BUYERS GUIDE | Your Step by Step Guide to Buying Property

2. Having your finances ready

Before buying a house you need to be sure you have the funds to do this. It is recommended that you either have a pre-approval letter from the bank or know exactly where the money is going to come from. This way you will place yourself in an advantageous position when it comes to negotiating a price and conditions for the purchase of the property. But, while it is great to be a cash buyer, often it doesn’t work this way.  You may need to enter into an agreement to buy a property on the condition that you sell your existing property first. Or you may find that you want to secure a property prior to having your finances approved.  In this case your offer to buy may be conditional on finance. The key component for you before making an offer is to know how you intend to fund the property purchase as this will help you in negotiating a deal with a seller and disclosing your conditions.

3. Enlist a Lawyer

It is important to enlist the support of a lawyer if you are purchasing a property whether this is through a real estate agency or privately. Having a lawyer onboard will ensure your conditions for purchase, documentation, title transfer, dates for possession and payment of funds are legal and tidy. As a private buyer we recommend you contact your lawyer early in the process to ensure you are set up correctly to make an offer. You should also ensure they are the right type of lawyer to assist with property conveyancing  and that they are clear about what you need from them. A lawyer can help you with the following:

• Talk you through the sale and purchase process
• Help you complete a sale and purchase agreement, including your conditions for purchase
• Help your deal with changes to the sale and purchase agreement while you negotiate with a seller
• Communicate with the seller’s lawyer
• Hold your deposit prior to settlement date
• Arrange the transfer of title from the buyer
• Handle any loan documents with lending institutions or brokers
• Ensure the final payment is drawn down correctly on settlement day
• Pass the sales information on to the values authority
• Calculate any proportional council rate payments you need to fund

From our experience, legal costs for the sale or purchase of one property can range anywhere from $600 to $1800 so it pays to shop around and agree a fee upfront.

4. Checking a Property

You will want to know that a property is in good physical shape and has what you need before putting in an offer. We recommend you sit down and write a list of the features you want in a property before you start looking.  This will provide you with some specifications to check a potential purchase against to avoid buying an unsuitable property based on a whim of emotion. We also recommend that you have a builders’ inspection undertaken on the property or a builder friend look over the property before purchasing. Building inspections can be costly but in the long run they can save you a lot of money and heartache. Instead of forking out money for a building inspection before negotiating a deal, the smart approach is to include an inspection as a condition in the sales and purchase agreement. Then, if you are unsatisfied with the inspection report once the deal has been signed, you can walk away from the sales and purchase agreement deeming it null and void.  Or conversely you could re-negotiate your conditions on the property purchase.

When discussing a property through Here’s a House we recommend you get as much information about the property as possible. Visiting the property, seeing additional photos and talking in depth with the seller about the history of the property is essential. Aside from the specific details of the property, some other questions to ask the seller are:

• Why are you selling the property?
• Do you live at the property or is it leased / rented? If rented do the tenants plan to stay?
• If this is a rental, what income is currently generated from the property?
• Have there been any alterations / Is everything permitted?
• How much are the rates?
• Are there any additional costs i.e. residential parking, water supply, gas, etc?
• What are your price expectations?
• How long has it been on the market?
• Have you had much interest?
• Is there anything special / different about the property that I need to know?

When viewing the property here are some key areas to check or look out for:

• Does the property get good sun?
• Does it smell damp or nice and dry? Are there any pet smells?
• Does the property have black plastic piping? (this is prone to bursting - look under the house)
• Is the roof in a decent state or does it need replacing?
• Are the bedrooms a decent size? Are there wardrobes in the bedrooms?
• Are there any signs of leakage on the ceiling or signs of water damage in the kitchen, bathroom, laundry and toilet?
• Are the floors even or do they have a slope? Are any of the piles damaged? (look under the house)
• Is there insulation? (take a torch - climb into the roof cavity and look under the house)
• Does the property flow and make sense? Does it have a usable layout?
• Is there double glazing?
• Are the windows made of aluminum or wood?
• What is the state of the big ticket items - bathroom and kitchen? Are they new or do they need replacing?
• Does the property need painting inside or outside, is the flooring serviceable or does it need replacing?
• Is there enough off street parking, or will vehicles fit inside the garage?
• Where are the boundary pegs for the property?
• What are the neighbouring properties like? Are they well kept, are there big scary dogs, etc?
• How does the property compare to the other properties in the street? Is it a ‘worst house - best street’ or a ‘best house - worst street’ scenario?

5. Understanding what a property is worth

Before making an offer on a property you should try to establish what it is worth. To protect your investment and for the property to remain viable during a downturn you don’t want to be paying more than it is worth. However, you also need to be realistic in what you offer so the seller is willing to have a conversation with you. If you want a quick purchase or have a number of conditions to include in the sale and purchase agreement, you may be comfortable offering in at a higher price.  On the other hand, if you have a cash offer with minimal conditions, you may be well placed to offer in at a lower price.

Here are some ideas to help you establish what a property is worth:

• Look through other listed properties in the area to see what their price expectations are. You can view such properties in your local newspaper or on sites such as https://www.trademe.co.nz/ or https://www.realestate.co.nz
• Review recent housing sales information in your area from sites such as https://www.homes.co.nz and https://www.qv.co.nz
• Visit your local council website and check out the rating information (Government Valuation - GV / Capital Valuation - CV / Ratable Valuation - RV) for your property and other properties in the area.
• Obtain a full market valuation, or instant property pack (Basic, E-valuer, Comprehensive or Home Buyers Pack) through https://www.qv.co.nz or through other property valuing businesses in your region.

There will be some sellers who have unrealistic price expectations. Be prepared to walk away if they are unwilling to be more realistic. Other properties will always come onto the market, so as a buyer always try to avoid ‘fear of loss’ when it comes to negotiating a sales price.

6. Discussion and Negotiations with Interested Parties

After you have sent a contact request on Here’s a House, the seller will hopefully get in touch with you and start providing you with more information about the property. From this point on you can start discussing the potential purchase of the property with the seller.  The unique 'offer service' on our site is designed to help you and the buyer arrive at a verbal agreement for the sale of the property.  Once a verbal agreement is reached a sale and purchase agreement can then be drawn up between the seller and yourself. The sale and purchase agreement is often drawn up by the person selling the property but can originate from either party (seller or buyer). While a lawyer does not need to be involved at the offer or acceptance stage, we would highly recommend that you enlist the support of one when drawing up or responding to a sale and purchase offer.  This is especially important if you have limited experience with sale and purchase contracts.

Below are some useful areas to cover off when working towards a verbal agreement with another party. You can include your preferences in these areas when making a verbal offer through the 'offer service' on the Here's a House site.  Having this information will help provide clarity around what has been agreed.  It will also provide you and the seller with the necessary details when it comes to completing the formal sales and purchase agreement.

• Amount agreed upon for purchase / sale of the property.
• Deposit amount you agree to pay when conditions are met.
• The proposed settlement date for title transfer and final payment.
• The full names and contact details of the people entering into the contract / or the name of the business/es entering into the contract.
• Whether you or the selling party are GST registered or using or intending to use the property to make taxable supplies or services.
• Any conditions that you wish to include in the agreement i.e., sale conditional on builder’s report, LIM report, methamphetamine check, sale of another property, finance, etc.
• Any additional conditions the seller wants to include based on the buyer's offer i.e., cash out clause, escape clause if conditions are not met within a certain time, etc.

7. Completing the Sale and Purchase Agreement

A sale and purchase agreement sets out the legal obligations and conditions for both the seller and purchaser of the property. In New Zealand there is a standard Sale and Purchase Agreement put out by the Auckland District Law Society Incorporated (ADLSI). It is recommended that you and the seller use this form when agreeing on the sale of a property or seek the advice of your lawyer. The seller or yourself can either purchase this form from the ADLSI by phoning (09) 303-5270 or fax (09) 309-3726, or most bookshops sell hard copies of the standard agreement.

While your lawyer can help you complete the form, here are some helpful prompts. Remember that in most cases the seller will draft up the agreement and pass this to you for your completion. However, there will be some occasions when you decide to draft the agreement and send this to the seller. The 'offer service' on our site helps you and the seller compile all this necessary information and agree in principle on the terms of a sale. This is all done online to move the process along and to help the seller and buyer avoid those awkward negotiation conversations.  

• You fill in your name or the entity who is buying the property.
• Fill in the exact amount you wish to purchase the property for.
• Fill in the deposit amount you wish to pay for the property (this is to be paid as soon as all of your conditions on the agreement have been met i.e., builders report, LIM report, etc).
• List the conditions in which you want met before you are willing to buy the property outright - for example conditional on the sale of a house, LIM report, Builders Report, Obtaining Finance, Methamphetamine Check, etc.
• On the back page fill in your lawyers details.
• Check the settlement date and ensure this works for you.
• Once you are comfortable with everything contained in the agreement, initial each page and then sign the agreement (if two people are buying the property, each person must initial each page and sign the agreement).
• If you want to change anything on the agreement, then cross it out, write in the change, and insert your initials next to the change.
• Then pass the agreement back to the seller and they will either sign the agreement, decline the agreement, or make changes to the price and terms, and counter sign the agreement before passing it back to you for consideration.
• Once the sales and purchase agreement is finalised it can be passed to either your lawyer or the seller’s lawyer who will start their conveyancing process and ensure you and the seller meet your obligations of the sale as outlined in the agreement.

8. Possession, Payment and Insurance

Yippee, you now own the property!!! You are legally obliged to go through with the purchase process as outlined in the sale and purchase agreement. You will need to pay the agreed deposit to either your lawyer or the seller’s lawyer as soon as the property goes ‘unconditional’ (this is when all the conditions you listed on the sale and purchase agreement have been met). Your lawyer will also arrange for you to take possession of the keys on the agreed settlement day and they will arrange for you to come in and sign any bank loan documents in relation to the purchase. The final payment for the property will be handed over or drawn down on the agreed settlement date. It is important that you arrange property insurance as soon as possible after reaching an agreement.