Buyer Budget Over: A Recent Test Case

By Craig Lowe


A local real estate professional was recently cleared in court in what has been called a “landmark” case for the industry. The case came about because a purchaser had made an offer just slightly above the advertised “Buyer Budget Over” price and their offer was rejected. The commerce commission (on behalf of the purchaser) charged the real estate agent with breaches of the Fair Trading Act claming he had made misleading representations.

The judge said:

“The Fair Trading Act is consumer-orientated legislation. It ensures consumer protection so that the average consumer of any product or land is not misled as to the nature or price of goods. However, it is important to bear in mind that negotiation is integral to real estate transactions. People offering to purchase expect to negotiate. Vendors selling expect to negotiate …in real estate transactions, vendor expectations may decrease and purchasers offers increase ultimately to arrive at a mutually acceptable figure known as the market price”

It was made clear that a Real Estate professional is entitled to take into account the “nature of give and take that occurs in real estate transactions.”

What is a ‘Buyer Budget Over’ guide?

The term ‘BBO’ or ‘Buyer Budget Over’ is used by real estate agents in their advertisements to give buyers some indication of where the properties value may sit, without putting a ceiling on the advertised price. Another way to think of it is “Offers are invited upwards from $800,000” meaning anyone who likes the look of the house and has a budget upwards of $800,000 should inspect the property. And then make their own decisions on what they might offer to secure the home. Good agents will provide comparable sales and guidance, with buyers also making direct comparisons through their own research.

Using a ‘Buyer Budget Over’ guide during a Closed Tender:

The closed tender process (where a property is marketed for a couple of weeks and all offers are submitted for the vendors consideration in private on a set date) is one of the most effective and powerful methods of marketing a home there is, but traditionally it has meant marketing homes without an asking price. The only problem with this is that buyers often overlook properties that do not have any price indication. With no price advertised, how does a buyer know if the property is even within their means? Buyers do not like this and some won’t view the property on principal, or they just assume that the property is out of their price range.

Running a closed tender with a ‘Buyer Budget Over’ price guide is very important alternative to marketing a property without a price. The idea is to give people an indication without capping the price (unlike a range like $700,000 – $800,000 which means no one would ever pay more than $800,000 for the home).

In summary:

Utilising a “Buyer Budget Over” Guide is in fact a very good way of giving an indication for the benefit of the buyer while not capping the price for the seller. Would buyers rather no price was advertised at all? I doubt it.

Please feel free to call me on 021 764 647 if you wish to discuss these marketing methods in more detail.


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