do I need a solicitor?
Yes you do need a Solicitor, if not right now, definitely once you have a signed Contract. It is highly recommended however, to engage the services of a Solicitor prior to signing the Offer, so that before you reach the Contract stage you have received the appropriate Legal Advice. Remember that you may be charged for the Solicitor’s services even if you do not get to Contract stage with the Seller. Also Solicitor costs vary, but as an estimate budget anywhere between $950-$1,200 [estimated only].
what is an offer?
An Offer is a written document that is signed by the Buyer, and presented to the Seller. The Offer is then negotiated until such time as agreement on all terms and conditions is mutually reached. Once the written agreement is reached, and signed by all parties, the Offer Document is dated and subsequently is now a CONTRACT, which is legally binding on all parties.
what is a multiple offer?
This is when there is more than one interested party in making an offer to buy the property. The terms of all Buyers’ Offers are kept strictly confidential, and will be presented to the Seller at the same time. You will be required to sign a Multiple Offer Form which discloses you have been advised that there are other interested Buyers. In these situations it is highly recommended you submit a very strong Offer; there is no guarantee that you will have a chance to increase your offer or negotiate with the Seller. So when it’s a Multiple Offer; very carefully consider the terms of your Offer and the level you are prepared to pay to make it as attractive as possible to the Seller. However DO NOT jeopardise your position and remove clauses that you feel are imperative to making a sound real estate decision.
what is a contract?
Following negotiations [taken place above] once your signed Offer is presented and full agreement is all reached with the Seller, the Offer is signed by the Buyer and Seller, then subsequently dated and sent to the respective Solicitors. This document then becomes a legally binding Contract, whether it is conditional or unconditional.
what does conditional mean?
A Contract to purchase a property, subject to conditions [that is you like the property and you want to proceed provided you are happy with your further research], is called a “Conditional Offer”. Properties for sale by “Tender”, “Fixed Price” or “By Negotiation” can have conditions included in the Contract. NB: When buying a house at Auction you cannot have Conditions – you must have completed all your due diligence before knowing if you have secured the property.
what reports do I need?
Before committing yourself to an Unconditional Contract, the following are typical clauses buyers commonly research in satisfying their Conditions – commonly called “the due diligence stage”: (you may elect to choose all, none, or some of these clauses, or have your own specific clause you need):
[$ estimates only] [allow 10 working days]
- Written Builder’s report ($700-$1,000)
- Verbal Builder’s report [if available] ($250-$350) – nb: should you elect to cancel any contract based on the outcome of a builder’s report you may be required, at the Seller’s request, to provide a copy of the builder’s report
- Registered valuation – ($800-$1,000)
- Electrical inspection [particularly homes pre-1945s] ($350-$450)
- P-Testing ($300-$400)
- Insurance confirmation (particularly important for homes pre-1950s)
- Finance [standard banking] – and a separate Kiwisaver/Home Start Grant clause
- Property Search ($40) this report from the GDC tells you about permits only and some buyers prefer this report than the LIM condition below
[allowing 10-15 working days]
- Full LIM report – ($365) – allow 15 working days;
- In addition to your Finance condition, you should also have a separate Kiwisaver/HNZ Homestart Grant condition [some providers may require 10-15 working days]
NOTE: If you are using Kiwisaver you should be seeking Legal Advice now to help with the paperwork – this will put you in a stronger position if you are at least some way through the process, rather than, only just starting the process, when you are making Offers.
what does unconditional mean?
A Contract to purchase a property, with NO conditions at all, is called an “Unconditional Offer”. To bid at Auction you MUST BE UNCONDITIONAL in all respects. If your Solicitor confirms all the conditions you have listed in your original Contract to buy, at that point in time, ie: when the SOLD sign goes up … the Contract is considered UNCONDITIONAL.
what happens if I am not happy with my due diligence reports?
If you are genuinely not satisfied with any of the Reports you have obtained – advise the Seller’s Real Estate Licensee (“Licensee”) who may be able to resolve any issues for you, and also seek advice from your Solicitor. If neither the Solicitor nor the Licensee can negotiate the issues that have arisen for you, then your Solicitor may take the appropriate course of action to cancel the Contract on your behalf.
what happens when I have satisfied my conditions?
Once you have satisfied yourself with your Conditions and you are 100% happy to proceed with the purchase, your Conditional Contract, then becomes an Unconditional Contract. Your Solicitor handles this for you. Then your SOLD sign goes up.
how much deposit to we have to pay?
The standard deposit payable is 10% of the agreed purchase price, however this amount is negotiable at the time of entering into the Contract with the Seller. Just remember, if you are using Kiwisaver you may not have any deposit, so make sure to mark your deposit as NIL if that is the case. It depends on the terms of your Contract when you pay the deposit, it can be either at the time of signing and dating the Contract, however it is not unusual to have the deposit paid when you confirm your conditions, that is on Unconditional Date [just check the wording of your Contract and ensure the payment time for the deposit, works for your financial situation].
what is a cash-out/escape clause?
The Seller will likely seek the inclusion of a cash-out clause – in my opinion that is best practice when looking after the Seller’s best interests. Typically it is a 3-5 working days clause. Here is how it works …
- You have the first Contract in place, a signed and dated Contract, while you are completing your due diligence conditions you have requested.
- During your due diligence phase, the Seller receives another offer they want to accept too, just in case the first Contract does not confirm at unconditional stage.
- The Seller can accept that second offer, but first have to give you an opportunity to satisfy all your conditions that you have listed in your Contract.
So technically the time frame that you have is shortened down to either 3-5 working days to “tick all your boxes”.
If you tick all your boxes in that shorter time frame then you put up your sold sign and you have confirmed your Contract Unconditional.
If you cannot satisfy your due diligence conditions in that shorter time, then the second Buyer will secure the property over-riding your Contract – but in the first instance, as the first Buyer, you will always have the first option provided you complete your due diligence in the short time frame as noted in the cash-out clause.
what is a pre-settlement inspection?
No later than at least one working days before the scheduled Settlement Date [as noted below] you should complete a Pre-Settlement Inspection. On this day you should check:
- All chattels as listed in your Contract remain at the property and as they were when you entered into the Contract with the Seller;
- All chattels as listed in your Contract are in working order;
- Keys are available for all exterior doors and garage doors [including automatic door openers];
- Any matters the Seller undertook to be completed by them prior to Settlement Date have been completed.
Once completed, advise your Lawyer you are happy for Settlement to proceed on Settlement Date.
what is a settlement date?
Settlement Date is the day you pay for the property and legally become the new owner. On this day, once the Seller’s Lawyer has received full payment of the purchase price from your Solicitor, you will receive keys to the property.
what time do I get the keys on settlement date?
When making arrangements to actually move, and booking trucks etc, work towards after lunch. Sometimes if all matters move easily keys can be handed over much earlier however this is something that is out of everyone’s control. It can be a very stressful day for everyone so work towards a hand-over later in the day to avoid disappointment. Keys cannot be released to the Buyer until the Seller’s Solicitor has authorised the Real Estate Licensee.
Don’t forget to organise well before move in day:
- Gas Mains or Gas Bottle Supplier
- House and contents/vehicle insurance
- Redirect your mail