What is a deadline sale?

Auction, tender, by negotiation and deadline – these are the 4 different sale processes for buying a house in New Zealand.

A deadline sale is the most flexible sale process for buying a property in New Zealand.

That said – is it a good choice for your next investment purchase? For instance, how do you negotiate a deadline sale to get the best deal?

In this article, you’ll learn what a deadline sale is and how an investors and home buyers can use one to their advantage.

Do you have a question or comment about deadline sales? Feel free to leave your thoughts in the comment section at the end of the page.

What is a deadline sale?

A deadline sale is a process of selling property, whereby a property is marketed for a set amount of time with a specified end date (the deadline).

During the deadline sale offers can be made (and accepted) at any point, up to the end date.

But because offers can be accepted at any time, the property can be sold earlier than the date advertised.

This is all up to the seller. They can choose to sit there and wait until all offers are on the table and make the decision on the final day. Or they may choose to take the first offer a few days after going on the market.

So, if you’re making an offer on a property that is listed by deadline sale, you’ve got to be proactive. You’ve got to make your offer early.

More from Opes Partners:

• What is a tender sale? (Article)
• How much is my home worth? (Article)
• Property market update (February 2024) (Video)

What are the deadline sale rules?

In a deadline sale, the property is advertised with no fixed price. Buyers can then put in any offer they like, up until a set deadline.

At the end of that period (or sooner in some cases) the seller accepts any offer (usually the highest) and/or starts negotiating.

You can identify a deadline sale by the way the advertisement is worded.

It will either say “deadline sale,” or at the very least will usually say “unless sold prior” somewhere in the advertising.

Deadline sales are more flexible and more negotiable than other types of sale. And that’s because you, as a buyer, can add conditions to your offer.

For instance, you could offer a lower price and add in a clause saying that you want an earlier settlement date – if that’s what matters to the seller.

Similarly, you could make a higher offer and add in as many conditions as you like, e.g. a delayed settlement or a building inspector’s clause.

Compare this to an auction where every bid is unconditional. There is no scope to negotiate non-price factors, and you have to do all your due diligence before the auction.

Sellers also have greater flexibility with a deadline sale. They don’t have to accept the highest offer; they can accept any offer they like and negotiate conditions where necessary.

How do I make an offer on a property available by deadline sale?

If you see a property you like being sold by deadline sale you’re going to want to let the seller (or their agent) know as soon as you can.

This is because, as we’ve stated earlier, the seller can accept offers at any time – so the clock is ticking.

You don’t want the seller accepting another person’s offer before you’ve had the chance to make yours. So the real estate agent can let the seller know that your one is on the way (if you let them know in advance).

To make an offer you’ll speak to your lawyer who will prepare the contract for you.

There are a few steps involved in the process:

Step #1 – Identify a deadline sale

Firstly, as previously stated, a deadline sale will be recognisable by keywords in the advertising, such as “deadline” and usually the words “unless sold prior”.

This simply underlines the fact that as offers can be made at any time, they can also be accepted at any time. So, be proactive in letting the seller know you’re interested.

Step #2 – Do your research

Just as you would any property, learn as much as you can about the property before you make an offer (without taking too much time).

This will include things like:

• Undertaking a registered valuation

• Asking your lawyer to look at the Title

• Undertaking a building inspection

• Asking your lawyer to review the LIM (Land Information Memorandum) i.e. council documents

Step #3 – Get your finances in order

It’s a good idea to get your finances sorted before you make an offer. In some cases you may include a ‘finance’ condition of your offer (where if you can’t get the mortgage together, you can pull out of the contract).

However, the fewer conditions you offer, the more likely your offer is to be accepted (all other things being equal).

Sometimes the bank will want specific details about the property before signing off on a pre-approval – such as a building inspection.

So you may then include a ‘building inspection’ clause within your contract, which is more likely to be accepted than a finance condition.

Step #4 – Make offer

Now’s the step where you submit your offer. Take the contract your lawyer has prepared and send it in to the agent.

You’ll make an offer by submitting a signed sale and purchase agreement (contract) that has the price you are offering and the clauses you want to include.

If you’ve made a conditional offer – and the seller hasn’t accepted just yet – the real estate agent may go back and forth between the two of you as the negotiator.

The seller may have some conditions for you as well.

Don’t worry, all this will be added into the contract for you. Obviously, get your lawyer to look over any changes – unless the contract already contains a solicitor’s approval clause.

Step #5 – Offer accepted

If your offer is accepted by the seller they will countersign the sale and purchase agreement your lawyer has drafted for them.

That means you are now in a binding agreement with the seller.

You may be able to pull out of the contract (depending on the conditions you’ve got within the agreement).

You will then either pay your purchase deposit straight away or when the agreement goes unconditional, depending on what you and the seller have agreed.

If there are added conditions you’ll agree on a date with the seller for these to be completed, and add that to the contract too.

When all the conditions have been met, the sale becomes unconditional.

Who are deadline sales right for?

Deadline sales are common for home buyers and investors.

But, they are particularly useful for first home buyers. This is because it is very difficult in the current climate for a first home buyer to make an unconditional offer, which is what you need to do when heading to an auction.

That’s because you need to get pre-approved by the bank, which means a lot of due diligence and cost (lawyer’s and building inspector fees).

Because first home buyer budgets are lower, that means they can spend a lot of money on due diligence … and still miss out on a lot of auctions.

A deadline sale means a buyer can make an offer that has some conditions with it, so they only have to spend money on due diligence once their price is accepted.

However, while deadline sales have always been popular – they are becoming even more common in the current market. That’s because the market has changed and auction rooms are quieter.

Micky Limmer, of Opes Property, says he sells quite a few properties at deadline, and they are no longer just popular with first time buyers.

“If you are an investor, if you go back 12 months ago it was easy to get unconditional lending from the bank, but these days the hoops are agonising,” he says.

What are the pros and cons of a deadline sale?

Pro #1 Flexibility

From a buyer’s point of view, a deadline sale is advantageous because they have the ability to add conditions in their offer.

If you play your cards right and find out more about your seller’s situation, you might just be able to put in a lower offer (in terms of price) in exchange for something else – like an earlier settlement date. More on this below.

Pro #2 More engagement with the property you’re buying

Because there is the ability to negotiate conditions of contract, there is a lot more engagement with the property before you buy it.

For instance, it’s not uncommon to ask for alterations to be completed as a condition of sale.

So, before going in you know about, and can actively change, some aspects of your property – before you’ve gone unconditional.

Pro #3 More accurate price point

Deadline sales are “blind” – all offers are private – which means the agent will give a better guide at the price point.

What do we mean by this?

Well, if the agent expects a property to sell for $600K, sometimes (more than likely) the agent will say anyone with a budget over $500K should attend the auction.

When you ask them what they think the property will sell for at auction, they might say “it would be a good deal at $500K”, knowing full well that it’ll sell for more.

However, with a deadline sale it’s more common for the real estate agent to be up front, and say the price is about the $600K mark (in this example).

If people come in lower than that, so be it. But the guide price is tighter.

Con #1 Deadline sales are blind

The downside to all this flexibility is it’s a blind process.

This can be frustrating because, unlike an auction room filled with potential buyers declaring their price offers in real time, you have no idea what other people are offering in a deadline sale.

This means, if you are out for a deal you wont know if you’ve overpaid, or how much you’ve missed out by.

In an auction it is open for everyone to see.

What are some alternatives to a deadline sale?

As we’ve mentioned earlier in this article, deadline sale is only one of several ways to purchase property in NZ.

Here are some of the alternatives:

Price by negotiation

Price by negotiation means the seller can take an offer at any time. This is different to a deadline sale, because there is no deadline – it’s an open-ended timeline.

However, once an offer has been submitted and conditionally accepted, any other offer that might come after will have to wait for the initial offer to be cancelled before being able to make a move.

This means, just like a deadline sale, it’s a good idea not to dilly-dally too long if you plan on making an offer.

Often, with price by negotiation, there is no advertised price. So, it can be hard to know what price to offer if no indication is given.

Tender

Like a deadline sale, in a tender process all offers are made “blind” and are conditional.

But with a tender all bids are opened at once on the same day. Whereas with a deadline sale, they are viewed as they come in.

This means there is a D-Day, and all offers must be made on that day.

Similar to a price by negotiation, offers are usually the best the buyer can muster – in the hope that the seller will agree.

But in this process, offers are made on a tender document rather than a sale and purchase agreement.

Auction

A property auction is a public sale that happens in real time. Interested buyers all gather to bid against each other, with the highest bid winning the property, after the seller’s reserve price is reached.

Similar to a price by negotiation, the auctioneer will not disclose the reserve price. But it’s easier to know what to bid, since the price will start low and go up.

If you win an auction you are committed to purchasing the property. The sale is unconditional, and you will usually pay the deposit on auction day.

Deadline sales vs tender – Which is better?

Out of all these options, a tender and a deadline sale are most similar.

One real estate agent we spoke to said: “A deadline sale is like a deregulated tender”.

Unlike auctions, tenders and deadlines work off conditional offers, and therefore you’ve got some ability to negotiate the conditions.

But a tender cannot be sold before the tender date, whereas a deadline sale can. So, from this perspective a deadline sale is less restrictive – for both parties.

This means buyers in a deadline sale can put in conditions to accompany their offer (e.g. conditional on 10 days’ due diligence) and sellers can accept an offer at any time.

With a tender, there’s less negotiation going on because everyone is putting in bids at the same time.

Like a sale by negotiation, you are going to want to put your best foot forward – first, get accepted, and then do your negotiating down the line.

The hope is that, by the time you get to your negotiations a few weeks in, some of the other offers have gone cold – and then you can negotiate some of your clauses (or price) once you are a bit further down the line (that actually might be your legitimate strategy).

Usually the negotiations are on things like: finance clauses, solicitor’s approval, or a builder’s check.

But a word of warning: finance isn’t something you can use as easily to get you out of a contract these days, and a builder check can be something the owner can remedy ahead of going unconditional.

What are some tips for negotiating in a deadline sale? How do I win?

You’re more likely to negotiate a good price if you know why the seller is selling.

This is because in a deadline sale, there is more room for negotiation on certain clauses. Here are the top 2 tips to be aware of when negotiating a deadline sale as a buyer.

Tip #1 – Find out what the seller cares about, other than price.

You don’t need us to tell you that everyone cares about price – obviously. But there’s usually something else too.

For example, do they want a quick sale? Let’s say, the owners have another offer on another property and they need to settle as soon as possible to avoid having to deal with expensive bridging finance.

Or one of the home owners is moving to another city, and they are running on a tight deadline.

Said another way, is there some sort of time restraint for the existing owners that you could use to your advantage?

If this is the case, you might be able to introduce clauses.

For instance, you could organise an early settlement date or forgo some conditions around alterations to the house that you would otherwise ask for.

And you could find the owners will be more willing to give on price in exchange for these conditions.

The only way to find out this sort of information is to ask the real estate agent some exploratory questions.

Here are some examples:

• How quickly does this need to be sold?

• What are some of the deadlines the vendor has given you?

• What’s going to make this offer stand out from any other offer?

Tip #2 – Make price your last point of negotiation.

This is an important tip – leave the price negotiating till last.

Even if the other party tries to push it earlier, you can deflect on price and bring it back to something else before actually getting to specific numbers.

Ideally, what you want is a situation where you’ve been flexible with your offer. For example you might have:

• been flexible on the owners wanting to take the curtains with them and

• flexible on taking the awkward settlement date of December 23

And now the owner is so invested in the sale, he or she might just be more willing to negotiate on price. (This is the hope anyway).

Sure, these conditions might not be ideal, but you want to be flexible on all these prior details before you get to price … if you want a good deal.

What if I ask for too much, and I’m unsuccessful?

The only way to win a deadline sale every single time is to be high on price, light on conditions. But if you do this every time you may not get a good deal on your prospective investment property.

The point we’re trying to make is: You’ve got to be willing to lose.

You’re not going to win every single one when you’re hunting out a good deal – and that’s OK.

This is really important for investors because you need to do your numbers, and know what your limit is before going in. Then you don’t go a dollar over it. Because there will be an instance where you think: “Ah, I'll just go a bit higher”. And then all of a sudden you are no longer buying a good investment.

Remember, any property can be a rental, but not every property is a good investment at that particular price.

Write your questions or thoughts in the comments section below.