Private Sale vs Auction
Private sale (treaty/negotiation) lets you include conditions like finance and building inspection to protect yourself. Auction requires you to bid unconditionally โ once the hammer falls, the deal is binding with no way out.
Side-by-Side Comparison
| Attribute | Private Sale | Auction |
|---|---|---|
| Due diligence timing | After signing (during condition period, typically 10-15 working days) | Before auction day โ all checks must be completed in advance |
| Conditions | Can include finance, building report, LIM, valuation, and other conditions | Unconditional on the fall of the hammer โ no conditions allowed |
| Deposit | Negotiable (typically 5-10%, paid on confirmation) | Typically 10%, payable immediately on auction day |
| Cooling-off period | Effectively yes โ conditions provide an exit path | None โ the sale is binding the moment the hammer falls |
| Negotiation dynamics | Private negotiation between buyer and seller via agents | Public, competitive bidding โ price driven by competing buyers |
| Price transparency | Often listed with asking price or price range | No price indication โ market determines the price on the day |
| Agreement form | Standard ADLS/REINZ Sale and Purchase Agreement | Auction Sale and Purchase Agreement (no conditions) |
| Risk to buyer | Lower โ conditions protect you if problems are found | Higher โ no conditions means you accept all risks |
Private Sale Explained
Private sale (also called sale by negotiation or treaty) is the most common method of selling residential property in New Zealand. The buyer makes an offer using the standard ADLS/REINZ Sale and Purchase Agreement, typically with conditions attached. Common conditions include finance approval, a satisfactory building inspection, a satisfactory LIM report, and a satisfactory valuation.
The key advantage for buyers is that conditions give you a structured exit path. If your builder finds serious issues, your finance falls through, or the LIM reveals hazards, you can cancel the agreement without penalty during the condition period. Your lawyer can negotiate the specific conditions and timeframes to suit your situation.
Private sale also allows for more flexible negotiation. You can negotiate price, settlement date, chattels, and other terms back and forth until both parties agree. There is no public pressure or time constraint forcing a decision.
Auction Explained
Auction is a public, competitive sale method where buyers bid against each other in real time. In New Zealand, the critical rule is that the sale is unconditional on the fall of the hammer. This means the winning bidder is immediately locked into a binding contract with no conditions โ no finance condition, no building report condition, no way out.
This means all due diligence must be completed before auction day. You need to have your finance pre-approved, your building inspection done, your LIM reviewed, and your lawyer's advice received โ all before you raise your hand to bid. This costs money upfront with no guarantee you will win.
Auctions create urgency and competition, which can drive prices above what a private sale might achieve. For buyers, this means you may end up paying more than you planned due to the heat of bidding. Setting a firm maximum price before the auction and sticking to it is essential.
Do You Need Both?
You do not choose the sale method โ the seller does. However, you can decide which properties to pursue based on the sale method. If you are a first-home buyer or have tight finances, private sale is generally safer because conditions protect you. If you are buying at auction, you need deeper pockets for upfront due diligence and the confidence to commit unconditionally.
Which Should You Get First?
If a property is listed for auction but you want conditions, you can make a pre-auction offer with conditions attached. The seller is not obliged to accept it, but many will consider strong pre-auction offers. Talk to your lawyer before making any offer, regardless of sale method.
Frequently Asked Questions
Can I make a conditional offer on an auction property before auction day?
Yes, you can submit a pre-auction offer with conditions. The seller can accept, reject, or counter-offer. If they accept your conditional offer, the auction is typically cancelled. Many sellers will only consider pre-auction offers if they are compelling.
What happens if the property does not sell at auction?
If the highest bid does not meet the seller's reserve price, the property is 'passed in.' The highest bidder usually gets the first opportunity to negotiate with the seller after the auction, and conditions can often be included at that point.
How much does pre-auction due diligence cost?
Budget $1,000-$2,000+ for a building inspection ($400-$800), LIM report ($250-$565), and lawyer's review of the title and auction terms. This money is spent whether or not you win the auction.
Related Terms
Unconditional
GlossaryThe status of a sale and purchase agreement once all conditions have been satisfied or waived, making both parties legally committed to the transaction.
Conditional Offer
GlossaryAn offer to buy a property that includes one or more conditions that must be met before the buyer is legally committed to the purchase.
Buying Existing Property vs Buying Off the Plan
CompareBuying an existing property lets you inspect what you are getting before you commit. Buying off the plan means purchasing a new-build before it is constructed, with risks around delays, material changes, and developer solvency โ but also the potential for a brand-new home at a locked-in price.
Residential Due Diligence vs Commercial Due Diligence
CompareResidential due diligence focuses on building condition, title, and council records. Commercial due diligence adds layers of complexity โ zoning and permitted use verification, lease agreements, seismic assessment, environmental contamination, and commercial body corporate obligations.
Conditional Offer vs Unconditional Offer
CompareA conditional offer includes clauses that let you cancel if certain checks fail โ like finance, building report, or LIM. An unconditional offer has no conditions and is immediately binding. Conditions protect you; going unconditional means accepting all risks.
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