Buying a home is great, but it's also a long term commitment
Deciding to purchase a home is a big decision and for most people, probably the largest investment they will make. Whether it is your first home or not, it is important to make sure you make the right decision. There are a number of factors to consider in this decision, but probably some of the most important ones are: What do we need in a home and what can we afford?
In terms of requirements, besides the obvious such as the number of bedrooms, you also need to do a bit of homework about the area, schools and other factors that might be important to your household before deciding to purchase.
Affordability is always the big question. If you have the cash to purchase, that is fantastic, but most people require some financial assistance. Before you start looking at properties, get a written pre-approval from a financial institution so you know what you can afford. Having this pre-approval in writing may also be advantageous during the negotiation process, especially if you find yourself in a multi-offer situation. Don't view properties you cannot afford - you will be disappointed when you have to look at those you can afford and you will be tempted to over commit yourself financially .... the biggest mistake buyers make!
Anti Money Laundering
The update to the Anti Money Laundering legislation in New Zealand requires your solicitor to perform Client Due Diligence on all clients. Please find more information via the link: The Act
Buying your first home
First home buyers in New Zealand who meet the criteria set by the government, might be able to access their Kiwisaver or other forms of financial assistance. Talk to your financial adviser as to what may be available to you.
Making an offer
When you make an offer on a property, you will be asked a number of questions such as: Do you require finance? Would you like a builder's report? Would you like a LIM, or toxicology report or whether or not you have OIA approval? If you have never bought a home before, these questions might be rather confusing. Find below a short explanation with links to more information. Familiarise yourself with the terminology so you understand the consequences of your choices during the offer stage of the sale and purchase process.
Whether or not you will be able to get finance is a question only your bank or mortgage broker will be able to answer. There are some basic guidelines such as the requirement for a deposit (normally 20% of the purchase price on a residential property), you will need a fixed income to pay your mortgage and your approval will not be based on the lowest interest rate currently available. Normally a financial institution will calculate your eligibility on a higher interest rate to ensure you can still pay your mortgage if interest rates go up - something that happens all the time.
Most importantly - get your pre-approval in writing before you start looking for that ideal property.
If you wish to withdraw an offer and you provide inability to obtain finance as your reason, you will have to provide the vendor with written proof of the fact that your finance has been declined by the financial institution.
The builder's report
The builder's report will provide you with information regarding the structure and condition of the property. It will not tell you whether or not the property has a code of compliance from the local authority. This information will be provided in the LIM and property file. If you select to have a builder's report done, you will need to engage a professional, and pay for his/her services. They must provide a written report as per the criteria in the clause of the sale and purchase contract. If you, as a result of the information in the builder's report, decide to withdraw your offer, you must make this written report available to the vendor and indicate what information in the report convinced you to withdraw your offer. If you would like to have a friend who might be good at building, have a look at the property and give you guidance, this is not an official builder's report, but a condition that can be added as a clause to the contract.
The toxicology report
If you are purchasing a residential property, it might be worthwhile to request a toxicology report on the property. You will pay for this report, but it might provide peace of mind. A toxicology report covers more than methamphetamine as was the practice with the old "meth tests". Read more about it here.
The overseas investment act
The New Zealand government has limited who can purchase property in this country. If you are not a New Zealand citizen or permanent resident, please review the criteria and determine if you are eligible to purchase before you start looking at properties. Have a look at the act here.
The land information memorandum (LIM)
The land information memorandum is a document prepared by the local authority that manages the area the property is located in. This document contains information such as code of compliance, plans, zoning and a number of other aspects about the property and area which might be of importance when making a decision to purchase. You can order a LIM from your local council office at your expense.
The property title
The property title is a document issued by Land Information New Zealand and it contains information such as the legal owners, the full legal description of the property and any easements and liabilities registered against the property. Your solicitor or real estate sales person can order the title of a property on your behalf. Visit the LINZ website for more information.
The council property file
The local authorities in New Zealand keep a record of the properties within their jurisdiction. This record normally contains all the building applications, code of compliance issued and many other documents which is important for a prospective buyer to review. If you purchase a property with buildings for which no code of compliance or certificate of acceptance has been issued, you might have to complete remedial work to enable compliance or remove the structure in question at your cost after purchasing the property. You might even be eligible for a fine. If the council has already contacted the current owner of a property regarding resource or building consent issues, they would normally attach a copy of the "Notice to Fix" instructions provided to the current owner, to the property file. You can legally purchase a property with resource or building consent issues, but it is important to know the risk that you are taking on and factor the possible financial impact in when you negotiate with a vendor. You can contact the appropriate local authority and order the property file directly. It is most often delivered through a link emailed to you. Some local authorities still have hard copy files available, but most do not.