The 5 property purchase methods every buyer should understand

Why knowing property purchase methods gives buyers an advantage

Whether you are a first-home buyer or a seasoned investor, understanding the different property purchase methods can make a significant difference to your success. Each method has its own rules, risks, and advantages. Knowing how they work helps you prepare properly, avoid surprises, and act with confidence when the right opportunity appears. Below, we break down the five most common ways to buy property and what you need to know about each.

1. Buying by negotiation

Negotiation is one of the most common ways to purchase a property. You make an offer using a sale and purchase agreement, and negotiations take place through the real estate agent acting for the vendor.

Offers can be conditional, allowing you to include clauses such as finance approval, a builder’s report, or a LIM report. Once the vendor accepts your offer, it is your responsibility to satisfy those conditions by the agreed dates.

Because this method involves legal commitments, it is strongly recommended that you seek advice from a solicitor before signing. If your offer is subject to finance, you typically have five to fifteen working days to confirm lending, so engaging a mortgage adviser early can help ensure everything is in place on time.

2. Private sale

In a private sale, the buyer and vendor negotiate directly without an agent managing the process. This can offer flexibility, but it also places more responsibility on both parties to ensure the transaction is handled correctly.

A standard sale and purchase agreement is essential, and legal advice is critical before signing any documents. If you require finance, most lenders will require a registered valuation to confirm the property’s market value. A mortgage adviser can help coordinate this as part of your finance approval.

3. Buying at auction

Property auctions are becoming increasingly popular in many markets. Auctions take place at a set time and place, with buyers bidding competitively for the property.

If you are the successful bidder, the purchase is unconditional. This means all due diligence, including finance approval, building reports, and legal checks, must be completed before auction day. A deposit, usually around 10 percent, is typically required immediately after the auction ends.

4. Tender

A tender is a less common property purchase method but is still used in certain situations. Buyers submit written offers by a fixed deadline, and all tenders are presented to the vendor at the same time.

Tenders can be conditional or unconditional. In most cases, you only get one opportunity to submit your offer, so it is important to put forward your strongest price and terms from the outset. Vendors may choose to negotiate with one or more parties after reviewing the tenders.

5. Mortgagee sale

A mortgagee sale occurs when a lender exercises its power of sale after a borrower fails to meet their mortgage obligations. These properties are usually sold by auction or tender to recover the outstanding debt.

While mortgagee sales can sometimes offer lower purchase prices, they also carry higher risks. Access for inspections may be limited, the property may not be vacant at settlement, and the lender does not provide warranties for the property or chattels. In some cases, the property can also be withdrawn from the market if the borrower resolves their debt before settlement.

Because of these risks, thorough due diligence, legal advice, and confirmed finance approval are essential before proceeding.

Position yourself for success

No matter which property purchase method you choose, securing finance approval early puts you in a stronger position. It gives you a clear understanding of your budget, improves your negotiating power, and allows you to move quickly when the right property comes along.

Working with a mortgage adviser early in your property search helps ensure you are prepared, informed, and ready to act with confidence in a competitive market.

For more information and to talk through how we can best help you, please contact us at info@krispedersen.co.nz or call the office at (09)4864719, and we can discuss what you want to achieve from there.

About the author: Kris Pedersen is a leading figure in mortgage advising and property investment, consistently ranked among the country's top six mortgage advisers for the past four years. With over a decade of experience, Kris is the preferred choice for investors seeking expert guidance to expand their portfolios. He shares his insights as a respected speaker at Property Investor Association groups, and his expertise extends to New Zealand and overseas property and finance markets, with regular features in NZ Property Investor Magazine. Kris Pedersen and Kris Pedersen Mortgages Limited are registered financial service providers, ensuring transparency and reliability in all financial dealings. Their credentials on the Financial Service Providers Register can be viewed here: https://fsp-register.companiesoffice.govt.nz/