Thinking of buying a house or property? What are the things you need to think about when buying a house? When does your lawyer get involved when you’re buying a house? Whether you’re a first-home buyer or a seasoned property purchaser, this guide takes you through the key stages of buying a house and the key things you need to think about at each step.
Stage 1: Preparation
Before you start your property search, you’ll need to do some pre-work to set your goals and get your finances in order, including saving a deposit. The property market is always changing and can move quickly, so if you’re able to secure a pre-approved home loan, it can help to speed things up when you’re on your property search. Even with a pre- approval, you should still include a finance condition in your agreement, as the bank still has to give the property the final “tick” of approval that the property is suitable security to them.
Stage 2: Property Search and Open Homes
Look at listings and visit open homes in your target neighbourhoods to get a feel for what is on offer. Weigh up the pros and cons of properties and keep your property goals in mind. Pay attention to things like whether the property is cross lease or a unit title (body corporate). For a unit title, annual fees are usually payable and you should get this information through an open home or pre-contract disclosure. Narrow down your search to fit your goals and budget.
Step 3: Researching your preferred property
Once you’ve found a property that you’d like to purchase, it’s time to research it in more detail. Before making an offer, make sure you understand all aspects of the property including any issues. Key things you need to do are:
Seek Legal Advice - If you haven’t already, this is the time you need to engage your lawyer (i.e. us). Your lawyer can discuss options to include in your purchase agreement, and review the draft sale and purchase agreement. They will provide advice to make sure you fully understand the terms and conditions of any agreement before you sign anything. There are many things to be considered, depending on te type of property you are looking at and how you are completing the purchase (ie using KiwiSaver – very strict timeframes and clauses/conditions are required).
Additional Documentation - Request additional information from the real estate agent including the LIM report (if the vendors have this), record of title and body corporate documents including pre-contract disclosure information (if buying a unit title property)
Insurance Check – While it’s not a legal requirement in New Zealand to have insurance for a home when you are purchasing, it is a non-negotiable requirement of your bank if you are borrowing money to purchase it. Make sure you can get insurance for your property and that you can afford the premiums. You need insurance to access borrowed funds. If you make this a condition, you are covered if the insurers say no or the premiums are much higher than you had budgeted for.
Stage 4: Make an Offer
After completing your research, and you’d like to make an offer, you’ll need to:
Consult your lawyer. Your Lawyer can review the draft sale and purchase agreement before you sign to ensure that you have the right conditions and clauses included based on what you are doing. You’ll need to let us know how you are purchasing, and how you are paying for the purchase, so that we can correctly asses what may be required. Your agreement sets out the terms and conditions of your purchase. It includes all of the details of the transaction including price, the settlement date and any other terms and conditions such as chattels being sold with the property and whether the buyer needs to sell another property first. Minimum conditions are usually recommended, and we can discuss these with you during our review. For KiwiSaver, there are very specific clauses required and timeframes needed, so please let your lawyer know if you are withdrawing KiwiSaver funds as soon as possible. The agreement provides clarity to both the seller and buyer on what is intended to happen and, perhaps most importantly, the consequences if things don’t progress as intended. When you sign a property sale and purchase agreement, you are entering into a legal contract. The agreement may include a solicitors approval clause* as well.
Understand the method of sale – being used for the property you want to buy, such as advertised price, deadline sale, negotiation, auction or tender.
*What is a solicitors approval clause?
Commonly included in property sale and purchase agreements, a solicitor’s approval clause usually means that the agreement depends on your lawyer being satisfied with the contract terms. Here’s what you need to know about solicitor’s approval clauses.
Stage 5: Offer Accepted, not yet unconditional
Before your offer goes unconditional, you’ll need to reconfirm your finances with your bank or mortgage broker and work through your own due diligence by way of the conditions you have included in the agreement.
Building Inspection – Engage an expert for an independent building inspection to highlight any potential issues with the property. This is often a requirement of the bank if providing you with a home loan. Under the standard terms of the agreement, you can only raise concerns where a suitable building inspectors report is provided.
Order the reports under the conditions as soon as possible to ensure that the timeframes under the agreement can be met. Talk to your bank and send them a copy of the agreement for final approval. We can help you to get the LIM report underway if needed.
KiwiSaver withdrawal* - talk to us as soon as you sign your offer, as we will need to see you urgently to sign documents so that the timeframes under the agreement can be met
*KiwiSaver and first home buyers
Where you are using KiwiSaver funds for the deposit, the documentation for your withdrawal application should be signed as soon as possible. There is a statutory declaration, so you’ll need to see your solicitor (or Legal Executive that is a Fellow) or a Justice of the Peace for this. Funds used for a deposit MUST be paid to a vendors solicitor, not the agent, who must also agree to hold the funds until settlement date and return them if settlement is not completed (unless it is you that has defaulted).
If not using KiwiSaver for the deposit, then you will need to have allowed enough time from unconditional date to settlement date to allow the funds to come in. At least 20 working days is recommended.
Stage 6: Going Unconditional/Cancellation
Any timeframes under your agreement MUST be met. If you require an extension to any dates, we need to know as soon as possible, but it is still up to the vendor to agree to this. If a condition is not satisfied on its due date, depending on the structure of the condition, it can either waive (meaning it no longer exists), it can automatically cancel the agreement OR the vendors may choose to cancel the agreement if you do not satisfy in time.
If there are any issues to raise under any of the conditions, please let us know as soon as possible so that we can talk these through with you (particularly builders report matters that we need to ask if they will rectify).
Once you have worked through all of your conditions and you are satisfied that everything is in order to confirm each of the conditions by or before their due date, then this will be communicated to the vendors and your agreement will become UNCONDITIONAL. This means that there are no further conditions and you are obliged to settle on the agreed settlement date. Your deposit will also become payable (if it is payable upon becoming unconditional). If there is an agent involved, this would usually be paid to them, but for a private agreement, or when KiwiSaver is involved, this must come through your lawyer.
Unconditional to pre-settlement
The work doesn’t stop for your lawyer, or your bank. You’ll need to contact your bank to set up your loan structure if you are borrowing funds to purchase. The bank will then send instructions to your lawyer, who will need to meet with you to sign all documentation, including land transfer documentation, prior to settlement to ensure your loan funds are received in time. This will include KiwiSaver documents if you haven’t already made the withdrawal. As above, you need to ensure timeframes can be met for your KiwiSaver withdrawal.
Your solicitor will also let you know any personal funds they will need in addition to the bank lending for settlement.
You are entitled to complete a pre settlement inspection of your property prior to settlement day. This is to ensure that the property is in the same condition as when you first made your offer and chattels are working. This must be done at least one to two days prior to settlement (with enough time to let your lawyer know if there are any issues they need to raise with the vendors at least one day prior to settlement date). The vendor has no obligation where you choose to raise issues on settlement date.
Stage 7: Settlement and Handover
Your Lawyer, the sellers Lawyer and the bank/s providing mortgages all need to coordinate together to get to property settlement day. Settlement is managed by your lawyer or conveyancer (i.e. us), and there isn’t anything for you to do if all documents have been signed a few days earlier.
Payment of settlement funds required, is managed through your Lawyer who can’t settle until they have all funds from your bank and you, and they have also received the required undertakings from the vendors solicitor confirming they can settle with your lawyer. In most cases, unless arranged otherwise, any legal fees are also cleared on settlement. Early settlements are not always possible given the details your lawyer must have lined up in order to complete your settlement and we do not settle until these are all in place. Given this, you can’t always rely on early settlement if you are arranging a truck to move you.
Have property questions or need help?
Get in touch with our Gallie Miles Property Team, who can assist you with the legal aspects of buying and selling property whether you’re a first home buyer or a seasoned property purchaser.
