Source: Real Estate Agents Authority – Press Release/Statement:
Headline: Understanding the sale and purchase agreement when selling
Summary of important things to know
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You must sign a written sale and purchase agreement when you sell a property.
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Always check your sale and purchase agreement with a lawyer or conveyancer before signing. You need to read and understand the agreement before you sign it.
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You should always get legal advice before you sign the agreement and throughout the selling process.
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You can negotiate the conditions in a sale and purchase agreement.
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A sale and purchase agreement becomes unconditional when all the conditions are met.
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The agent helps you and the buyer to include the conditions you both want. Even though the agent works for you, they also have to deal fairly and honestly with the buyer. They can’t withhold any information, and they must tell the buyer about any known defects with the property.
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If your agent or anyone related to them wants to buy your property, they must get your written consent to do this. They must also give you an independent registered valuation of your property.
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Your agent will probably use the agreement for sale and purchase approved by the Auckland District Law Society and the Real Estate Institute of New Zealand.
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Before you sign a sale and purchase agreement, the agent must give you a copy of the REA’s New Zealand Residential Property Sale and Purchase Agreement Guide . They must also ask you to confirm in writing that you’ve received it.
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You can download our New Zealand Residential Property Sale and Purchase Agreement Guide.
Sale and purchase agreement
A sale and purchase agreement is a legally binding contract between you and the buyer.
It sets out all the details, terms and conditions of the sale. This includes things such as the price, any chattels being sold with the property, whether the buyer needs to sell another property first and the settlement date.
A sale and purchase agreement provides certainty to you and the buyer about what will happen when.
The New Zealand Residential Property Sale and Purchase Agreement Guide
This guide tells you:
- what a sale and purchase agreement is
- what’s in a sale and purchase agreement
- what happens after you sign the sale and purchase agreement
- what happens if you have a problem
- where to go for more information.
Download the residential property sale and purchase agreement guide [PDF, 2.7 MB]
What’s in a sale and purchase agreement
- Your name(s) and the name(s) of the buyer.
- The address of the property.
- The type of title (for example, freehold or leasehold).
- The price.
- Any deposit the buyer must pay.
- Any chattels you are selling with the property (for example, whiteware or curtains).
- Any specific conditions you or the buyer want to be fulfilled.
- How many working days you have to fulfil your conditions (if there are conditions).
- The settlement date (the date the buyer pays the rest of the amount for the property, which is usually also the day they can move in).
- The rate of interest that the buyer must pay on any overdue payments.
General obligations and conditions you have to comply with
The sale and purchase agreement includes general obligations and conditions that you will need to comply with. These may include the following:
- Access rights. What access the buyer can have to inspect the property before settlement.
- Insurance. To make sure the property remains insured until the settlement date and outline what will happen if any damage occurs.
- Default by the buyer. The buyer may have to compensate you if they don’t settle on time, for example, with interest payments.
- Default by you, the seller. You may have to compensate the buyer if you don’t settle on time, for example, by paying accommodation costs.
Your lawyer or conveyancer will explain these clauses to you.
Specific conditions a buyer may include
Some buyers will present an unconditional offer, which means there are no specific conditions to be fulfilled. Some buyers will include one or more conditions (that must be fulfilled by a specified date) in their offer. These are some common conditions:
- Title search. This is done by the buyer’s lawyer or conveyancer to check who the legal owner of the property is and to see if there are any other interests over the property such as caveats or easements.
- Finance. This refers to the buyer arranging payment, for example, a mortgage or loan.
- Valuation report. A bank may require the buyer to obtain a valuation of the property (an estimate of the property’s worth on the current market) before they agree to a loan.
- Land information memorandum (LIM). Provided by the local council, this report provides information about the property such as rates, building permits and consents, drainage, planning and other important information.
- Building inspection report. To determine the condition of the building.
- Engineer’s or surveyor’s report. Similar to the above but more focused on the entire section and the structure of the property.
- Sale of another home. The buyer may need to sell their own home in order to buy another.
What happens after you sign the sale and purchase agreement
Signing the sale and purchase agreement is not the end of the sale process.
Both parties work through the conditions until the agreement is unconditional
A conditional agreement means the sale and purchase agreement has one or more conditions that must be met by a specified date.
The buyer pays the deposit. Depending on what the agreement says, the buyer may pay the deposit when they sign the agreement or when the agreement becomes unconditional. Usually the deposit is held in the agency’s trust account for 10 working days before it is released to the seller.
An agreement for sale and purchase commits you to sell
Once you’ve signed the sale and purchase agreement and any conditions set out in it have been met, you must complete the sale of the property.
Payment of a commission
Once the sale is complete, you pay the agent for their services. The agent or agency usually takes the commission from the deposit they’re holding in their trust account. You should make sure the deposit is enough to cover the commission. The agent cannot ask the buyer to pay for their services if they have been hired by you.
The buyer pays the rest
The buyer pays the remainder of the amount for the property on the day of settlement, usually through their lawyer or conveyancer.
Selling a tenanted property
The agreement for sale and purchase may contain a specific date for possession that may differ from the settlement date, for instance, where the property is tenanted. If the property is tenanted, the agreement for sale and purchase should specify this.
If the buyer requires the property to be sold with vacant possession it is your responsibility to give the tenant notice to vacate, in accordance with the tenant’s legal rights.
Signing the sale and purchase agreement
Signing the sale and purchase agreement
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