My husband and I have just returned from New Zealand where we spent the month of February. During that time we thoroughly investigated the real estate market there.
Much to our surprise, we were not the only Americans interested in acquiring a home in New Zealand. As a matter of fact, we were bumping into fellow potential expats right and left who were seriously considering purchasing a home, some as second homes and some as primary residences, if they could acquire permanent resident status. The most sought-after areas for purchases were the seaport city of Auckland, which is very popular with sailing enthusiasts and Queenstown in the South Island, which is known for adventure sports and spectacular scenery.
Here are the important facts that you need to know before embarking on a search for a residence in New Zealand. The process differs greatly from the way residential real estate is marketed and sold in the U.S.:
- 75-80% of the homes in New Zealand are sold at auction. These are not foreclosure auctions, but rather the normal way that prices are established and properties are sold. Some very high-end properties over $4m are sold “by negotiation” and never go to auction.
- The process begins when the seller engages a marketing agent to sell their home. The entire process from beginning to end is a matter of weeks, if the property is appropriately priced.
- The seller’s agent usually secures a stager to dress up the apartment and give it maximum visual appeal. The unit gets photographed and published online and in the weekend newspaper real estate inserts. The cost of the staging and advertising is borne by the seller.
- The agent then holds a number of Open Houses for the public to attend – maximum of four, but more likely only two, one on the weekend and one early evening during the week. This takes place during a two week period.
- The auction date is posted and is scheduled to take place a few weeks later. Numerous properties will be auctioned on the same occasion. All due diligence must be done by the prospective buyers prior to the auction because there will be no contingencies in the sale contracts. Furthermore, everything is sold on an all-cash basis, so any financing commitment, if desired, must be secured before the auction.
- These auctions are usually held in a large conference room at the central office of a real estate firm on a weekday. They are attended by the interested buyers along with the agents representing them. There are two large TV screens showing a photograph of the property, a one sentence description and the auction lot number. Some buyers are only represented by their agents who are in touch with them by cell phone.
- A professional auctioneer begins the auction, usually at a lower number than the upset price that the seller has said he would accept. The auctioneer tries to bid the price up to and beyond the acceptable number which the seller has indicated is the lowest price that he will accept. The purchasers are unaware of what the upset number is. There are often three or four prospective purchasers bidding against each other. Depending upon the interest in the property, approximately 80% of the properties at the auction, reach the upset price and many go considerably beyond it. After the gavel falls awarding the home to the highest bidder, the buyers and their agents retire to a small room to sign the sales documents and put down a 10% deposit, agreeing to the closing time which was set by the seller as a condition of the sale.
- Those properties which don’t reach the minimum upset price trigger a brief, private negotiation between the highest bidder and the seller’s agent. If they cannot agree on a price acceptable to the seller, the property is pulled from the auction and will not be sold that day. It may be re-introduced at a subsequent auction with a lower upset price in the future.
This system, although foreign to us, seems to work quite efficiently in both New Zealand and Australia. The question for foreigners is, how to work it when you live on the opposite side of the globe and can’t fly in multiple times to inspect homes at Open Houses?
How to Purchase a NZ home when you don’t already live there
Our suggestion is to go to New Zealand and familiarize yourself with the areas where you might want to live. Then find a local agent who will represent you as a buyer’s representative. They will keep you advised of every appropriate listing which comes on the market in that area and send you the information and a video along with a full description of the property. If you have a really competent agent, you will be able to bid on the property without physically being in the country at the time of the auction. Granted, there is somewhat of a leap of faith involved, but the Kiwis are lovely, very honest people. If you find a competent and experienced agent, you will be in good hands.
There are no restrictions on home purchases by foreign buyers, and you can spend up to six months a year in New Zealand without having permanent resident status.
The NZ Dollar is approximately 30 cheaper than the U.S. Dollar.
Stay tuned to this website for more information about purchasing a home in New Zealand and Australia.