how to buy a property

​It sounds easy enough, but there are a number of different ways to purchase property in New Zealand.  Brian, The Wellington Mortgage Broker, highlights the options and key points to remember with each.
 
Auction

Buying at auction can be pretty exciting, and daunting at the same time. If you’re new to property buying it makes sense to go along to a few beforehand just to see how they work and what to expect.
If you are successful at auction (ie your bid was the highest) then your offer is considered unconditional – which basically means you are buying the house! For obvious reasons you need to have all your ducks in a row before you go to auction. After you win is not the time to start looking for finance!
As part of your pre-auction package the real estate agent will give you a copy of the Sale & Purchase (S&P) agreement, title and possibly a LIM (Land Information Memorandum) report as well. You may also want to consider having a valuation and building inspection completed prior to the auction as well for your own peace of mind.
As you imagine the ‘due diligence’ work done before an auction can be quite expensive, so it pays not to go nuts and bid for loads of properties. Take your time, choose wisely and go after the ones you are really serious about only.
Before you turn up to the auction you’ll need to register your interest with the agent. As a 10% deposit is generally due on the day (if successful) you’ll also need to ensure you have funds available to cover this cost.

6 Auction Steps You Need To Cover

• Touch base with the agent and register your interest in a property before the auction day
• If a 10% deposit is too rich for you, make sure you agree any changes with the agent prior to the day also. You may be able to pay a lower deposit (e.g. 5% or a fixed, agreed amount instead)
• Contact us to ensure your finance is in place and fully approved
• Contact your solicitor a few days beforehand to check title etc.
• Complete your due diligence work (e.g. building inspection, valuation, LIM report). Allow 10 days for the LIM report, and 4-5 days for each of the other checks)
• Ensure your deposit is ready and available in good time for the auction. If you win you need to have these funds in place and ready to go!

 
Tender
 
Tenders can be restricted to unconditional offers (which will attract fewer offers) or open to all offers (including conditional offers). You submit a written offer (through the agent) of how much you’d be willing to pay for the property, along with any conditions of the purchase (such as ‘subject to finance’ etc) if applicable. The vendor then considers all the offers they received by the date specified, and decide which they are happiest with.
It is a pretty nerve-wracking process as you have no idea what the other offers are. For this reason it makes sense to try and glean as much info from the agent as you can to give yourself the best possible chance.  

Private treaty

This is a purchase by negotiation where you enter conditions into the Sale & Purchase (S&P) agreement.

Private sale
With a Private Sale you will be negotiating directly with the vendor (seller) rather than communicating through a real estate agent. You’ll need to get a registered valuation completed as part of the finance approval, and it makes sense to have your solicitor check through the agreement before you sign anything. As you don’t have an agent involved in the process there is an increased chance that something will go wrong as no one is there to spot potential issues – so it pays to employ a legal expert early in the process to help guide you.

Sale & Purchase (S&P) Agreement

Upon finding the property you’re keen to purchase a Sale & Purchase (S&P) agreement will need to be completed and signed. This agreement outlines all the conditions of the sale and allows you to enter any specific conditions you may have or wish to be part of the sale. Some of the main conditions you may wish to use are as follows:

• Subject to finance – 5 to 10 working days
• Subject to Building Inspection
• Subject to LIM report
• Subject to Valuation
• Subject to solicitors approval – 3 working days (insert this if you are not confident about what you are signing)

 
You may also wish to include a ‘due diligence’ clause to ensure you have greater control of the process. This can be a useful clause to include as it gives you an ‘out’ should you need one. Buyers like this clause, agents not so much...
 
Along with the conditions of sale the ‘Sale & Purchase’ agreement will also clearly state the finance date and the settlement date.
 
The finance date is the day you need to have your finance in place by (fully approved), and the settlement date the date of possession (when the loans are drawn, keys are picked up and the property is yours!)
 
The Deposit

The deposit is normally paid when you go unconditional on a property (so on the day of the auction if successful).
Here are a few guidelines for paying deposits:

• At auction a 10% deposit is normal, but is completely negotiable. Make sure you have agreement on the deposit amount with the agent before bidding though.
• If buying by negotiation (private treaty) you can agree the deposit amount at the time the Sale & Purchase agreement is completed. Again, the deposit amount is completely negotiable.
• If you are using Kiwisaver funds towards your house purchase you can now access the funds as part of your deposit. You need to allow at least 10 days for this to happen. Your solicitor will action any withdrawal so speak to them as early as possible regarding this option.
• If you cannot pay the deposit on the day you go unconditional you have 3 days to do so once the vendor’s solicitor has served notice.

 
What is a LIM report?

Land Information Memorandum Report – provided (for a fee) by the local authority or at times by the seller of the property. It shows details on a property such as plumbing, drainage, water reticulation plans, consents, licences and permits, etc. It is important to check with the seller of the property for details of other work that may have been carried out without notification to the local authority as this may not be included in the LIM report.
You can expect to pay around $300-350 for the report. Given the time it takes to receive it’s best to order this asap once the S&P has been signed.

No matter which method you use to purchase your property it pays to do so with as much understanding and knowledge as you can. Ensuring you have a great team there to help you can make the difference between a simple transaction, and a potential nightmare. Contact us today and let us guide you to your next purchase.