Purchase Guide

purchase guide for buying your new home

Whether you’re about to buy your first home or your tenth, purchasing residential real estate is both an exciting and nerve wracking time.

Here at Property Conveyancing Services  we want to make it as stress-free and plain-sailing as possible.

The best time to seek legal advice when purchasing real estate is before you sign any Agreement for Sale and Purchase – especially if you have a house of your own to sell at the same time.

If you don’t already have a real estate agent, then the agent who is selling the property you are interested in purchasing, will no doubt want to list your house for sale.

Any conveyancer will advise you to do your homework and seek legal advice first.

If it is too late and you didn’t seek legal advice prior to signing an Agreement for Sale and Purchase, the next best time is immediately after you have signed it any document.

conveyancers (like real estate agents) are familiar with all the paperwork that’s required to buy and sell houses and, because we’re professionals and do it often, we have a streamlined process to ensure absolute best value for our clients.

Regardless of whether this is your first time (or tenth) it always pays to ensure you are working through a checklist so that something important isn’t overlooked or forgotten and then becomes a last minute panic.  Or worse – something that will end up costing you (either in time, inconvenience or dollars) to retroactively take care of it.

As with every profession and industry there is always jargon – to help you understand what we (as your conveyancers) and your real estate agent might talk about, we’ve created an A-Z of real estate terms designed specifically for the New Zealand market.   We hope you find it helpful.  [hyperlink A-Z]

How can your conveyancer help you purchase your next home?

In New Zealand there are a number of legally binding transactions that only lawyers or registered conveyancers can undertake (for example registering and discharging a mortgage).  However, there are other aspects of sale and purchase process we can help you with as well.

Here at Property Conveyancing Services, we have an experienced licensed conveyancer of more than 20 years who can help you with:

  • Property conveyancing for purchasers and sellers
  • Preparation of Sales and Purchase Agreements
  • Refinancing
  • Subdivisions
  • New mortgages and discharges
  • Increases in priority amounts
  • Business sales and purchases
  • Trusts and wills
  • Estate planning
  • Titles searches
  • Explaining LIM Reports
  • Explaining what might be registered against the Certificate of Title of the property you might be purchasing (for example, easements).
  • Kiwi Saver documentation

Kiwi Saver

kiwi saver to purchase your new home

If you’re about to purchase your first home you may be eligible to cash in your Kiwi Saver contributions.

We’re extremely experienced in what’s required to include Kiwi Saver contributions as part of a first home purchase and will help make it as easy as possible for you.

Valuations

With the strict limits imposed by the Reserve Bank of New Zealand limiting borrowings some banks may require you to get a valuation of the property you’re intending to purchase.  As these can cost anywhere in the region of $500-$1,000, it is important to ensure you’ve allowed both enough time to get this done and that you have selected a valuer your lending institution will accept.

Therefore, before you arrange for a valuation to be undertaken ensure your lending institution (eg, your bank) will accept it.   It’s always a good idea to get a couple of quotes so you know you are getting the best value possible.

Weather Tightness

leaky buildings and watertightness first home purchase - Purchase Guide Real Estate

Depending on the age of the house you want to purchase, some banks require a Weather Tightness Report (this is to ensure they are not lending against a ‘leaky building’).

Here at Property Conveyancing Services we are used to working alongside many trades when it comes to purchasing (and selling) residential real estate and therefore we can help you in this area as well.

It’s important to remember that conveyancers cannot give advice in relation to weather tightness or a builder’s report, but we can help ensure you’ve taken all legal and practicable steps to ensure you have undertaken your due diligence and are making an informed and educated purchasing decision.

The (Sale and) Purchase Process

sale and purchase - Purchase Guide Real Estate

Once all the conditions of your Sale and Purchase Agreement have are satisfied the Agreement is confirmed as being unconditional.

This means that if you are purchasing a property that we, as your conveyancers, will advise the seller’s solicitor (or conveyancer) that you are unconditional.   This is the point of no return – you cannot back out of the Agreement now.

At this point your lawyer will receive loan instructions from the bank and mortgage documents will be prepared for you.

Your bank will make electronic arrangements with Land Information New Zealand (where land titles are held) for the discharge of existing mortgages and other encumbrances, transfer of the certificate of title to be registered in your name, together with any mortgage you may require.

Documentation will need to be signed and therefore a meeting will need to be arranged with us.

You will need to bring confirmation that you have arranged for insurance cover of your new property with your bank as having a financial interest in the property.  Your bank will require us to include the insurance certificate when we send them your loan agreements.

It is common practice for the purchaser’s solicitor to receive a settlement statement from the vendor’s solicitor (ie, seller’s solicitor) detailing the funds required to complete your purchase.

As the purchaser you are entitled to a pre-settlement inspection prior to settlement.  This is something that real estate agents usually undertake on behalf of the purchaser so it is important to know this has been arranged with your real estate agent.

If you are purchasing a property privately (that is, no licensed real estate agent is involved) it is important for you to make arrangements for a pre settlement inspection.  Make sure you have organised a date and time for this to take place with your conveyancer.

Authorising the release of your deposit to the Real Estate Agent’s office

authorising release of funds for real estate purchase - Purchase Guide Real Estate

When you first enter into a Sale and Purchase Agreement for Real Estate, the vendor’s (seller’s) real estate agent will normally expect you to pay a deposit as a sign of good faith and intent, of 10% of the purchase price.

This amount is then held in the real estate agent’s office’s trust account for a statutory 10 working days.

If no deposit was paid at the beginning of the agreement period, it is imperative that once the agreement has become unconditional (the point of no return) a deposit is paid.

Once an agreement has gone unconditional (that is, prior to settlement) a real estate agent can be paid his or her commission from your deposit.  The balance of your deposit less commission paid to the real estate agent is then forwarded to the vendor’s conveyancer or lawyer.  This amount then forms part of the purchase funds.

It has become common practice that real estate agents will ask for their commission to be paid as soon as an agreement has gone unconditional.  As the purchaser you should always be contacted and your authorisation given, to release your deposit in this manner;  it is, after all, your deposit.

As your conveyancers we will not authorise (on your behalf) any release of the deposit from the real estate office’s trust account if there are insufficient funds available (by the vendor) to fully discharge any mortgage(s) and any rates and applicable taxes on the property.

Any good conveyancing practitioner or lawyer will always obtain the purchaser’s authority and obtain an undertaking from the vendor’s lawyer that there are sufficient funds available for clear discharge of all liabilities, prior to authorising the release of an early deposit.

Sometimes there are long settlement periods (perhaps the property has sold earlier than anticipated and the vendor would like to stay on as a tenant until such time as s/he moves into their next home).  In these cases the deposit less commission funds should be placed on interest-bearing deposit so that you (as the purchaser) receive the interest earned on your funds.

If you are purchasing a property by auction, not only are you required to have all loan documentation in place prior to the auction (should you be the successful purchaser), and all building inspections, etc completed and satisfied, you are required to pay a deposit of 10% of the purchase price on the fall of the auctioneer’s hammer.

Purchasing your first home

first home purchase - Purchase Guide Real Estate

As we have mentioned earlier on this page, if you are a first home buyer you may be eligible to use your Kiw Saver contribution as part of your deposit.

If you are just starting to look for your first home (that is, you haven’t signed any agreements yet) we recommend you speak with a mortgage broker or your bank manager and arrange for pre-approval of finance.  Although pre-approval doesn’t necessarily guarantee the “subject to finance” clause in the Sale and Purchase Agreement will be satisfied, it will give you an indication as to the purchase price you will be able to consider.

As we have also mentioned previously, some banks may require you to arrange for a valuation to be undertaken.   It is important you include any such fees (including, for example, a builder’s report, LIM report and maybe even water tightness report) into your budget.

As your conveyancing practitioner we would recommend (in most cases) you include the following additional conditions in your Sale and Purchase Agreement:

  • Approval of the Title and encumbrances by your registered Property Conveyancing Practitioner.
  • Land Information Memorandum which will detail all Building Permits, Building License, Code of Compliance Certificates or Certificate of Acceptances.
  • Building Inspection Report.
  • Weather Tightness Report.
  • Sale and settlement of an existing property. In this case you will want to ensure the settlement and possession date coincide.

If you are purchasing the property with another party you must let your conveyancer know this – we will have questions about how you want this to be handled in the future.   For example, we will need to address the forms of “tenancy” (this refers to the ownership of a parcel of land):

  • Joint Tenants: this is where two or more individuals own the property. On the death of one party, the property passes to the survivor/s, irrespective of any provisions in a Will.  If you are in a second marriage you may not want this to happen, as it would mean children of a prior relationship will not inherit their parent’s share in the property.
  • Tenants in Common: this means you own a specified share in the property, either in equal or unequal shares.  You can leave your share in the property to beneficiaries named in your Will.

It’s important you allow enough time for these extra conditions to be satisfied without rushing.

Note there should always be sufficient time given to you for the satisfaction of your conditions.

Once a first home purchase becomes unconditional the sale process is as per that outlined above.

Finance

home finance options

When you are purchasing a property it is very important to understand the difference between a pre-approval of finance and an unconditional offer of finance as they are completely different.

Pre-Approval of Finance

As we have mentioned earlier, do not assume that just because a bank has given you pre-approval of finance that any agreement you enter into will automatically satisfy the “subject to finance” clause in the Sale and Purchase Agreement.

A formal application to the bank is required once you have entered into an agreement to purchase a specific house.

Unconditional Finance

This is when you have met all the bank’s conditions and lending criteria and they will lend you the money (by way of a registered mortgage) for you to purchase a specific property.

It is critical you do not enter into a ‘cash’ offer to purchase real estate without first consulting with your lawyer or conveyancer.

We always recommend you always make an offer to purchase subject to you obtaining finance on terms and conditions that are satisfactory to you.  “Satisfactory to you” means you agree to the interest rate, the term of the loan, the amount of the repayments and the address the finance is to be secured over and any other terms and conditions as stipulated by the bank.

We highly recommend you consider using a mortgage broker (their services are paid for by the banks once your mortgage has been drawn down) as they are totally independent and can usually arrange for the very best deal for you.

Builder’s Report & LIM Report

Unless you are in the trade (ie, a builder) and will undertake an inspection of the house you are purchasing yourself, it may pay (peace of mind) to arrange a Builder’s Report, a LIM Report and maybe even a Water Tightness Report.

If you are purchasing an older house that has had alterations made to it, or perhaps has had some outbuildings built, it is definitely a wise move to have a LIM (land information memorandum) report added as an additional condition of purchase.

If, for example, the house you are considering purchasing has a rumpus room in it, but that rumpus room has been added without the council’s knowledge (and therefore consent) it may mean that, in the event of a fire, your insurance may be null and void because part of your property was without “consent”.  That would then have major repercussions regarding your mortgage.  Which would then upset the bank.

As you can imagine, some vendors (and sadly, even some real estate agents) do not want prospective purchasers finding out that some alterations or additions don’t have Certificates of Acceptance or Code Compliance Certificates.

If you’re thinking that’s okay – you don’t intend to purchase a house with a rumpus room, be warned because it also applies to tradeswork.  For example, electrical, plumbing, spa pool, swimming pool, garaging, heat pumps, fire places, fixed BBQs, etc.

Non-compliance and “Remedy”

What if we discover something non-compliant in the LIM Report?  Depending on how the Sale and Purchase Agreement has been worded in the first place, there could be a requirement for the vendor (the seller) to remedy.  (Not everyone wants the option to remedy;  some purchasers are willing to just walk away in this event).

Making good (remedy) will depend on which Building Act the alterations or additions have been completed under and the individual requirement of the relevant local authority (council).

Some can be remedied by either obtaining a Safe and Sanitary Report (which is lodged on the council file) or a Certificate of Acceptance.

In some cases remedy is not possible because local authorities will not issue a certificate.  As each local authority has its own rules, regulations and bylaws it is essential you understand the ramifications of whatever is discovered on your LIM report.

Final Inspections

As has already been mentioned, as the purchaser of a property you have the legal right to a final inspection of the property you are purchasing prior to the completion of your property conveyancing.

You will need to discuss how you want this to take place with both your conveyancer and the relevant real estate agent so that arrangements can be made and then followed through on.

Because licensed real estate agents understand the legal requirement for this, they will probably have made arrangements as a matter of course.  However, if you are purchasing a property privately you will need to make these arrangements direct with the vendor (seller) and / or their lawyer / representatives.

In New Zealand the property must be in the same state and condition as at the date of the Agreement.  It is important to make sure all the Chattels listed in the Agreement are in working order.

If you are undertaking this inspection yourself we strongly recommend you check everything thoroughly.  An example of chattels could include (but is not limited to) any of the following:

  • Dishwasher, turn it on for a short cycle wash.
  • Electric or gas cook tops, turn on the elements to make sure they are working.
  • Range hood with extractor fan, turn on and check.
  • Heated towel rails, turn them on.
  • Washing machine taps, turn them on check both hot and cold water.
  • Garage door with remotes, check they are working.
  • Security lights, check they are working.
  • Gas hot water system, check the pressure and heating.
  • Oven, turn it on and check that it is working.
  • Power points, take a hair dryer to your final inspection and check the all the power points are working.
  • Security alarms, check that it is working, and more importantly make sure the codes and pin numbers are handed over to you. You may also want the Vendor to demonstrate the operation of the system.
  • If the property includes a spa or pool. Make sure all equipment included are working.
  • Check all the light fittings are working.
  • If smoke alarms are included, check the batteries and that they are working.
  • Make sure all the toilets flush properly.
  • Check no windows are broken or cracked.

This list is not extensive but you can see the importance of checking things are in good working order.

You can download a printable copy of the Final Inspection Working Order Chattels Checklist here or alternatively click on the image below.

You only tend to discover things are not working, once you have been in occupation of the property for a few days or weeks.  If you discover something is not working and then want the vendors to remedy it is pretty hard once your property conveyancing has been completed and the vendors have moved on.

In the event something hasn’t been remedied (that was, for example, a condition of purchase) it is you may enter into an arrangement with the vendor that you will withhold an amount deemed suitable for remedy which will be released by your conveyancer once remedy has been made.