The Property Banks Buyers Guide to New Zealand
There are basically two ways to buy
property in New Zealand and that’s either at auction or by buying
real estate for sale at a fixed price.
Both processes are straightforward if an investor understands the
protocol and necessary steps in the entire property buying process.
This is a guide to buying property in New Zealand whether it be for
sale at auction or at a fixed price.
In New Zealand many vendors operate an ‘open house’ policy where
potential buyers can view a particular home for sale without making
an appointment. On open days the house is freely available for
inspection which means that this is a great opportunity not only for
potential buyers but also for property investors to get a feel for
what a particular asking price will get them in a given location.
For those interested in the New Zealand property market it’s wise to
attend a number of open house viewings in a given area of interest
to get a feel for the market. Armed with this knowledge an investor
can then employ the services of a real estate agent to show them
properties that match their investment criteria and budget and they
can assess what looks like a bargain and what’s over priced for
example.
In New Zealand realtors work ultimately for themselves – although
officially they work on behalf of the vendor – this is because they
work on commission and the more houses they can sell at the highest
price the more money they make. While agents will be polite,
courteous and helpful at all times they are ultimately working for
themselves and an investor should not forget this and should remain
unclouded by an estate agent’s judgment.
In terms of the additional people an investor will need to employ to
assist with the sale there is a requirement for an investor to find
a lawyer and also a home inspector – recommendations from trusted
sources can be taken or alternatively there are many who advertise
their services locally in property newspapers in New Zealand –
taking a recommendation from an estate agent is not really wise.
If an investor will require finance to purchase New Zealand real
estate they should agree this in principal with a lender before
making an offer on a property especially if they intend to buy at
auction. When buying at auction it’s a legal requirement that the
property investor has the money available to pay for it. Overseas
buyers can secure a mortgage locally in New Zealand and current
interest rates are attractive – the other alternative is to secure
an international mortgage.
Once a property has been identified by a buyer as potentially
suitable he should have a full house inspection and survey conducted
on the property. And it is at this point that the property buying
process begins to differ depending on whether the property is
available for sale at a fixed price or at auction.
Fixed Price Property
It’s usual for an investor to make an offer to purchase a fixed
price property via their estate agent. This offer is usually below
the asking price and should be based on the investor’s personal
valuation of the property based on their research into other
properties in the area and the state of the property for sale.
This offer to purchase should be conditional to various factors
which should include the property having a satisfactory LIM report
and inspection report for example. An investor should contact the
local council for the LIM report – or Land Information Memorandum
report – when their conditional offer has been accepted. This report
will detail all the information about boundaries, zoning, building
permissions and permits etc., and it is critical that an investor
gets a good report and that they follow it up with a visit to the
local council to clarify any outstanding issues. A home inspection
report is also critical as this can highlight any issues like
termite damage, damp etc.
Once all conditions for the sale have been covered and the title
deeds check for accuracy and legitimacy by the investor’s solicitor,
the offer to purchase becomes unconditional and legally binding.
At this point the investor will pay a non-refundable deposit and the
sale will move to closure. The time this takes depends on the
contract signed giving the vendor a certain amount of time to vacate
the premises.
Auction Property
If an investor decides to buy a property that is for sale at auction
they can actually make an offer prior to the property going to
auction – they should be aware however that if an offer is accepted
it is treated as though it were made at auction and it is therefore
immediately legally binding and cannot be conditional to any terms.
This means that it is critical that anyone considering purchasing
property in New Zealand at auction has all their surveys, LIM
reports, inspections etc., in place before they make an offer.
If an offer is not made before auction day then it will be made on
the day and sometimes a bidder will find they are bidding against
the vendor or real estate agent as they try and push up the price of
the property. If this situation occurs it’s wise to drop out of the
bidding war. The reason properties go to auction in New Zealand is
because real estate agents charge a higher fee for selling
properties at auction and because vendors hope their property price
will be ‘bidded up’ and they will achieve more money from the sale.
If a property investor is successful at auction they will need to
close the sale and settle the balance within days and have to be in
the financial position to do so.
And finally, the good news for property investors in New Zealand is
the fact that there is no such thing as stamp duty payable on the
purchase of property, furthermore estate agents fees are met by the
vendor, and solicitors used in the conveyancing process usually
charge a fixed fee which can be negotiated before they are employed
to assist with the buying process. If an investor budgets an
additional 5% for all their property buying related expenses they
should find that they are easily covered.