Follow rules, not instinct in property deals

Kevin Lampen-Smith

Wellington, May 20, 2018

Some people fall in love at first sight when they’re looking to buy a property, but many like to keep their options until the last minute.

This is understandable, because it can be scary signing up to such a major financial commitment if you think something better might come along.

But it can also be hard to know what to do if you’re not sure if your offer on a property will be accepted and you are worried about missing out on the other ones on your Wishlist.

Legally binding contract

Every time you make an offer on a property, you are saying that you are committed to buying it, subject to whatever conditions you include in the offer.

These conditions might be things like getting a satisfactory property inspection, or confirming insurance, or having finance approved. It would be extremely unusual to add ‘we want the right to change our minds in case we see a property that we like more.’

Remember that a sale and purchase agreement – the document that you and the seller sign that lays out all the particulars of the property and any chattels being sold with it, the price you are prepared to pay and the date that it will take place – is a legally binding contract.

Whether you can make offers on other properties will depend on how your conditions are written. This is why it’s crucial to get legal advice before making the offer, which becomes legally binding as soon as it’s accepted. If you offer on a property while you’re waiting to hear back on another one, you could end up with two accepted offers and two legally binding contracts.

Deadline Sale

The REA says a seller doesn’t have to respond to your offer within a certain time frame unless there is a strict deadline, such as in a tender or deadline sale. If you are making an offer on a property that is for sale by negotiation or by advertised price, and you think you might want to keep your options open, talk to your lawyer about adding an expiry time to it.

Alternatively, if the deadline for offers has not passed and you have a change of heart, you could consider asking the agent about withdrawing your offer.

In this situation, we recommend that you have the agent confirm in writing that your offer has been withdrawn.

‘Jail-free Card’

Keep in mind too that making a conditional offer on a property, such as having finance approved, will not necessarily provide you with a ‘get out of jail free card’ if you subsequently decide you don’t want to go through with the purchase. In this situation you could be required to prove you weren’t able to get finance.

The better option is simply to arrange for your offer to be withdrawn promptly.

Buying a property is a complex process whether you’re doing it for the first time or not – but it is it’s important to take every decision seriously.

If you are finding it hard to keep going on your property search, or to commit to making an offer, it might be helpful to remind yourself about why you want to buy a home and to identify your must-haves. Writing these things down can help keep you on track and make it easier to stay focused.

For independent advice on buying or selling property, check out settled.govt.nz.

Kevin Lampen-Smith is Chief Executive of Real Estate Authority based in Wellington.