1. by offer and negotiation
2. by auction
3. by tender.
Most people sell through an agent, but private sales are becoming more common.
Most homes are still sold this way. You set an asking price, put your home on the market and if a buyer is interested they make an offer. If you’re using a real estate agent and someone wants to make an offer the agent usually contacts other interested buyers in case they also want to make an offer – so you could end up with several offers at once.
Offers are usually made using the standard sale and purchase agreement form developed by the Real Estate Institute and Auckland District Law Society.
If you want to accept, you just sign the form. But if you want to negotiate you go back with a ‘counter offer’ by putting your change on the form and then signing it. If the buyer signs the change the deal is done – or they may come back with another counter offer themselves. This process is repeated until you and the buyer agree on the price and all the conditions – or you can stop at any stage. Your real estate agent will act as the go-between and try to help you make the deal.
Once both you and the buyer have signed the form and initialled all the changes, the agreement becomes legally binding. The buyer then pays the real estate agent a deposit (usually 5-10% of the sale price).
Is the offer conditional?
The buyer will normally have several conditions in the agreement, such as getting a building consultant’s report, or arranging finance. Once these conditions are met the agreement between you becomes unconditional and you are both legally bound to go ahead with the deal. The real estate agent then takes their fee out of the buyer’s deposit and pays you the rest.
If either you or the buyer back out at this stage it usually means the lawyers (and maybe the courts) become involved and penalties and costs may be awarded.
Negotiating the deal
As the seller you can also negotiate on the price and the other conditions. For example you might be prepared to accept a lower price if the buyer makes an unconditional offer or agrees to give you more time to find another home. Or you might want to keep some of the chattels.
If the buyer wants to make their offer conditional on selling another home you can add an ‘escape clause’ in case you get a better offer from someone else. It means you can give the first buyer a deadline to go unconditional and if they can’t meet this you can accept the other offer.
Auctions are often used if a property is unusual or hard to value because it has a special feature, such as a great view. The main advantages of selling by auction are that competition between buyers can push the price up – and the sale is unconditional.
The way it works is that interested buyers bid for your home on the auction day. You usually set a reserve (the minimum you’ll sell for) and once bidding is over this level the home is sold to the highest bidder, they pay a deposit and settlement is usually 20 days later.
Two important things to understand
1. you shouldn’t tell anyone your reserve – only the auctioneer just before the auction starts
2. you need to do your homework before setting the reserve, because if a home sells at auction it is unconditional – you can’t negotiate further.
What if the reserve isn’t reached?
If the bidding doesn’t reach the reserve the home is ‘passed in’ and the auction ends. However, you can then negotiate with the highest bidder or, if that doesn’t work out, with the other bidders.
You can also sell before the auction if you receive a good offer – but you would generally expect the offer to be unconditional. Usually if this situation arises the agents will notify everyone interested in your home, so they have a chance to put in offers as well.
One drawback to selling by auction is the extra cost of promotion, which you will have to pay on top of the real estate fees.
3. Selling by tender
Tenders give the seller a chance to see what interest there isin their home, without having to put a price on it. Tenders can also be useful if you have a set date you need to sell your home
by, but they generally work best for special or unique properties.
Potential buyers are invited to submit written offers, usually by a set date. You are not obliged to accept any of the offers, and can choose to negotiate with any of the people who have made an offer if you wish.
If your home is likely to attract a lot of interest, a tender may help you get the best price for it. This is because potential buyers don’t know what other people may offer and tend to put in their best price with few if any conditions. On the other hand tenders can limit the number of people who are prepared to make an offer – some are put off by the closed nature of the tender process.
You can tender your home using the services of a real estate agent, or privately through a lawyer or another agent. If you use a real estate agent they will arrange everything. You will pay their normal fees and probably extra for advertising.
|Offer and negotiationCan be done through a sole or general agency, or privately||
|Auction Can only be done through a sole agency||
|TenderCan only be done through a sole agency, or privately||