You’ve joined the open home circuit, become a master at taking off and putting on your shoes in under 10 seconds, fine-tuned your knowledge of real estate speak, when at last, you find something with potential to be “the one”. Things start moving, and fast.
Keeping a cool head is important, and having a good lawyer on your side can help you avoid potential pitfalls, make the most of your KiwiSaver and sail into a smooth settlement.
Here are our top five tips.
1. Know the lingo
Here are the common methods of sale you’ll encounter when buying a house:
- Conditional Offer – When negotiating on price don’t give too much away. Remember the agent’s job is to act for the vendors and get them the best price (and one day, when it’s your turn to sell, you’ll thank them for it!). Do your research before putting pen to paper.
- Auction – Do be careful. Your ability to add conditions to your offer is limited at auction, so it’s harder to protect yourself. So if you’re serious, get a lawyer to check out the property as much as possible before the auction, and get pre-approval from the bank so you know your price limit.
- Tenders – Tenders can feel scary because you never know how much to offer, and there is particular paperwork to be completed. Saying that, these factors can put off other buyers, improving your own chances! Start by looking at the CV/QV, recent sales in the area for comparison (agents will usually supply these for free) and then check out the house. The value will vary depending on improvements, location and other aspects.
- Private Treaty – This is an agreement to buy a property that the vendor has marketed for sale themselves, not through an agent.
2. Make your agreement work for you
Clauses can be added to the agreement and they usually allow a certain number of days in which to satisfy them. They can be there for the vendor or for the purchaser. The deposit is (usually) payable on satisfaction of all the conditions in the agreement.
The three key clauses you definitely want to see in your agreement are:
- Finance – The timeframe for this clause should match the LIM. This is to avoid a situation where you have been approved for a certain value and then the LIM shows up certain things which may affect your ownership of the property or ability to obtain finance.
- LIM (Land Information Memorandum) – A LIM is essential, and usually a standard condition. It will tell you, among other things, if:
– the house has a building permit or a consent
– any Building Consents have Code Compliance Certificates
– there are any archaeological zones on or near your property
– swimming pool fencing requirements are up to date and comply with the relevant Act
– there are Zoning and Environment rules which may affect your ownership of the property, and
– any additions or alterations have been done without getting the correct permits or consents.
The LIM may also have the plans for the house in it, and other important pieces of information about the property.
- Builders’ report – This will tell you if the house you want to buy is structurally sound! Or, if there are any defects or aspects that need repair, or maintenance likely to be needed soon.
The agreement also allows your lawyer 10 working days to check the title of the property. You can make objection to the title in certain circumstances if the title is not in order.
3. Tap into KiwiSaver if you can
If you have been contributing to KiwiSaver for at least three years you may be entitled to withdraw your savings, as long as you leave a minimum balance of $1,000 in your KiwiSaver account (excluding any amount transferred to your KiwiSaver from an Australian complying superannuation fund).
You also need to:
- intend to live in the property you are buying as your main residence
- have never owned your own property or land before*, and
- have never made a withdrawal from a KiwiSaver scheme to purchase a home before.
*If you have owned your own property or land before, but no longer do so, and have never made a withdrawal from a KiwiSaver scheme to purchase a home before, you may qualify as a previous home owner. You’ll need a letter from Housing New Zealand to confirm that you qualify.
You are only allowed to make one first-home related withdrawal from your KiwiSaver so you’ll need to decide whether you want to use the funds to pay the deposit on the property, or on settlement. If you want to use them to pay some or all of your deposit – act fast. You’ll need to submit your application and all the supporting documents to the bank at least 10-15 clear working days before you want the funds paid out (we can help with that). You’ll also need to make it clear to the vendor that you are using KiwiSaver for the deposit, as they’ll need to agree to hold the funds until settlement – they won’t be able to access them right away.
KiwiSaver HomeStart Grant
If you’re buying an existing house under $400,000 or a new house under $500,000 in Northland, you may be entitled to a HomeStart Grant.
For an existing/older home, the grant is $1,000 for each year of contribution to the scheme, so from $3,000 to $5,000 (five years) maximum. For a new home, land or a property bought off the plans, the grant doubles: $6,000 to $10,000.
You need to apply for the HomeStart Grant at least four weeks before you need it paid out. However, you can apply for pre-approval (similar to finance pre-approval from a bank), which lasts six months.
You can only receive the KiwiSaver HomeStart grant or its predecessor, the KiwiSaver deposit subsidy, once.
4. Be prepared
Once you find a property to buy, things can move quickly. However, completing applications and getting the necessary paperwork can take time. It’s best to find out what support you’re eligible for nice and early, go for pre-approval where you can and make sure you have the supporting documentation you’re going to need at the ready so that when you find the right property, you’re all set to go.
It’s easy to get caught up in the competition aspect of buying a house, especially in today’s market. Make a realistic plan and stick to it. Often we talk to purchasers who are upset initially if a deal falls through, only to be so much happier with the property they eventually end up purchasing. Keep looking, and when it’s meant to be, it will happen.
This article is not a comprehensive guide. Each situation can be a little different, and we recommend getting legal advice. Our team is excited to help you into your first home and guide you through the process so that you understand what is happening each step of the way.
Happy house hunting!