A First Home Buyer's Guide to Real Estate Terms and Sale Methods in New Zealand

How Properties Are Sold in New Zealand

When someone decides to sell their home, they choose how they want to sell it. This is called the "method of sale" and it affects everything from how the price is set to how you make an offer and what conditions you can include. Each method has its own advantages and disadvantages for buyers, so it pays to understand how they work.

Auction

An auction is a public sale where buyers gather together and bid against each other for a property. The person who makes the highest bid above the reserve price wins the right to buy the property. The reserve price is a minimum amount that the seller has agreed to accept, and it is kept secret until either someone bids above it or the auction ends.

Auctions are exciting but they can also be stressful and risky for first home buyers. The most important thing to understand about auctions is that they are unconditional. This means you cannot include any conditions in your offer, such as "subject to finance" or "subject to a building inspection." When the hammer falls and you are the winning bidder, you are legally committed to buying that property. There is no cooling-off period and no way to back out without serious financial and legal consequences.

Because of this, you need to complete all your homework before the auction day. This means getting your finance fully approved (not just pre-approved), having a lawyer review all the legal documents, getting a building inspection done, reviewing the LIM report, and being absolutely certain you want to buy that property at the price you are willing to bid.

Auctions work well in hot markets where there is a lot of competition for properties. Sellers like them because they can create urgency and sometimes push prices higher than expected. However, for first home buyers, they can be challenging because you need to have everything sorted in advance, and you are competing in a high-pressure environment against potentially more experienced buyers.

Learn more: What First Home Buyers Need to Know When Considering Buying at Auction

Deadline Sale

A deadline sale is a method where the property is listed with a specific date and time by which all offers must be submitted. Unlike an auction, you do not know what other buyers are offering, and you only get one chance to put your best foot forward.

The good news is that offers in a deadline sale can be conditional. This means you can include conditions like "subject to finance" or "subject to a satisfactory building inspection," which gives you some protection if things do not go as planned.

However, there are some things to be aware of. The seller is not required to accept the highest offer or any offer at all. They might choose an offer that is slightly lower but has fewer conditions, or they might choose a buyer who can settle sooner. The seller can also accept an offer before the deadline if they receive one they are happy with, so if you are interested in a property, do not wait until the last minute to submit your offer.

Deadline sales create a sense of urgency, which can sometimes lead buyers to make rushed decisions or offer more than they should. Take your time to do your research, understand what the property is worth, and submit an offer you are comfortable with. If you miss out, there will be other properties.

Price by Negotiation

Price by Negotiation, often shortened to PBN, is a sales method where no asking price is advertised. Instead, interested buyers submit offers and the seller negotiates with them through the real estate agent.

This method can be frustrating for first home buyers because it lacks transparency. Without an asking price, it can be hard to know if a property is even within your budget, and you might waste time viewing homes that are completely out of reach.

If you are interested in a property listed as Price by Negotiation, ask the real estate agent for a price indication or feedback from other buyers. They should be able to give you a rough idea of what range the seller is expecting. You can also research recent sale prices for similar properties in the area to get a sense of what might be reasonable.

The advantage of this method is that there is room for negotiation. You can submit a conditional offer and work with the seller on terms that suit both parties. Do not be afraid to start with a lower offer and negotiate upwards if needed.

Asking Price

When a property is listed with an asking price, the seller has set a clear expectation for what they hope to receive. This is often the most straightforward method for first home buyers because you know from the start whether a property is within your budget.

The asking price is not necessarily the final price. It is a starting point for negotiation. In a quiet market, sellers might accept less than their asking price. In a busy market, properties might sell for more. Either way, having an asking price gives you something concrete to work with when arranging your finance and deciding what to offer.

You can make conditional offers on properties with an asking price, which gives you protection if your finance falls through or if the building inspection reveals problems. This flexibility makes asking price listings a good option for first home buyers who need time to finalise the details.

Tender

A tender is a formal process where all offers are submitted in writing by a set deadline. Each offer is sealed and confidential, meaning you do not know what other buyers are offering, and they do not know what you are offering.

Your tender will include your proposed purchase price, your conditions, your preferred settlement date, and any other terms you want to include. The seller reviews all tenders after the deadline and can choose to accept one, decline them all, or enter negotiations with one or more preferred buyers.

Tenders are often used for higher-end properties, commercial properties, or unusual properties where the seller wants to see what the market is willing to pay. They can feel intimidating because of their formal nature and the lack of transparency, but they also offer an opportunity to submit a well-thought-out offer on your own terms.

Key Real Estate Terms Explained

Beyond understanding how properties are sold, you will also encounter a range of terms that are specific to real estate transactions in New Zealand. Here is what they mean and why they matter.

LIM Report

A LIM report, which stands for Land Information Memorandum, is a document issued by the local council that contains important information about a property. It includes details about zoning, building consents, drainage, and any known hazards such as flooding, erosion, or contaminated land.

Reviewing the LIM is an essential step before buying any property, especially older ones. It can reveal issues that might affect your ability to get insurance, make future alterations, or even live in the property safely. For example, if extensions were done without proper consent, you might become responsible for fixing any problems or obtaining retrospective consent.

LIM reports cost money, usually a few hundred dollars, and take a few days to arrive from the council. Some sellers provide a LIM as part of their marketing material, which can save you time and money. If they do not, you should order one yourself before making an unconditional offer.

Learn more: The Importance of a LIM Report: What You Need to Know

Title Search

The title is the official legal record of who owns a property and what legal interests are registered against it. A title search allows you to see this information and is an essential part of your due diligence.

The title will show the current owner, the size of the land, and any encumbrances registered against the property. Encumbrances are legal interests held by someone other than the owner, and they can include mortgages, easements, caveats, and covenants.

Your lawyer or conveyancer will order a title search and help you understand what it means. They will identify any potential issues that might affect your use of the property or your ability to sell it in the future.

Types of Property Ownership

In New Zealand, there are several different ways you can own property, and the type of ownership affects your rights and responsibilities.

Freehold, also known as fee simple, is the most common and straightforward type of ownership. You own the land and the buildings on it outright, with no time limit. You can do what you like with your property, subject to council rules and any covenants on the title.

Leasehold means you own the buildings but not the land. Instead, you pay rent to the landowner for the right to use the land. Leases can be for long periods, sometimes 99 years or more, but they can also be much shorter. When the lease expires, the land and buildings revert to the landowner unless the lease is renewed. Leasehold properties are usually cheaper to buy, but you need to factor in the ongoing ground rent and the risk of the lease not being renewed.

Cross-lease is a uniquely New Zealand arrangement that is common in older subdivisions. With a cross-lease, you own a share of the land together with other owners, and you lease your specific part of the property from the other owners while they lease their parts from you. This can create complications if you want to make changes to your property, as you usually need the consent of the other owners. Cross-lease properties require extra care during due diligence. Learn more: The Challenges of Cross Lease Properties.

Unit title is the form of ownership used for apartments and townhouses. You own your individual unit outright, and you share ownership of the common areas with the other unit owners. Unit title properties are governed by the Unit Titles Act and come with specific rules and obligations. Learn more: What Is a Unit Title? Essential Guide for First-Home Buyers.

Body Corporate

If you are buying a unit title property, you will become a member of the body corporate. This is the group of all unit owners who collectively manage and maintain the common areas of the building or complex.

The body corporate makes decisions about maintenance, repairs, insurance, and rules for the complex. As an owner, you will pay a body corporate levy, which is a regular contribution to cover these shared costs. The levy amount varies depending on the size and condition of the building and the services provided.

Before buying a unit title property, ask for the body corporate meeting minutes and financial statements. Look for any upcoming major works, such as weathertightness repairs or lift replacements, as these can result in significant additional levies. Also check whether there is a long-term maintenance plan and adequate funds to cover future work.

Easements and Covenants

An easement is a legal right for someone else to use part of your land for a specific purpose. The most common easements are for access, allowing a neighbour to cross your property to reach theirs, or for services like power lines, water pipes, or drainage that run across your land.

Easements are registered on the title and stay with the property when it is sold. They do not necessarily mean you cannot use the affected area, but you cannot interfere with the easement holder's rights. For example, you could not build over a drainage easement in a way that blocked access for maintenance.

A covenant is a promise registered on the title that restricts what you can do with your property. Covenants are often used in new subdivisions to maintain a certain look or standard. They might require you to build a house of a minimum size, use certain materials, or get approval for your house design. Some covenants also restrict things like keeping commercial vehicles or running a business from home.

Covenants can be positive, requiring you to do something, or restrictive, preventing you from doing something. They usually remain in place indefinitely, although some can be removed or modified with the consent of whoever benefits from them.

Chattels

Chattels are the moveable items that are included or excluded from the sale of a property. Common chattels include things like curtains, light fittings, the stove, dishwasher, heat pumps, and garden sheds.

The Sale and Purchase Agreement should clearly list what chattels are included in the sale. Do not assume that something is included just because it is there when you view the property. If you want something specific, make sure it is written into the agreement.

Disputes over chattels are surprisingly common, so take the time to go through the list carefully before you sign. If a high-value item like a fancy light fitting or a built-in coffee machine is something you want, check that it is listed. Conversely, check that you are not paying for things you do not want or that the seller might take with them.

Building Report

A building report is an inspection of a property by a qualified building inspector. Unlike a LIM, which tells you about council records, a building report tells you about the actual physical condition of the building.

A good building inspector will examine the structure, the roof, the cladding, the plumbing, the electrical systems, the insulation, and anything else that might affect the building's condition or safety. They will identify any defects, areas of concern, or maintenance issues and give you an estimate of what it might cost to fix them.

Building reports are especially important for older properties, houses with unusual construction, or properties that might have weathertightness issues. Even for new or near-new homes, a building inspection can reveal problems that were not obvious during your viewing.

Building reports typically cost a few hundred dollars but can save you from buying a property with hidden problems that could cost tens of thousands to fix. If the report reveals significant issues, you can negotiate with the seller for a price reduction, ask them to fix the problems before settlement, or decide to walk away if the issues are too serious.

Learn more: Why Building Reports Are Essential for First Home Buyers

Conditional vs Unconditional Offers

When you make an offer on a property, it can be either conditional or unconditional.

A conditional offer means you agree to buy the property only if certain conditions are met. Common conditions include finance, meaning your mortgage needs to be formally approved by your lender, and building inspection, meaning you need to get a satisfactory report from a building inspector. Other conditions might include a satisfactory LIM report, the sale of your current home, or a toxicology report if you are concerned about methamphetamine contamination.

Each condition will have a deadline by which it must be satisfied. If you satisfy all your conditions by their deadlines, your offer becomes unconditional and you are committed to buying the property. If you cannot satisfy a condition, for example if your finance is declined, you can withdraw from the agreement without penalty.

An unconditional offer has no conditions attached. Once the seller accepts an unconditional offer, you are legally bound to complete the purchase. There is no way to back out, even if you discover problems with the property or your circumstances change. Unconditional offers are required at auction and are sometimes used in competitive situations to make an offer more attractive to the seller.

Learn more: So, You Think You are Ready to Make an Offer? and Key Clauses in the Sale & Purchase Agreement

Pre-Approval

Pre-approval, sometimes called approval in principle, is when your lender has reviewed your financial situation and indicated how much they would be willing to lend you for a home purchase. It is not a guarantee of finance, but it gives you a good idea of your budget and shows sellers you are a serious buyer.

Getting pre-approved is one of the first steps you should take when you start thinking about buying a home. It helps you understand what you can afford and saves you the disappointment of falling in love with a property that is out of your reach.

Keep in mind that pre-approval usually has an expiry date, often 60 to 90 days. If you have not found a property by then, you will need to get it renewed. Also remember that final approval depends on the lender being satisfied with the specific property you want to buy, so pre-approval does not mean you are guaranteed to get a loan for every property in your price range.

Learn more: Pre-Approvals vs Live Deals: What First Home Buyers Need to Know

Deposit

Once your offer is accepted and any conditions are satisfied, you will need to pay a deposit. This is usually ten percent of the purchase price, although sometimes a smaller deposit can be negotiated.

The deposit is a sign of your commitment to the purchase. It is held by the real estate agent or a stakeholder until settlement day, at which point it goes to the seller as part of the purchase price.

At auction, you typically need to pay the deposit on the day, so you need to have the money available immediately. For other sale methods, you usually have a few days between the offer going unconditional and when the deposit is due.

The deposit is protected in certain circumstances. If the seller fails to complete the sale, you can get your deposit back. However, if you fail to complete without a valid reason, the seller can keep your deposit and potentially sue you for additional losses.

Learn more: How Much Deposit Do I Need as a First Home Buyer?

Settlement

Settlement is the day when ownership of the property officially transfers from the seller to you. It is the finish line of the buying process.

On settlement day, your lender will release the mortgage funds to your lawyer, who will combine it with any other money you are contributing. Your lawyer will then pay the full purchase price to the seller's lawyer, who will confirm that the funds have been received. Once this happens, the property is officially yours, and you can collect the keys from the real estate agent.

Settlement usually happens four to six weeks after the offer goes unconditional, but this can be negotiated. If you need to align the purchase with the sale of your current home, or if you need extra time to arrange things, you can discuss a settlement date that works for everyone.

The day before settlement, you should do a pre-settlement inspection to make sure the property is in the same condition as when you agreed to buy it and that all the agreed chattels are still there. If there are any issues, let your lawyer know immediately.

Knowledge is Your Best Tool

The property market can feel overwhelming when you are starting out, but most of that overwhelm comes from unfamiliar language and processes. Now that you understand how the different sale methods work and what the key terms mean, you are in a much stronger position to navigate the market. When you see a listing advertised as a Deadline Sale or come across an easement on a title, you will know exactly what you are dealing with. That knowledge, combined with a good mortgage adviser and a thorough lawyer, will serve you well throughout your first home buying journey.