’. Sometimes with all that is going on with just making a tender, once the tender has been submitted you find yourself saying - What now? Well here is what to expect.

What Happens After the Tender is in?

The tender(s) received are all kept sealed (confidential) and are not opened until after the close of the tender. The tenders will be opened with the vendor present, this may not be until a few hours after the tender closes.



The details of each tender will be explained to the vendor as they are opened. If there is more then one tender, the agent will usually document the key points of the individual tenders as they are opened on a separate piece of paper for the vendor to review.

The vendor can choose to accept any tender (not necessarily the highest one), reject all the tenders, or enter negotiations with one or more of the tenderers.

If the vendor does not receive the price or terms they want, they may choose to start negotiations. The submitters of the top tenders can be asked to re-submit a new offer, or negotiations can continue with one. This can mean that tender negotiations continue well past the tender time/date.

When Will I Hear if my Tender is Successful?

You should hear back from your agent within a few hours of the tender close time. The agent will tell you whether or not you have been successful. If you are, you now have a contract with the vendor and can start working through your conditions (if any). If your tender has not been successful, your deposit cheque will be returned.




Your agent may come back to you asking for an improvement in your offer (more money, less conditions), there may be another offer very close to yours, or your offer is the most favourable offer, but the vendor is after a bit more i.e. the vendor wants to enter into negotiations with you, the agent may even come back to you with a countersigned agreement.

Think through any changes in your offer carefully, remember you already put in your ‘best offer’ when you submitted the tender!

What If I Don't Hear Anything About the Tender?

If you do not hear within a few hours the result of the tender, contact the agent and discuss the situation. Agents often hold off contacting any of the tenderers until a contract has been agreed.

In this situation make sure you are comfortable with what is going on. Ultimately, if the tender deadline has past, and the vendor is in negotiations with another party, your offer is now considered unaccepted and you are free to pursue other house purchase opportunities.

What Happens After the Tender on a house
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The Propertytoolbox Home Buyers Guide

Just starting out on the house hunt? Not even sure if you can afford a house? Maybe a free chat with a mortgage broker could help you find out.