For most people, buying your first home is the single biggest decision they will ever make. It’s no wonder first-home buyers have many questions. Questions are good. You need to be completely comfortable throughout the process.
We’ve helped many a nervous buyer through their first purchase and so we’re well practised at anticipating the things you might want to know. Here are some of the most frequent questions our team is asked:
Q/ When should I see a lawyer?
A/ You should always see a lawyer BEFORE you sign an agreement for sale and purchase and before you go to an auction. Your solicitor can review the agreement and the title. It is important that you fully understand and are happy with the terms of the agreement you are entering into.
Q/ When should I arrange insurance?
A/ Your bank will require you to arrange insurance when you are sorting out your loan. You should make sure that the insurance takes effect from settlement day.
It is important that during your due diligence period you look into insurance. It is a requirement when getting a mortgage that you insure the property, you will need to ensure that you can make the premium payments and that the property can be insured.
Q/ Can I cancel the agreement if I’m not happy with the LIM report?
A/ Usually, however, all reasonable endeavours must be used to satisfy any condition in an agreement. This means you cannot simply pull out because you have changed your mind. You must do everything reasonable to try and satisfy the condition. Due diligence clauses are the only clauses that give you more flexibility about what you might consider before deciding to go ahead. It is prudent to include in the agreement a carefully drafted due diligence clause. If the market allows it, we suggest you use one.
Q/ Can I rely on the vendor’s or real estate agent’s LIM?
A/ Well, you can look at it and read the information and if that is all you want, their LIM can be useful. But if you want to have a document that you can challenge Council on, then the answer is ‘no’. Council’s obligations are to the party that bought the LIM and you should arrange your own LIM report (or ask your lawyer to obtain a LIM for you).
Q/ Can I use my KiwiSaver for the deposit?
A/ Yes, except you will need to ensure you start this process early as some providers can take up to 15 working days to process your application. Talk to your Kiwisaver and solicitor about withdrawing your Kiwisaver as soon as possible. Read more about using your KiwiSaver for your first home.
Q/ Can I get a Housing NZ First Home Grant?
A/ There are certain criteria you must meet. Check the Kainga Ora website for more details.
Q/ What do I need to know if I’m buying with someone else?
A/ If you are buying a property with a friend or with family, you might want to consider a property sharing agreement. Find out about property sharing agreements.
If you are buying with your partner, you may want to put in place a contracting out agreement. Read about contracting out agreements.
Q/ Do I have to visit my lawyer to sign documents?
A/ There are documents which will need to be signed by all parties prior to settlement. The easiest way to do this is to visit your lawyer. However, if for some reason you are unable to visit your lawyer (due to distance, travel restrictions or sickness) let your lawyer know. They can discuss with you alternative ways the documents can be signed.
Q/ What will I need to pay on settlement?
A/ Before settlement you will be given a statement which sets out the purchase price less the deposit. Normally you will also need to pay your lawyer’s fees, a portion of the rates (and body corporate levies if applicable). If the vendor has paid for the full year of rates, you will need to pay for your portion will be up to the end of the rating year. That might be a cost you are not expecting.
Q/ Must I be in NZ during my settlement?
A/ If you are planning on being overseas leading up to your settlement, you should make arrangements with your lawyer as you will need to sign documents to ensure settlement can take place. Someone will need to do a pre-settlement inspection.
Q/ When can I move into my house?
A/ The actual time of day will be out of your, and your lawyer’s hands. It might be early in the day, or sometimes your lawyer may not be able to settle until 5 pm. Your lawyer will need to wait for the mortgage funds from your bank/lender, sometimes these arrive early in the morning and sometimes not till later in the afternoon. Once the lawyer has the funds ready to settle they will pay the vendor’s solicitor. Your solicitor will then contact you to let you know settlement has occurred. You will then need to arrange to pick up the keys.
Q/ Is there a standard form of agreement? Can I rely on it without reading all of the fine print?
A/ There is no universal agreement, different types of agreements are used depending on how the property is being sold (auction, tender offer etc or off-the-plans). The most common form of agreement is the ADLS/REINZ Agreement for Sale and Purchase of Real Estate Tenth Edition. You must read all of the fine print, regardless of the agreement being used,
Q/ The agent wants to include a lawyer’s approval clause and then have me sign the agreement before I show it to you. What do you think?
A/ As always our preference is that you engage us prior to signing any agreement. It is important that you fully understand what you are signing and the obligations you have under the agreement. Solicitor’s approval clauses are often drafted in a way where it limits what your solicitor can approve. This clause does not provide an easy way for you to get out of the agreement if you change your mind.
Q/ Can I rely on the assumption that everything in the property works or do I need to try all of the taps and light switches etc.?
A/ There is a vendor warranties clause in the agreement for sale and purchase. Part of this clause states that unless stated otherwise, all chattels must be provided in reasonable working order (taps working and lights turning on). However, we do advise that you double-check all of these prior to signing the agreement and again when you undertake your pre-settlement inspection.
Q/ Can I sign the agreement on behalf of my partner?
A/ Yes, you can sign the agreement on behalf of someone else, but only if you have their express authority. Nowadays, with electronic signing in common use, there’s often no need to sign on behalf of another person.
Q/ What’s a counter offer and how do they work?
A/ If you make an offer to purchase a property and the vendor is willing to sell to you, but not on exactly the terms you have proposed; they can make a counter-offer. The vendor might do that if the price you offer was not high enough, for example. They will make the counter-offer by making a change to the document you signed, initialling that change and then sending the agreement back to you.
When they send it back to you in this way, they are making a counter-offer to sell the property on the new terms. If you accept the offer you have a binding agreement and the seller is bound to sell on those terms.
Sometimes there will be a number of counter-offers between the seller and the buyer. It is not necessary to create a new document each time. The changes can be made and initialled in each stage of the negotiation. It is important to keep track though, so everyone knows the terms of the deal.
Q/ Can I get my Dad to do the building inspection?
A/ No under the agreement for sale and purchase, a qualified building inspector must carry out the inspection and provide an objective report. If you try and cancel the contract based on the building inspection, the vendor can request a copy of the building inspector’s report. Under the agreement, you are required to provide a copy of this to the vendor immediately upon request.
The process of buying a property is a lot more involved, download our first home buyers guide for more details. It’s great that you are doing your research, an informed buyer is less likely to make mistakes. The next step is to have a chat with a member of our residential property team. We have all experienced the process not only acting for buyers but as buyers ourselves at various times. Read my article about buying my first home. No question you ask will be too trivial and no concern is unfounded. If possible, remember to contact us BEFORE you sign an agreement.
By Elise Brooks