Making an offer

You’ve found the house you want. Here are the three most common ways to make an offer, and an outline of what you need to do before you make your offer.

4 minute read

Be prepared before you make an offer

To avoid surprises, it’s good to do any due diligence before you make an offer. Due diligence means doing your homework on a property, and in some cases, like auctions, you need to do this before making an offer. It usually involves the following steps.

Read the LIM report

Check the Land Information Memorandum (LIM) report - you can get a copy from the local council, or sometimes it’s provided by the real estate agent. The LIM report covers the property’s history, building compliance for alterations, flooding risk, etc.

Get a building inspection

Arrange for a building inspection, to check for any structural damage or things that need fixing. Many offers are dependent on an inspection, and it also lets you renegotiate or withdraw your offer if there is significant damage.

Get yourself a lawyer

Lastly, hire a lawyer. They’ll help you with the process by searching the property title, which includes the type of property (e.g. cross lease), the owner, and interests on the property (the rights to use the property).

They’ll also offer legal advice on potential issues, like property boundaries or body corporates, talk you through the sale and purchase agreement, and negotiate with the seller’s lawyer to make sure any conditions you specify are met. It might sound overwhelming, but it’s their job to help it all make sense, so make sure you ask any questions you have.

1. Making an offer by negotiation

Properties are often listed with an advertised price, and the real estate agent might also give you an idea of what the seller is looking for. You can make an offer on the property through a real estate agent, or directly to the owner if it’s a private sale. You can then negotiate until you’ve reached an agreement. There are two types of offers you can make - conditional or unconditional.

Conditional offer

A conditional offer lets you specify conditions that need to be met before the sale goes through, like getting a building inspection, LIM report, or finance approval. You need to meet those conditions within an agreed timeframe e.g. five working days.

Unconditional offer

If no conditions are specified, the offer is unconditional and you are legally bound to buy the property. You need to do all your due diligence before you make an unconditional offer, and you also need to talk to the bank to make sure you’ve met any conditions they set and the property is suitable from their perspective.

2. Buying at auction

In an auction, the seller sets a reserve (the minimum price they’ll accept). When the bidding begins, if the price reaches the reserve or over, the highest bidder wins and is legally bound to buy the house. This is also an unconditional offer, which means you must do any due diligence beforehand and have your deposit ready – usually 10%, unless a lower amount is agreed beforehand. You should always talk to your bank before you go to an auction, or make an unconditional offer.

3. Making an offer by tender

If a house is for sale by tender, everyone who is interested puts forward their best offer by a set date, not knowing what anyone else is offering. You can attach conditions to your offer such as finance approval. The seller then chooses their preferred offer, which may not be the highest. For instance, they might choose an offer that’s lower but has fewer conditions, over a higher offer with a lot of conditions. Again, make sure you talk to your bank before you make an unconditional offer by tender.

After you’ve made your offer

If the offer is conditional, you need to meet any conditions by the due date. Once the conditions have been met, the offer becomes unconditional and neither you nor the seller can change their mind. At this point, you usually pay the deposit - and you’ll be required to pay the rest of the purchase price on the settlement day.

Next, it’s time to finalise the details of the purchase, and your home loan (or mortgage).

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This material is for general information purposes only and does not constitute, and is not intended as, personalised financial advice or as a replacement for legal advice. BNZ strongly recommends you seek advice specific to your personal financial or legal situation from a qualified adviser.