Well by now hopefully you have chosen what you want. Done your research and found what you need to find and are able to make an educated decision when it comes to buying your home.
There are three main ways to buy a home
1. by offer and negotiation – you make an offer and then negotiate if necessary until you and the seller agree on a price
2. at an auction – you go along on the day and everyone interested bids against each other until only one bidder is left
3. by tender – everyone interested in buying puts in a written offer for the seller to consider, usually all at the same time.
Most homes are still sold by the first means. But auctions and tenders are often used in sought after areas, or if a home has a special feature, or needs to be sold by a set date.
Buying by offer and negotiation. This is normally done through a real estate agent using a standard sale and purchase agreement. You make a written offer using this form, which the agent takes to the buyer.
If the buyer accepts your offer, they sign it and the form becomes your sale contract. But the seller may want to negotiate and make a counter offer (where they change something in the offer then sign it). The agent will come back to you to see if you agree to the change and if you do, you sign the change and the deal is done. Or you might decide to change something yourself and the process is repeated until an agreement is reached or one of you decides to stop.
The big plus about buying this way is that you can take time to think – and you can put in conditions that let you check the place out before you’re fully committed.
Important things to know
Your sale and purchase agreement is a legal contract. You need to have it checked by your lawyer before you sign it – and if any of the conditions change during negotiation. The agreement becomes binding once both you and the seller have signed it and initialled all the changes. You can stop negotiating at any time up until then.
You can take your time. You don’t have to have everything agreed in one day or evening – although this is what the agent may be hoping to do.
If the seller changes something, you can change the offer. So if the price goes up you may want to extend the settlement date or ask for something else to be included in the deal. Or you may want to make your offer more attractive without raising the price by taking some conditions out.
Paying a deposit to the agent
Once everything’s agreed you pay a deposit of 5–10% of the sale price to the agent. The rest of the money is paid on settlement day. The agent pays the money to the seller when your offer becomes unconditional (when all the conditions are met and the sale is definitely going ahead). You get your money back if the sale falls through because the conditions are not met. Butyou can’t usually get it back if you want to back out after everythingis unconditional.
The deposit is held in a trust account and is protected by law. No one can take it if the real estate company goes broke and there’s a fidelity fund to cover missing money.
If you’re buying privately
The process is much the same if you’re buying privately but it may be more difficult negotiating directly with the seller, especially as they may be expecting more from the sale. It’s very important to use your lawyer at each step. If you buy privately, pay the deposit to your lawyer so they can arrange for it to be held in a safe trust account.
The sale and purchase agreement
The agreement mainly used these days is a standard one created by the Real Estate Institute and the Auckland District Law Society. It’s about 10 pages long and in small print, so you may want to get a copy from your agent and read it in advance so you understand
what’s in it.
It covers things like responsibilities under various laws and what happensif settlement is late – and lets youinsert your own dates, amountsand conditions.
Is your offer conditional?
Making your offer subject to conditions gives you time to check that everything’s okay. If your conditions are not met you don’t have to go ahead, or you can renegotiate – for instance you might be happy to do repairs if the price is lower. It’s very important that your lawyer checks your offer and any conditions you add. The other thing to remember is that too many conditions can put a seller off.
Is your offer unconditional?
If you make an unconditional offer you need to sort out your loan and everything else beforehand because once the offer is accepted you have to go through with the sale. If you break the contract you can be sued.
Sellers can add conditions too
Sellers can also add conditions, although this is less common. One you may see is an ‘escape clause’. This means if they get a better offer they can give you a deadline to make yours unconditional. If you can’t meet the deadline they can accept the other offer.
Important dates
Your offer has several dates in it. The finance date is when you need to have your money arranged by and settlement date is the day you take over the home. I suggest you put in a date that your offer ends if the seller doesn’t accept it – that way you’re not left
wondering while the seller possibly waits for a better offer.
This offer is subject to…
Here are some common types of conditions buyers add to the agreement.
• finance – this gives you time to arrange your loan. Make sure it says finance on terms satisfactory to you or you could be forced to borrow on terms you don’t like
• title search – so your lawyer can check there are no problems with the title, or restrictions, covenants or easements you need to know about
• valuation report – so you can check the market price. Your lender will probably want you to get one anyway
• LIM report – so you can check what the council knows about the property and make sure there are no problems with things like consents or flooding
• building inspection report – so you can check the building is sound and find out about any problems that might cost money
• engineer’s report – so you can check any structural or land issues
• sale of another home – if you need to sell one home to buy another.
You might also want to add other conditions covering things like repairs they’ve said they’ll make or extra items they’ve agreed to leave.Your conditions need to state that the report, finance or repairs must be satisfactory to you. Otherwise you will still have to go ahead even if you’re not happy with the results.
Your lender will need to see the sale and purchase agreement after the deal is done. But talk
to them beforehand to check if they have any specific clauses they want added.
My advice is to always get legal advice and get the agreement explained to you before signing anything. Although I myself think this is annoying when your trying to secure a deal I honestly believe this is the safest thing to do. An agreement is binding and I would hate to think that your going to be bound by something you dont fully understand.