Helping you succeed in life's financial journey

A beginner’s guide to home-buying methods

9 April 2019

Written by:

Tania Heighway - Mortgage & Insurance Adviser (Wairoa & Gisborne)


A beginners guide to home buying methods compressor

Buying your first home is one of life’s big milestones. Maybe you’ve been renting for a while and would like to settle into your own place, or you’re looking to join the property investment market...

Whatever the case, here’s an outline of four common sale methods, so you know what to expect when the time comes along.

Auction

Over the last few years, there has been a lot of media attention around real estate auctions, as they can be a very efficient way to sell.

But from a buyer’s point of view, purchasing by auction can be a little intimidating. While there is a potential for savings on the value of the property, everything happens really fast and it can be easy to blow the budget.

Most importantly, auctions are ‘unconditional’: once you have won the house, you are committed to purchasing it. So before starting to bid, research the property as much as possible and make sure your finance is ready. As for the deposit, you will usually need to pay a 10% deposit on the day, and the rest of it on settlement day.

Remember: even if the house of your dreams is being sold by auction, you can still make a pre-auction offer at any time. The vendor may accept it and cancel the auction, or move the auction to an earlier date to see if anyone else beats your price.

Negotiation

Negotiations (or ‘asking price’) are one of the most widely-used methods of selling property, allowing for both buyers and sellers to have some ‘leverage’ in the sale. There’s no end date for offers, so you can make one at any time.

Unlike auctions, with this home-buying method, you can either make an unconditional offer or attach conditions. For example, you may want to wait for a property inspection report or for your current home to be sold – or perhaps your mortgage hasn’t been approved yet.

These are all valid reasons to make a conditional offer. While unconditional offers usually get more attention, don’t forget that buying a house is a long-term financial commitment – and a decision that shouldn’t be made on the spot.

Tender

Buying by tender means that anyone who’s interested in the property can send in a written confidential offer (‘the tender’) by a certain deadline. In some cases, the vendor may give a price indication, but buyers are still welcome to offer more or less than that.

Just like negotiations, buying by tender allows you to attach terms and conditions to your offer. However, you’ll need to include a cheque for the requested deposit on the property (which will get returned if the tender is unsuccessful).

What’s next? The tenders are all presented to the seller, who will then decide whether they want to accept one of them or negotiate further.

Deadline sale

In many respects, a deadline sale is very similar to the tender process; the property is marketed for a set period of time, and buyers can make an offer at any time before then. Once again, as a buyer, you are allowed to attach terms and conditions.

However, one of the advantages of deadline sales over tender is that it has less ‘rules’ to follow; for example, offers are made on a standard sale and purchase agreement, rather than specific tender documents…

NEED AN EXPERT IN YOUR CORNER? 

At the end of the day, all these methods have their pros and cons, but no matter what road you end up taking, asking for expert help is always a good idea. Getting your finance ready with the help of a Mortgage Adviser and having a team of other professionals (agents, builders, laywers etc) in your corner adds confidence and peace of mind to the process.

We welcome you to contact us for a no-obligation 15 minute chat, and work out your next steps to home ownership.

 Ask a Mortgage Adviser

It's a service that comes at no cost to you*, and puts your interests first - learn more here.


You might also be interested in: 

How much can you borrow for your first home? 

> What is a Mortgage Adviser (and why use one)?


*Our standard Mortgage Advisory service is provided free of charge as we are remunerated (paid) by the banks, but we also provide specialised services and advice for non-conforming, credit-impaired, business and complex cases. After our free initial no-obligation consultation, we will advise you if a fee may need to be charged before we undertake any work. In many cases we may find a simple solution for you. 

An Adviser Disclosure Statement is available free and upon request. 


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