How do I buy a property?

There are many different ways to buy property in New Zealand. Auctions are very common at the moment as they command the best price for the vendor.

Auction

An auction is where you get into a room and yell about buying a house. If you win, it’s considered an unconditional purchase, so you need to do all of your due diligence homework beforehand. The real estate agent will have given you a copy of the sale and purchase agreement, title and maybe the LIM report. You may need to do a building inspection and valuation. This can get a wee bit expensive if you keep bidding at auction, so it’s best to be choosy.

You’ll also need to register your interest in the auction before the day and be able to front up with a 10% deposit if you win.

Auction checklist
  • Register your interest with the agent before the day
  • Agree any changes to the deposit or settlement day with the agent before the auction
  • Have your solicitor check the title
  • Get your finance fully approved
  • Read the LIM report and do any other due diligences
  • Do a building inspection or valuation (if required)
  • Arrange your 10% deposit (check out our page on deposit bonds for help with this)

Tender

A tender is like dating. You put in a written offer with a specified timeframe and the vendor considers your offer alongside others. You can put conditions on the offer but this might make it less appealing than others.

Private treaty

A private treaty is buying by negotiation and lets you put conditions into the sale and purchase agreement.

Private sale

Private sales are the same as Private Treaty but are worth covering separately because you’ll be negotiating directly with the vendor. Because no one will be managing the process and spotting the issues early there’s more chance that something will go wrong. If you buy privately you’ll need a registered valuation and should have your solicitor check the agreement before you sign. The alternative is to insert a solicitors’ clause, which is like a Get Out of Jail Free card – if the solicitor’s not happy, you have three days to get out of the agreement.

Sale and purchase agreements

Once you find a place you want to buy you’ll need to sign a sale and purchase agreement. This is basically just a template where you can insert your own purchase conditions. We’ve outlined the main conditions below.

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

Another popular condition is a due diligence clause that gives you full control on the purchase process – unsurprisingly, this isn’t nearly as popular with agents as it is with buyers. Remember though, this is a legal contract and the point of no return; once you go unconditional you’re committed to purchasing the property. It’s mostly not as ominous as that sounds.

Important dates:

  • Finance date – 5 to 10 working days from offer date
  • Settlement date – the day you take ownership of the house

Paying the deposit

You might find that you don’t actually have the deposit available when you buy a property. Rather than searching down the back of the couch to make up the difference here are the rules and the process you should follow:

The amount of a deposit is completely negotiable.

Auctions are set at 10% deposit, but you can negotiate with the real estate agent before the auction if you don’t have it on hand. Agents and vendors will want as many bidders as possible at the auction so will generally agree to a lower deposit.

With private treaty (by negotiation) sales you set the figure when you sign the sale and purchase agreement. 5% is usually enough. With bigger purchases you can usually cap the deposit at a set amount, say $25k, which is pretty handy.

When is the deposit paid?

You normally agree to pay the deposit once the sale goes unconditional. Occasionally real estate agents ask for the deposit upfront but this isn’t all that common.

If you don’t have the funds available immediately, a deposit bond could be the answer. It’s essentially a guarantee for the money without having to actually move any funding prior to settlement, allowing your money to remain where it is until then. This is often cheaper than borrowing the money and stops you having to arrange a temporary overdraft or draw down the funds on your existing property.

Although it is best to pay the deposit on the day you go unconditional, this is often not possible because of the amount of paperwork required to get temporary facilities in place. If this is the case, you can go unconditional and just let the agent know that the deposit will be paid within 48 hours.

Always check with your solicitor – you have three working days from being served notice (by the vendor’s solicitor) to pay the deposit. This means you have at least three working days from going unconditional to pay it. That’s enough time to search through a few couches – or set up alternative arrangements.

How do I get a building inspection and valuation?

Once you’ve signed a sale and purchase agreement we can arrange for a building inspection and valuation and have these available for you before going unconditional.

What is a LIM report?

A LIM report is prepared by the council and is based on its property records. It will tell you whether or not the property has the right consents and a code of compliance. You’ll have to order a LIM report from your Council, which will cost around $250-$350. It often takes up to 10 days to get it too, so order as soon as you’ve signed the sale and purchase agreement. Or if you like looking at heavy documents you can check the council’s property file yourself.

Choosing a lawyer and signing contracts

Your lawyer is a necessary evil in the house-buying process. You’ll find there’s a huge difference in quality of service, advice and cost from all the lawyers out there, so it’s really a question of what you need.

If personal service is important then pay extra and go to a reputable law firm. There are also a number of low cost transactional services available, which work great if you’re an old hand and don’t need lots of advice or reassurance.

Your lawyer will confirm that you would like to go unconditional with the vendor, check that the title of the property is clean, run through the mortgage documents with you, and settle the funds.

If you are outside of the city or overseas, they’ll courier the mortgage documents. You’ll need to sign them in front of a Justice of the Peace or Public Notary. For non-residents you don’t need to come to New Zealand to buy property – just allow enough time for us to send the paperwork back and forth.