There are four main methods of selling a home in New Zealand: negotiation, auction, tender and deadline sale. Your real estate agent will help you choose the best option.
Auctions are a popular way to sell property in New Zealand. But they’re not the only option. You need to understand how the different sales methods work in order to choose the best for your property. It’s one of the first steps to selling your home.
Common methods of sale in New Zealand
- Auctions: Auctions pit buyers against each other in a competitive environment and can result in a quick sale.
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- Negotiation: Negotiation opens the sale up to buyers who have conditions such as finance or a building report who can’t bid at auction.
- Tenders and deadline sales: Tenders and deadline sales are more private and encourage buyers to make their best offer first because they usually only have one chance to get the price right.
1. Auction - pros and cons
Auctions pit buyers against each other They bid the price up until they pass the reserve price and one wins. Auctions are one of the most popular methods of sale in New Zealand because they often result in a quick, unconditional (cash) sale. Sellers and agents like auctions because they create a sense of urgency, and buyers sometimes pay more than they might have without the competition of other bidders. Winning bidders are committed to purchase the property. If the auction doesn’t exceed the reserve price, the auctioneer will negotiate with the highest bidder.
Watch out for:
- The home may not sell at auction if there is only one bidder, or the reserve price is too high.
- First-home buyers are often locked out because banks require conditions such as getting registered valuations on the property.
- It can be more difficult to get the price you want, if buyers are aware of the price the property has passed in at.
- If the reserve is too low, you may sell too cheaply.
When the hammer comes down at an auction the property is sold. Photo / Fiona Goodall
2. Sale by negotiation - pros and cons
With a negotiated sale, buyers make offers via the real estate agent. You counter-offer until a price is agreed. Properties can be offered for sale with or without a fixed price. Some negotiated sales start with “offers over” a certain figure. It’s quite common to turn to negotiation and put a price on the property after it fails to sell by other sales methods.
Watch out for:
- It can be hard to pick the right price to market the property at.
- If the asking price is too high, buyers may not come forward.
- With no fixed auction or tender date, the sale can get drawn out.
- Buyers are not subject to the same urgency as an auction.
- When prices are listed, buyers may assume the house failed to sell by other methods, encouraging them to make low offers.
3. Tender - pros and cons
With a tender, buyers are invited to submit formal written offers before a deadline and provide a 10% deposit, which is refunded to unsuccessful bidders. The property can be listed “for sale by tender unless sold prior”, meaning the seller can accept offers early. The seller has five working days after the tender closes to choose which offer, if any, they want to accept. The vendor can choose to negotiate with the buyer whose offer is accepted, should the buyer agree. Tenders have specific sale and purchase terms set out in the ADLS/REINZ Sale & Purchase by Tender agreement.
Watch out for:
- If buyers are unaware of what the competition is prepared to pay, they may offer lower prices than at auction.
- Some buyers may be put off because they have to pay a 10% deposit with no guarantee of winning.
- If the property doesn’t sell at tender you could end up in a long negotiation process.
- Buyers may miss the tender date.
4. Deadline sale - pros and cons
A deadline sale (AKA “deadline treaty” or “private treaty” ) is half way between a negotiated sale and a tender. The property is marketed without an advertised price and buyers submit confidential offers by a fixed date. The seller chooses between the offers, but is not obliged to accept them. Unlike tenders, you can accept an offer and sell prior to the deadline date. This is a good option where the price is uncertain. A key advantage of a deadline sale is you don’t have to stick to all the terms and conditions of a tender.
Watch out for:
- Buyers are not subject to the same degree of urgency as in an auction.
- The sale process is often longer than an auction.
Large, unique or very expensive homes are often sold by deadline sale or by way of tender, although some are put up for auction. Photo / Getty Images
5. Other sales methods
- Multi-offer process. Where there is more than one offer on a property by negotiation, a “multi-offer” sale takes place. This encourages buyers to make their best offer. The vendor can choose an offer based on price, conditions or other factors, or to negotiate further. Real estate agents are required by law to treat all buyers fairly. Find out more about multi-offer sales here. Find out more about the best time to sell your house.
- Mortgagee sales. If homeowners default on their mortgage payments the bank will eventually sell the property to recover the money it is owed. Buyers sometimes get a bargain with mortgagee sales. But there are risks that the former owner will damage the property or remove fixtures and fittings including bathrooms and kitchens.
6. Sole agency or multi-agency?
Most properties in New Zealand are sold by one real estate company exclusively (AKA “sole agency”). If you choose to have the property sold by multiple agencies (“multi-agency” or “general agency agreement”) you sign agreements with more than one. The advantage of sole agency sales is that agents say they work harder, knowing only they can sell the property. On the other hand, a multi-agency sale puts your property in front of more buyers in theory and the agencies may compete against each other for the sale. If a sole agency agreement expires and you sign with other agencies it’s important to review both agreements carefully. If you sell to a buyer who was introduced by the first agency you may have to pay double commission. Find out more about multi agency sales.
Read part four of our Home Sellers Guide: Choosing a real estate agent to sell your house
