The sale of a property by tender involves an invitation to the public through formal advertising, to make offers to purchase a property. It is accepted practice for no amount to be stated in the advertisement. If the property is particularly desirable, or if as now, the market is extremely buoyant, there is a greater likelihood of a wider range of offers being made by prospective purchasers keen to outbid any number of unknown fellow tenderers. Needless to say, this "one-shot" purchase process does have the potential to elicit higher offers than may be finally negotiated between the seller and only one purchaser at a time.
The tender advertisement will mention where the tender documents may be obtained. If a real estate agent is being used then they will be uplifted from the agent's offices. However, should you be conducting a private sale of your property, then such documentation is invariably prepared by your solicitor and copies uplifted from their offices by interested parties. The tender documents comprise the following:
These detail the name of the vendor, the address of the property, tender closing date, tender acceptance date, possession date, tender deposit amount, any tenancies etc.
These conditions describe the method of tender. They relate to the completing of the formal agreement; its delivery to your solicitor with a deposit cheque; the period for which all tenders remain open; what you as seller may accept; your right to withdraw the property from sale by tender at any time without notice; and your warranties under the documentation which effectively and dramatically curtail those warranties appearing in the standard Agreement for Sale and Purchase of Real Estate (see point 3).
This is the standard agreement in force in New Zealand today and is used by all real estate agents and solicitors, unless the transaction dictates substantially different conditions of sale/purchase. Due to Copywright restrictions, photocopied blank forms are not acceptable. Your solicitor will be able to provide these to you or alternatively most Whitcoulls outlets have them for sale.
This process is also successfully used for the sale of a variety of businesses. The only difference is that the agreement used is called an Agreement for Sale and Purchase of a Business.
Whilst the current property boom will punish sellers less for over-pricing their properties than in previous years, the realistic and pragmatic pricing of a property remains critical to ensuring an expeditious sale. When selling through a real estate agency, sellers invariably rely solely on the listing agent's advice on the prevailing market conditions and likely sale price of their properties. Whilst the agent is likely to be very experienced in such matters, the agent's opinion may not be as objective and independent as that of a registered valuer. Accordingly, the options available to a private seller in accurately assessing the value of their property prior to advertising it for sale is as follows:
1. Securing a valuation of the property through a registered valuer. The cost of this exercise varies between $300.00 and $600.00, but is usually money well spent.
2. Referring to Quotable Value (QV), formerly the Valuation Department, which is able to supply the inquirer with a variety of reasonably priced reports relating to: a property's market value; rating valuation; sales history; property history; hazard reports and demographic profiles (refer www.quotable.co.nz).
Much of the information supplied by the above reports is accessible to, and used by registered valuers in preparing their reports, so a visit to the above web site may well be very cost effective, not to mention speedy, if time is of the essence. Your solicitor will also be able to source these reports for you if you do not have access to the internet.
We have all heard of numerous instances where sellers have marketed their properties at a level higher than the market is dictating - the consequence being massive delays and pressure on the seller to drastically reduce the sale price. The seller's perceived desperation results in even further price reductions through purchasers being convinced a bargain is in the offing. Alternatively, the seller is forced to withdraw the property from the market due to its over exposure and remarket at a later time.
The predominant reason most people choose not to sell their family home privately is their horror at the thought of having to negotiate a price for the sale of a major asset to which they are, not surprisingly, emotionally attached. A private sale of your home necessarily entails the eyeballing of any prospective purchaser who wishes to make an offer for its purchase. The potential difficulty is exacerbated should there be several counter-offers.
The solution is to forward the purchaser's offer to your solicitor, or advise prospective purchasers to forward their offer directly to your solicitor, who you will liaise with regarding any counter offer and/or acceptance or rejection of specific terms. Your solicitor will do this by writing either to the prospective purchaser directly or to their own solicitor. After several letters between the solicitors there is likely to be an offer and an acceptance on the final price and terms for your property. All this is normally achieved without any meetings between the parties which can be time consuming and stressful for all concerned. Your solicitor should be expected to charge for services in this regard at their usual hourly rate as for any other legal work. Your solicitor will not charge you based on a percentage of the negotiated sale price.
Although under New Zealand law the principle of caveat emptor (let the buyer beware) remains a guiding principle of commerce today, it does not protect a seller who innocently or fraudulently misrepresents any aspect of the property he/she is selling. Such untruths may relate to rental returns, the real extent of infill, the state of the plumbing or wiring etc.
The Contractual Remedies Act 1979 provides purchasers with extensive powers to cancel an agreement where a misrepresentation has resulted in substantial loss, and to claim damages against the seller for any such losses. Should a third party be selling the property on your behalf, it is imperative that that person is very careful to ensure that whatever is said to a prospective buyer before an agreement is signed, is true and accurate if the above consequences are to be avoided.
When a seller (vendor) leaves a portion of a sale price "in the property", the amount paid by the purchaser to the seller on settlement is reduced by that amount. The unpaid amount (say $25,000.00) is always secured by a mortgage registered against the property's title in favour of the seller, and is known as vendor finance. The seller therefore becomes the purchaser's mortgagee, just as a bank does.
The finance is repayable by the purchaser (the seller's mortgagor) by a certain date and interest is payable to the seller, usually quarterly, until full repayment occurs.
Vendor finance is made available to a purchaser usually for one or both of the following reasons:
1. Without it the purchaser would be unable to raise the necessary funds to complete the sale; and
2. Such finance, secured as it usually is by a second mortgage behind a first mortgage in favour of the purchaser's bank, can produce a steady stream of high returns for the seller. The interest rate on these mortgages may be several percent higher than current trading bank rates.
If you are contemplating either as a seller offering vendor finance, or as a purchaser requesting vendor finance, it is advisable to consult your solicitor first, who will be able to assist you regarding the appropriate terms to include in your advertising material or your offer to purchase.
The above is merely an outline of some things to consider when selling or buying property. However, it is our recommendation that you should not accept or make an offer on property without first discussing the terms with your solicitor BEFORE YOU SIGN.
Despite what some people believe, involving your solicitor at this early stage should not 'hold up' the process - it is often to the contrary, and may well save you unnecessary legal fees which often result from poorly and ambiguously worded documentation.
May 2004
All information in this article is to the best of the author's knowledge true and accurate. No liability is assumed by the author for any losses suffered by any person relying directly or indirectly upon this material. It is recommended that you should consult a senior representative of Rotherhams before acting upon any information provided in this article.
