FAQ

What is the current legislation on buying property?

The following information has been sourced from the Real Estate Agents Authority, a crown entity established by the Real Estate Agents Act 2008. It can be found in a booklet entitled “New Zealand Residential Property Sales and Purchase Agreements Guide. The Real Estate Agents Authority at www.reaa.govt.nz or by calling 0800forREAA (0800 367 7322).

In New Zealand there are several ways to sell and buy a home, including:

• Auction
• Tender
• Advertising/fixed Price or
• By negotiation

Regardless of the method used, you should always have a written sale and purchase agreement.

---

Why do I need a sale and purchase agreement?

A sale and purchase agreement provides certainty to both the buyer and the seller as it sets out in writing all the agreed terms and conditions. It is a legally binding agreement.

---

What is negotiation?

Put simply, the process of negotiation starts when a buyer asks the real estate agent selling the property to take an offer to the seller. The agent prepares a sale and purchase agreement that includes the price and any conditions that the buyer wants to include. The agent takes the sale and purchase agreement to the seller and, if it's accepted, the seller signs it and the agreement becomes binding. If necessary, the seller and buyer can negotiate, through the agent, until the buyer and seller agree on a price and any conditions.

---

What's important?

• You should have a written sale and purchase agreement.
• Have your lawyer check the sale and purchase agreement before you sign it.
• The buyer and seller can make changes to the price and conditions during the negotiation process.

---

The sale and purchase agreement

A real estate agent will probably use one of two forms of sale and purchase agreements:

• Auckland District Law Society and Real Estate Institute of New Zealand form (the ADLS form).
• Real Estate Institute of New Zealand form (the REINZ form).

Your sale and purchase agreement should include the following:

• The name(s) of the seller(s) and buyer(s).
• The address of the property.
• The type of title (freehold, leasehold etc).
• The chattels that are to be sold with the property (e.g. Whiteware,drapes, television aerial).
• The price.
• The rate of interest that the buyer must pay on any overdue payments.
• The deposit that the buyer must pay.
• The date on which the agreement will become unconditional if there are conditions.
• The settlement date (the date the buyer pays the remainder of the amount for the property, usually the day when the buyer can move into the property).
• Any conditions the buyer wants fulfilled before the contract is agreed.

---

Conditions in the document

The buyer will usually want to have some or all of the following conditions fulfilled before the contract is agreed.

• Title search — this is usually done by the buyer's lawyer to check who the legal owner of the property is and to see if anyone else has any claim over the property.
• Finance — this refers to the buyer arranging payment, normally a loan, by a specified date.
• Valuation report — normally required by a lender, this report is an estimate of the property's worth on the current market.
• Land Information Memorandum (LIM) report — provided by the local council, this report provides information on things such as rates, building permits and consents, drainage and planning.
• Building Inspection report — these are becoming more common and help determine how sound the building is and what might need to be repaired.
• Engineer's report — similar to the above but more focused on the section and structure of the property.
• Sale of another home — the buyer may need to sell their home in order to buy another.

---

General or standard clauses

A sale and purchase agreement also includes clauses that set out general obligations and conditions. It helps to understand what these mean as you will need to comply with them. Examples may include:

• access rights — what access the buyer can have to inspect the property before settlement.
• default by buyer — the buyer may have to compensate the seller e.g. interest payments.
• default by the seller — the seller may have to compensate the buyer e.g. accommodation costs.
• insurance — ensuring the property remains insured until the settlement date and outlining what will happen if any damage does occur.

Your lawyer should explain these clauses. If you want to make changes to any of these clauses, you should ask your lawyer to do this before you sign the agreement.

---

When does the buyer pay the deposit and the full amount?

When the seller and buyer have agreed on all aspects of the sale and purchase agreement, a deposit (usually of 5-10% of the sale price) is paid to the real estate agent by the buyer. This money is initially held in the agent's trust account.

The agent usually takes their commission from the deposit when the contract becomes unconditional. This is agreed between the seller and the agent as set out in the agency agreement2. The seller should make sure that the deposit is large enough to cover the agent's commission.

The buyer pays the remainder of the amount for the property on the day of settlement, usually through their lawyer. The settlement day is usually the date when the buyer can move into the property.

Before the sale and purchase agreement becomes unconditional and if the sale doesn't go ahead because some of the conditions haven't been met, the buyer may be entitled to have the deposit refunded in full.

However, once the offer becomes unconditional you won't be able to get your deposit back if you change your mind for any reason.

• Conditional refers to the sale and purchase agreement having a set of conditions that are to be met, such as the buyer's current house being sold, a building inspection being carried out, or finance being secured.
• Unconditional refers to when all conditions in the sale and purchase agreement have been met. It's important to understand that when a sale and purchase agreement becomes unconditional it is legally binding and the transfer of ownership must take place.

---

Can I cancel the agreement if I change my mind?

You cannot cancel a sale and purchase agreement just because you have had second thoughts about buying or selling the property concerned.

In general, once you have signed a sale and purchase agreement and the conditions set out in it have been met, you will have to go ahead with the sale/purchase of the property.

---

What if my agent or someone related to them wants to buy the property?

If your agent, or anyone related to them, wants to buy your property, by law, they must get your written consent to do this.

---

What can I expect from an agent?

The agent works for and is paid by the seller. The agent must therefore carry out the seller's instructions (as set out in the agency agreement) and act in the interests of the seller. Agents also have clear responsibilities to buyers even though they are representing the seller.

When you are buying a property, ask the agent questions. Be specific about what you want to know.

All agents are bound by the Code of Professional Conduct and Client Care, issued by the Real Estate Agents Authority. Under the Code, agents have to deal fairly and honestly with all parties.

---

Who pays the agent?

Real estate agents in New Zealand work on behalf of sellers and it is the sellers who pay the agents. An agent who is marketing a property on behalf of a seller cannot ask a buyer to pay for their services.

---

What if there's a problem?

If you are concerned about the conduct of a real estate agent, you should in the first instance discuss any concerns you have with the agent or their manager. Agents are required to have in-house complaints resolution procedures.

If this does not work or if you do not wish to go through this channel, you can complain directly to the Real Estate Agents Authority.

What is an open home?

"Open homes" are popular with both sellers and buyers, as they mean a number of potential buyers can view a property in a limited time frame (usually an hour), minimising the inconvenience of multiple buyer appointments on different days. They are hosted by the agent marketing your home.

Anyone is welcome to look around an "open house" without making an appointment first.Your agent will keep a list of all those who attend an open home and follow them up to gauge their interest and feedback on your property.

Visiting open homes is a great way to learn about the property market in your area.

How do I find out about the Christchurch area?

We recommend that a great place to start is  our Christchurch suburb profiles, which have been written to provide you with an overview of many of the main suburbs of the city, as well as images and the properties we have listed in each area.

For further information about Christchurch, please feel free to come in and talk to us - this is our home town!

For families coming to Christchurch, schools are an important factor as well as easy access to shopping precinct and leisure facilities.

What is a deadline sale?

The Deadline Sale method is fundamentally the same as those of Auction and Tender except it allows maximum flexibility for you to accept what you like and when you like.

The property is offered for sale with no price with a deadline upon which offers need to be submitted (eg three to four weeks) on the basis that the vendors reserve the right to accept an offer at anytime before then.

This method will:

• Attract a high level of interest through the marketing programme.
• Create urgency as a result of a fixed time frame for offers to be made by.
• Provide the opportunity for a motivated buyer, prior to the deadline, to get in quickly and present you with a favourable offer prior to close of deadline.
• Invite interest on your terms without eliminating purchaser's variations.
• Ensure that interested parties will have little idea as to the level and extent of other interest.
• Not cap the price, therefore the risk of forfeiting a premium is averted.
• Allow you to be able to make decisions in your own time without pressure.

What is the current legislation on selling property?

The following information has been sourced from the Real Estate Agents Authority, a crown entity established by the Real Estate Agents Act 2008. It can be found in a booklet entitled “New Zealand Residential Property Residential Property Agency Agreements Guide. The Real Estate Agents Authority at www.reaa.govt.nz or by calling 0800forREAA (0800 367 7322).

---

Why do I need an agency agreement?

While private sales are on the increase in New Zealand and there is no legal requirement to use a real estate agent when selling property, most people will engage an agent to help them through the sales process.

Employing a real estate agent means that your property will be listed and marketed by the agency for which the real estate agent works.

If you want to use an agent, you need to have an agency agreement as this gives the agent the right to sell your property.

---

What is an agency agreement?

An agency agreement is a contract between you and an agent. It sets out the terms and conditions on which you appoint the agent, what the agent will do for you, and what you will pay them.

When you enter into an agency agreement with a real estate agent, you are listing your home for sale. One agent may sign you up, but once you've listed your home any agent in the company can try to sell your home.

---

What do I need to know before I sign an agency agreement?

Before you sign an agency agreement the agent should give you the following information.

• A written market appraisal: This is the agent's best estimate of the price they expect your property could be sold for, based on sales and prices for similar properties in your area or a similar area. You can also get your own valuation.
• How they recommend you sell your property: This could be sale by advertised price, by tender or by auction. They should recommend the best way of selling and how they will market and advertise it.
• How they will be paid: Information on what you will have to pay the agent (usually referred to as commission), when you will have to pay, and how this payment is calculated. Commissions can vary from one agent to another, so you may want to compare them. You can also negotiate on the amount or rate of commission to be paid. Commission is usually calculated as a percentage of the selling price, plus GST. The agent must:
• explain the formula that is being used
• provide you with an estimate in dollar terms of the commission you would have to pay if your property sold at the appraised price.

Expenses: Information on whether you will have to pay any expenses
(e.g. advertising costs) that are not included in the commission.

---

What can I expect to see in an agency agreement?

While the layout and content of agency agreements vary from one agent to another, the following is a general indication of the main things you should expect to see.

---

Details about the property for sale

• The address of your property.
• The chattels that are to be sold with your property e.g. Whiteware, drapes, television aerial.
• Details about your property e.g. number of bedrooms and bathrooms, land area.

You must be honest and ensure that any details you provide to the agent are accurate and factual. If you knowingly provide misleading or incorrect information, you may leave yourself open to legal action.

---

Information about the parties to the agreement

• Your name, address and other contact details.
• The name and contact details of your lawyer.
• The name of the agent who is dealing with the marketing and sale of your property on a day-to-day basis.
• The agent's business name and address

Confirmation that you have the authority to sign the agency agreement on behalf of all owners of the property
If you are not the sole owner of the property, you must ensure either that all owners sign the agency agreement or that you have the authority of all the other owners to sign for them.

---

Confirmation you have been given a copy of this guide

The Real Estate Agents Act 2008 requires the agent to give you a copy of the New Zealand Residential Property Agency Agreements Guide before you sign an agency agreement, and to get your written confirmation that you have received the guide.
Appointment of the agent and details of what the agent is authorised to do

The agency agreement appoints the named agent (usually a company) and details what they are authorised to do. For example:

• put a 'For Sale' sign on your property
• advertise your property for sale at the price, in the way, and on the conditions you have authorised
• arrange inspections of your property by prospective buyers
• receive a deposit on your behalf
• deduct the agent's commission from the deposit in the event that an offer becomes unconditional.

---

The type of agency agreement and the term of the agreement

The agency agreement will state whether this is a sole agency or general agency, the date on which the agency agreement starts, when it ends, and how to end the agreement. The term of an agency agreement is negotiable. A sole agency means that only that agent (and the sales persons who work for that agent) can carry out real estate agency work on the property identified in the agency agreement.

---

What's the difference between sole and general agency?

• A sole agency gives one agent the exclusive right to market and arrange a sale of your property.
• A general agency is when you employ more than one agent to market and arrange a sale of your property

There are some things to be aware of if you are considering a sole agency:

• You should not sign another agency agreement with any other agent if you already have a sole agency in place. If you do, you may have to pay all the agents a commission, regardless of which agent actually arranged the sale.
• If you have second thoughts about a sole agency agreement after you have signed it, you can cancel the agreement by 5pm on the next working day after the day on which you receive a copy of the agreement.
• If you sign a sole agency agreement that is for a term of more than 90 days, either you or the agent can end the agreement after 90 days. This must be done in writing.

---

Method of sale and price of property

The agency agreement will detail how you have agreed to sell your property. This could be by advertised price, negotiation, tender or auction.

The agency agreement will include a 'listing price' if your property is being marketed with an advertised price. The agency agreement will not include a listing price if your property is being marketed by negotiation, tender or auction.

The agency agreement will include details of how the commission to be paid to the agent will be calculated and when it will be paid to the agent.

---

Expenses

Advertising and marketing

The agency agreement may include separate advertising and marketing costs. You do not have to pay extra for advertising if you do not want to. Before you commit to paying extra advertising costs, ask what advertising is provided without charge. As part of their service agents usually provide 'free' advertising, which may include:

• putting details of your property on the agent's website
• putting details of your property on other real estate websites
• putting details of your property in real estate publications
• displaying a photo and details in the agent's office
• providing a 'For Sale' sign outside your property.

You need to consider the cost of extra advertising against the possible benefits. The agent should prepare a detailed marketing plan and explain why this extra cost is worth it. Remember, you have to pay for extra advertising even if your property does not sell.

Disclosure of rebates, discounts or commissions that the agent may receive
If an agent gets a discount, rebate or commission on any services that they arrange for you and for which you are paying, they have to tell you about this. For example, an agent may receive a discount on the cost of advertising your property in a newspaper.

This disclosure is done by way of a form that must be included in the agency agreement. The form must either show the estimated amount of discount, rebate or commission, and its source, or a statement that the agent will not be receiving any rebates, commissions or discounts.

---

What happens when I get an offer?

When someone makes an offer to buy your property, your agent will bring you the offer in the form of a written sale and purchase agreement. Before you sign any sale and purchase agreement you must be given a copy of the New Zealand Residential Property Sale and Purchase Agreements Guide. You are advised not to sign anything until you have read and understood this guide and have shown the sale and purchase agreement to your lawyer.

If you are concerned over some aspect of the service you have received from a real estate agent, you should in the first instance discuss any concerns you have with the agent or their manager. Agents are required to have in-house complaints resolution procedures.

If this does not work or if you do not wish to go through this channel, you can complain directly to the Real Estate Agents Authority.

What if I don’t want a sign outside my house?

Signs are an important part of any promotion and are usually included in our marketing costs. Signage is a good marketing tool to get your property noticed, and will ensure that people who regularly drive through your neighbourhood, or who may be currently looking in your area are made aware your property is for sale. They are also a valuable avenue for publicising the dates and times for Open Homes if these are part of your marketing plan.

If you don’t want to display a sign for any reason we are happy to discuss this with you and will of course respect your decision.

What other costs will I need to think about?

If you really want your property to be seen we will ask you to contribute towards the costs of marketing your property.

We have a variety of promotional packages available depending on the nature of your property, the price bracket you are marketing in, and your budget. 

Your agent will be able to advise you on the best package for your property.

What is the commission rate to sell my property with Cowdy & Company?

Cowdy & Company charges vendors a one off administration fee of $350, and then up to $400,000 you'll pay 3.75%
.
For the balance of purchase price you'll pay 2% plus GST.

Of course, commission is only paid when you have a confirmed contract for the sale of your property.

Can I get Cowdy & Company to appraise my home for FREE?

We offer FREE residential and commercial sales appraisals. All you need to do is give one of our agents a call and they will make arrangements to come out and visit you in your home. You will receive a written appraisal, giving you an overview of recent comparable sales and other information relevant to marketing homes or commercial properties of your type in your area of the city.

What if I need to sell my property so I can purchase my new home?

We can help you sell your existing property to enable you to buy your dream home. When we complete the Sale and Purchase Agreement on your behalf we will make sure the appropriate clause is inserted to allow time to sell, which would normally be a month.

However it is standard practice for an escape clause to be inserted so the vendor/customer is able to give you 3 working days in which to confirm your purchase whether you have sold or not if they have another buyer wishing to make an offer on their property.