The steps to buy a property via negotiation
I get asked almost daily what the steps are to buy your first home.
As a first-time homebuyer, this might seem like a lot to take in initially. However, I want to reassure you that buying a home is achievable without too much stress if you have a dedicated team of advisers working with you.
Phase 1: Preparation & Making an Offer
Identify Property & Initial Due Diligence: You've found a property you're interested in. You've likely viewed it, researched the area, and perhaps done some preliminary checks. Initial due diligence include checking in with me as your adviser if the property would be acceptable as a security for the bank. You would need to ask for a property pack from the real estate agent. The property pack must include a draft copy of the sale and purchase agreement and email it to me. I will then advise to you on whether the bank will accept the property as security
Engage a Solicitor Early (Highly Recommended): Before making an offer, it's wise to engage a solicitor. They can provide initial advice, explain the process, review the standard Sale and Purchase Agreement (S&P) template, and help you understand potential conditions.
Formulate Your Offer: Decide on the price you're willing to pay, the amount of deposit, your desired settlement date, and, very importantly, any conditions your offer will be subject to. Common conditions include:
Finance Condition: Your offer is subject to obtaining satisfactory finance approval from your lender.
LIM Report Condition: Subject to obtaining and approving a Land Information Memorandum (LIM) from the local council.
Builder's Report Condition: Subject to obtaining a satisfactory building inspection report.
Insurance Condition: Subject to being able to obtain satisfactory insurance for the property.
Sale of Buyer's Property Condition: If you need to sell your current home to fund the purchase.
Other specific conditions like a toxicology (meth) test or valuation.
Prepare the Sale and Purchase Agreement (S&P): Your offer is formally made using a written S&P agreement (commonly the ADLS/REINZ Agreement for Sale and Purchase of Real Estate). Your solicitor will typically prepare this for you or review one provided by the real estate agent, ensuring your conditions are correctly worded.
Submit the Offer: The signed S&P agreement (your offer) is presented to the vendor (seller), usually through the real estate agent.
Phase 2: Negotiation & Conditional Agreement
Vendor Response & Negotiation: The vendor will review your offer. They can:
Accept it: As is.
Reject it: Outright.
Make a Counter-Offer: They might propose a different price, settlement date, or changes to conditions.
This stage can involve back-and-forth negotiation, usually facilitated by the real estate agent, until both parties agree on all terms.Agreement Reached ("Conditional Agreement"): Once all terms are agreed upon by both you (the buyer) and the vendor, both parties sign the S&P agreement (or the final counter-offer document). At this point, you have a legally binding agreement, but it is "conditional" on you, the buyer, satisfying the specified conditions by their due dates.
Phase 3: Satisfying Conditions
Working Through Your Conditions: You now have a set period (as specified in the S&P) to work on satisfying each of your conditions. Your solicitor will guide you through this. This involves:
Finance: Formally applying for and securing loan approval from your bank/lender.
LIM Report: Ordering the LIM from the council and having your solicitor review it for any red flags (e.g., unconsented works, hazards).
Builder's Report: Engaging a qualified building inspector to assess the property's condition and provide a written report.
Insurance: Obtaining quotes and confirmation that the property is insurable on terms acceptable to you (and your lender).
Other Conditions: Fulfilling any other specific conditions included in your offer.
Home Insurance: You would also need to arrange a quote for home insurance on the property. The property must be insured for an amount sufficient to repair or replace the property completely in a total loss situation . The policy would need to be full insurance with no exclusions. The lender would also need to be noted as a mortgagee on the insurance.
Outcome of Conditions:
If issues arise (e.g., finance is declined, the builder's report reveals significant problems, the LIM shows unconsented work, or you can't get insurance), you generally have options under the S&P agreement. You might:
Try to negotiate a solution with the vendor (e.g., a price reduction to cover repair costs).
Request an extension to the condition deadline.
Terminate the agreement (if a condition is legitimately not met, you can usually withdraw from the purchase, and your deposit, if paid, is typically refunded – but this depends on the specific wording of the S&P). Your solicitor will advise on this.
Your solicitor would be able to advise you on next steps if issues arise. I highly recommend that you discuss these issues with your solicitor and not the agent or the solicitor. Your solicitor represents you and acts in your best interest.
Phase 4: Going Unconditional & Pre-Settlement
Confirming Satisfaction of Conditions ("Going Unconditional"): Once you have satisfied all your conditions (or chosen to waive any), your solicitor will formally notify the vendor's solicitor that the agreement is now "unconditional." This means both parties are fully bound to complete the sale.
Paying the Deposit: The deposit, as specified in the S&P, is usually paid in full (or the balance paid if a smaller initial deposit was made) to the stakeholder (often the real estate agency's trust account or the vendor's solicitor's trust account) once the agreement becomes unconditional.
Solicitors' Pre-Settlement Work: In the lead-up to settlement day, your solicitor and the vendor's solicitor will:
Liaise with your bank to arrange for the mortgage funds to be drawn down.
Prepare necessary legal documents for the transfer of ownership (e.g., Authority and Instruction forms (A&Is), and the electronic transfer instrument).
Calculate the final settlement statement, which includes adjustments for council rates, water rates, and body corporate levies (if applicable), so you know the exact amount to pay on settlement.
Buyer's Pre-Settlement Preparations: You will need to:
Arrange for your contents and property insurance to commence from the settlement date.
Contact utility providers (electricity, gas, internet) to arrange connections for the new property.
Organise movers.
Pre-Settlement Inspection (PSI): Usually 1-2 days before settlement, you have the right to conduct a pre-settlement inspection of the property. This is to ensure the property is in the same condition as when you agreed to purchase it (fair wear and tear excepted), and that all chattels included in the sale are present and in working order as agreed. If any issues are found, you raise them with your solicitor, who will liaise with the vendor's solicitor to seek resolution before settlement.
Transfer of Funds to Your Solicitor: You will need to transfer the balance of the purchase price (plus any costs and adjustments as per the settlement statement) into your solicitor's trust account in cleared funds before settlement day.
Phase 5: Settlement Day
Solicitors Liaise & Funds Transferred: On settlement day, your solicitor will liaise with the vendor's solicitor. Once your solicitor confirms they hold cleared funds (from you and your lender), they will pay the settlement sum to the vendor's solicitor.
Title Transfer: Upon confirmation of receipt of funds, the vendor's solicitor will authorise the release of documents that enable the legal title of the property to be transferred into your name. This is done electronically via Land Information New Zealand (LINZ).
Keys Released: Once settlement is complete and the title transfer is underway, the real estate agent is usually notified by the vendor's solicitor and will then be authorised to release the keys to you.
Possession: You now have legal possession of the property!
Phase 6: Post-Settlement
Final Reporting: Your solicitor will provide you with a final reporting letter, a statement of account, confirmation that the title has been registered in your name and will notify the local council of the change in ownership for rates purposes.
The process would look different for other methods of buying property, ie auction, negotiation, tender and private sale.
I recommend that you seek legal advice before entering into a contract to purchase a property.