4. Buying
Navigate the process of buying your first home, learn about different offers and sales methods and work towards making your first offer.
This step is all about navigating the process of buying your first home, from learning about sales methods to making your first offer.
This is it – you’ve found the home that’s right for you. Now it’s time to make an offer. There are two types of offers – conditional and unconditional.
Conditional offer
This is when your offer has specific conditions that must be met before your sale and purchase agreement can be declared unconditional. Conditions could include your bank or lender confirming finance, a building inspector's report or a LIM report. Any conditions will need to be completed by an agreed date.
Unconditional offer
This is when there are no conditions attached to your offer. When an unconditional offer is accepted, you’re legally obligated to complete the purchase of the home.
You should only make an unconditional offer after your solicitor or conveyancer reviews the sale and purchase agreement and your bank or lender confirms full approval of your home loan. Your due diligence process should also have been completed.
There are four main ways homes are sold in New Zealand. Each has its own conditions and requirements. Before you make an offer on a home, make sure you understand the different methods of sale.
Negotiation
This is the most common way a home is sold. It’s listed with or without a price, and you make a written offer to buy it – including how much you’re willing to pay. The vendor (seller) may accept your offer, reject it or make a counter-offer. If they make a counter-offer, that’s when you enter into negotiations.
Tender or deadline sale
This is when a home is listed with no price and all interested buyers make a conditional or unconditional offer. The vendor then reviews and accepts an offer or may enter into negotiations with several buyers. Competing buyers may have to make predictions about what other offers are being made.
A deadline sale is like a tender process but with more opportunity for negotiating conditions. The agent will often use a tender document, which is a type of sale and purchase agreement.
Private sale
Most private sales are negotiated directly between the buyer and vendor. If you’re thinking about making an offer on a private sale, it’s really important to keep your solicitor involved from the very start. They’ll help you resolve any challenges.
Auction
A sale by auction is where you bid against other interested buyers. The vendor sets a reserve price or minimum price to sell the home as well as conditions of purchase (such as the settlement date).
If you buy a home at auction, the sale is unconditional – you’ll need to get legal advice and do your due diligence, have your finance approved ahead of the auction and be ready with your deposit on the day.
Pre-auction offers
In some cases, the vendor may be willing to accept an offer before the advertised auction date. Usually, this will mean the auction goes ahead earlier than planned or it’s cancelled altogether if a sale and purchase agreement is signed.
If you want to make a pre-auction offer, speak with your solicitor or conveyancer for guidance.
Tip – KiwiSaver and auctions
If you’re making a KiwiSaver first-home withdrawal, this can’t be used for your deposit when buying at an auction. Your KiwiSaver contribution will instead be paid towards the purchase on settlement day.
It’s crucial to check all aspects of the home you want to buy. This means gathering and reviewing important information and documents about the property, with help from your solicitor or conveyancer. This process is called due diligence.
These are the most common due diligence checks:
- The Land Information Memorandum (LIM) report - A summary of information kept by your local council. It may include things like building consents and whether the property is subject to resource consents.
- Building inspector’s report - A detailed look at the structural condition of the home and section. If the report finds any defects that need repair, you may be able to negotiate with the vendor to have them fixed before your settlement date or have the purchase price reduced.
- Valuation - Your bank or lender may request a valuation to show that you’re paying a fair price for the home. It’s also a good way to make sure you’re getting the best deal you can.
- Title, easement and covenants - The title gives the legal description of the property and its current owner and shows any loans currently registered against it. Easements and covenants listed on the title can place restrictions on what you can do on the property.
Tip – bidding at auctions
If you’re planning to bid at auction, you’ll need to complete your due diligence before the auction date as a successful bid is considered an unconditional offer. That means you’ll have some upfront costs, even if you’re unsuccessful in buying the home.
A sale and purchase agreement is a legal contract between the buyer and the vendor. It covers what will happen and when and sets out all the agreed terms and conditions of purchase.
Your conditions might include:
- confirming full approval of your home loan
- confirming approval of your KiwiSaver first-home withdrawal (if you are using your KiwiSaver savings towards your deposit)
- the sale of another property
- a title search, LIM and building inspector’s reports
- a sunset clause – where the agreement can be cancelled by you or the vendor if any conditions aren’t met by a specific date
- a due diligence clause – where the agreement can be cancelled by you if any outstanding issues are found.
Tip – negotiating a settlement date
If you can, avoid scheduling settlement for a Friday. That way, you have some extra time to solve any problems and you don’t have a weekend to wait if there’s any delay.
If you plan to use your KiwiSaver savings towards the purchase price on settlement day, make sure that the settlement date aligns with your KiwiSaver provider’s withdrawal timeframe.
Before you sign
Once signed, both you and the vendor are legally obligated to meet the terms of a sale and purchase agreement. Because of this, it’s important to have your solicitor or conveyancer review it first.
A real estate agent must also provide you with a copy of the New Zealand Residential Sale and Purchase Agreement Guide before you sign a sale and purchase agreement. You can ask for a copy if it’s not offered to you.
Tip – rules for real estate agents
From providing guides to treating you fairly, the Real Estate Agents Act 2008 sets out all the standards that agents need to meet.
If you have any problems with an agent’s actions or behaviour, you can make a complaint to the Real Estate Authority at rea.govt.nz(external link).
Once your offer is accepted, it’s time to finalise full approval of your home loan.
This is when your bank or lender reviews all available documents about the home you’ve found to make sure it meets their lending conditions. Getting full approval confirms your total loan amount and means you can continue with your offer to buy the home or bid on it at auction. It also means you’re ready for the next step!
Here are some useful website links to assist you with the “Buying” step.
Settled resource:
Kua whakahoungia te whārangi: 12 Huitanguru 2024