The term seller’s market has been thrown around a lot in recent months, but what exactly does it mean? A seller’s market arises when demand exceeds supply. In other words, this means that there are many interested buyers, but the number of houses on the market remains low. With fewer homes available, sellers are at an advantage, therefore, making it a seller’s market.
More recently we have seen amendments being made to sale and purchase agreements throughout Taranaki to make sale conditions more convenient for the seller (it truly is a seller’s market!). So, how exactly are these agreements adapting to the current market? In this article, we answer all by outlining what a sale and purchase agreement is, why they’re so important, as well as the clauses that are now appearing bringing new advantages to sellers.
What's a sale and purchase agreement?
A sale and purchase agreement is a legally binding contract between the seller and the buyer. It contains all of the sale’s terms and conditions, such as the price, date, chattels being sold with the property, whether the buyer is reliant on selling another property before the settlement date, and more. Ultimately, a sale and purchase agreement offers certainty to both the seller and the buyer about what exactly is going to happen and when it’s going to happen.
There’s no one size fits all or universal sale and purchase agreement. There are various agreements available with different clauses and conditions that all involved parties should be informed about. This is why it’s always helpful to obtain legal advice before signing any contract of this nature. Our team of licensed real estate professionals will be able to draw up a sale and purchase agreement for you, which will contain equatable clauses for both the buyer and seller. It is common for most sale and purchase agreements to include the following:
- The address.
- The type of title (such as freehold or leasehold).
- The price.
- Any deposit that must be paid.
- Any chattels being sold with the property (such as curtains or whiteware).
- Any conditions the seller or buyer wishes to be fulfilled.
- How many working days the conditions must be fulfilled within (if there are conditions).
- The settlement date (when the remaining money is paid to the seller, and when the buyer is typically able to take possession of the property).
- The rate of interest that must be paid on any overdue payments.
How have sale and purchase agreements changed?
With the current seller’s market, the demand for housing exceeds the available supply. This means that sellers have more leverage since there are many interested buyers for the low inventory of properties. Homes sell faster in this climate, and buyers are in direct competition with one another. As a result, sellers often have a little extra leeway to request special conditions and achieve a higher asking price, which may not be possible in a more balanced market.
Extended settlement dates
Extended settlement dates are becoming a normal inclusion in sale and purchase agreements. Often so the seller has enough time to buy a new home to move into once they have sold their current property. This can also be due to the seller needing cash to make an attractive offer on the new home they're looking at. Extended settlement dates are arguably a bi-product of the current seller’s market, if the roles were reversed and the buyer held more of the power there wouldn’t be quite so much wiggle-room on postponing the possession of their new property. This can also mean that offers with a longer settlement date are more attractive and should be considered, if possible.
Limited buyer conditions
Limited conditions are more appealing for the seller. This includes circumstances such as cash offers, pre-approval with the banks, or anything that can reduce the risk of a sale falling through. With the high level of buying competition out there, sellers are often getting their pick of the bunch when it comes to offers. Of course, sellers are not only going for a high offer but they are also opting for the least risky offers with the least amount of conditions for a quick and smooth sales process.
For example, when a potential buyer wishes to buy a property ‘sight unseen’ (meaning they are from out of town and haven’t had the opportunity to view the property in person), there are numerous risks associated with this. Real estate agents prefer to include a ‘subject to the purchaser viewing the property’ clause to safeguard the seller. However, this does weaken the buyer’s offer. As a direct result of COVID-19 lockdowns and restrictions, there is an increasing number of non-locals purchasing in Taranaki, even from overseas. Of course, with restrictions in place, it is physically impossible for these buyers to view the property, meaning that ‘sight unseen’ purchases are increasing. That’s why enlisting the help of an experienced real estate professional, such as our team, will ensure there are clauses included in the sale and purchase agreement that safeguards both the seller’s and the buyer’s interests to come to the most mutually beneficial outcome.
Ultimately, extended settlement dates and the push for limited buyer conditions are re-shaping common sale and purchase agreements across New Zealand. The current seller’s market is providing sellers with much more choice and leverage to get a deal that satisfies all of their needs while also obtaining the highest possible price for the property.
If you’re planning on selling a property in Taranaki and would like to discuss your options, please get in touch with our team of sales professionals who are available to discuss any questions you may have. By requesting a no-obligation appraisal on your home, we can help identify the best plan to achieve your selling goals. We understand that selling your home is a huge decision that shouldn’t be taken lightly.
To ease the pressure and help you along your selling journey, we have created the 'Ultimate guide to preparing you and your home for sale'. From deciphering real estate terminology, an in-depth analysis on when the best time to sell your home is, to the sales process, marketing, and tips on preparing your home for sale, everything you need to know is included. Download your copy today.