Buying a house

Before you begin think carefully about your long-term life goals and how you will get there.

• Ask yourself why you are buying. Do you want to buy or build a first home, buy a bigger home or invest in a rental property?
• Decide whether buying is right for you. Would renting suit your lifestyle better?
• If you’re in a relationship, make sure you discuss your plans together.

A home loan is likely to be the biggest financial commitment you will ever make. It’s important to investigate and understand your loan options before you take out a home loan.

• Most lenders ask first home buyers for a 20% bank deposit before they will lend the money to pay for a property.
• You may be eligible for government help if you’re buying your first home. It’s important to look at options early in your home buying process because the application processes take time.
• There are other options to think about if you have help from family or friends.
• There are additional costs to budget for when buying a home – for example: rates, home maintenance costs and insurance

Find a lawyer or conveyancer before you start looking at properties. The purchasing process can move fast when you find something you like.

• Consider to hire a qualified property inspector to check a property before you make an offer.
• Paying professionals to help you is a good investment. The cost of not getting reliable advice can be very high if things go wrong.
• The real estate agent will answer your questions, but remember they work for the seller, not for the buyer.
• It’s helpful to have support from family and friends during the home buying journey too.

Identifying your priorities helps you figure out what’s non-negotiable and what you’re willing to compromise on.

• What sort of property do you need now, and what are you likely to need in the next 5 to 10 years?
• Are you willing to do work on a property, or do you want all the work to have been done for you when you purchase it?
• Think about where you would like to live. Is location more important than the property itself?
• Are you interested in buying off a plan, or do you need a property you can move into now?
• Would you consider building a home, moving a home onto a section, or downsizing to an apartment?

There are four main types of property ownership in New Zealand – freehold, leasehold, unit title and cross lease.

• Each type means different rights, responsibilities and restrictions for the owner.
• Ask your lawyer or conveyancer to review the record of title (also known as the certificate of title). This is the legal document that contains the property’s legal description, details of its ownership and the rights and/or restrictions registered against it.
• Freehold, also known as fee simple, is the most common ownership type in New Zealand.
• Leasehold is when someone else owns the land. You purchase an exclusive right to possession of the land and the buildings on it for a specific period of time according to the terms of the lease.
• Unit title ownership is most common in a building development where there are multiple owners.
• In a cross lease, you own a share of the freehold title in common with the other cross leaseholders and a leasehold interest in the particular area and building that you occupy.

At an open home or viewing, have a good look around to check for problems and to make sure it meets your needs.

• It’s important to identify problems and potential issues with a property before you are too far into the buying process. Things you may with to consider include: the building materials, drainage and guttering, retaining walls, pathways, parking, light and trees, communal spaces, insulation, ventilation and heating, floors, doors and windows, electrical and gas, plumbing, the house layout, storage, appliances, security, and smells.
• Get to know the neighbourhood, what the neighbouring properties are like and the facilities that are close by.
• If you like what you see at an open home, you can start to research the property in more detail.
• Get professional advice before you make an offer.

Real estate agents are trained, licensed professionals who must follow the standards set out in the Code of Professional Conduct and Client Care. They must also meet their obligations under the Real Estate Agents Act 2008 (the Act).

• The real estate agent works for the seller. If they sell the property, the seller pays them a fee (commission).
• The agent or seller is required to tell you about any known problems with the property and must not withhold any details.
• Sometimes buyers use real estate agents called buyers’ agents to help them find and buy property.
• In a private sale, the buyer and seller deal directly with each other rather than through a real estate agent.
• In a private sale, make sure you and the seller sign a sale and purchase agreement because this will include all of the standard obligations and responsibilities for both parties.

• It’s important in a private sale to pay your purchase deposit to your lawyer or conveyancer so they can arrange for it to be held safely in a trust account pending the completion of the sale.
• The Real Estate Authority (REA) can help with questions and complaints about sales involving a licensed agent but cannot help you if there is an issue with a sale with a private unlicensed seller.
• Get legal advice, regardless of whether you buy through an agent or privately.

Check the neighbourhood and talk to the neighbours to make sure you’re happy with the immediate area.

• Arrange to visit the property at different times of day and at the weekend to check the sun, traffic and activity in the neighbourhood.
• Contact the council to ask about any zoning changes and any new developments planned nearby.

Consider hiring an accredited property inspector to produce a property inspection report.

• Look at what the roof is made of and find out what kind of ongoing maintenance it will need.
• If the house has piles, check that they are in good condition and are properly braced.
• Retaining walls are costly to repair — pay particular attention to large, structurally important walls when buying a home.
• Look for signs that the wiring is not performing as it should, for example, flickering lights and plugs or sockets that are hot to the touch.
• Check the type of water piping. Some have a limited life span (for example, Dux Quest piping) and can fail, leading to leaks and flooding.
• Boundary fences are generally owned equally between two neighbours. If they’re not in good condition, you need to factor in the cost to replace them.
• Check the drainage from the property. If the property is downhill from other properties, find out whether they drain onto the property you’re interested in.

Consider hiring a lawyer or conveyancer to search the record of title, which is often referred to as a title search. The title will be specific to the property you are buying and has a record of things that can have an impact on what you can do with the property and any access you need to provide to others.

• A land information memorandum (LIM) provides a summary of property information held by the different departments at the local council. It will show you the consents granted for any work on the property and information such as the flood risk for the area and the rates. The LIM will also show whether the property was part of any scheme offered by the council to retro-fit insulation.
• The property file at the council may contain a lot of relevant information that isn’t on the LIM such as a site plan and the original plans of the house.
• There are a few websites that will give you an estimate of what a property is worth, but paying a registered valuer will give you an accurate view.
• If you’re interested in a property that is part of a body corporate, the owner must provide you with a pre-contract disclosure statement, but it is also helpful to obtain additional information such as the minutes from the last 12 months of body corporate meetings.

Learn about leaky buildings

• A leaky building is one where moisture gets between the outside of the house (the cladding) and the inside walls.
• Buildings that have a high risk of leaking were mostly built between the late 1980s and the mid-2000s, using plaster-style monolithic cladding systems. The exterior walls typically have an unbroken or smooth appearance.
• If you are interested in a house or apartment with cladding of this type, you should get an independent building inspection or a weather-tightness expert to inspect the property, because there may be no obvious signs of problems.
• If you buy a property you know is leaky or has a high risk of becoming leaky, be aware of the risks to your health and the financial impact this may have.

Learn about problem building materials

• If you see black piping or know that the house was built or re-plumbed in the late 1970s to early 1980s, check if the piping is Dux Quest which is prone to leaking.
• Weatherside is an exterior house cladding product popular in the early 1980s. It is prone to swelling and turning to mush. The only way to fix it is to replace the cladding.
• Asbestos was a popular building material from the mid-1940s until the mid-1980s. If it is found at a property, you will need to get specialist advice on how much of a risk it poses, how it could be removed and the time and cost for removal.

Before you buy, find out if any natural events are relevant to the property and how you may be able to reduce the risk of damage.

• If you’re interested in a property in an area impacted by earthquakes, you should get it inspected by an appropriately qualified professional.
• If the property has been the subject of an “Earthquake Comission” EQC claim, check the EQC scope of work to see what was done and seek legal advice before you sign a sale and purchase agreement.

Understand methamphetamine

• The chance of buying a property where methamphetamine has been produced or smoked in large quantities is very low.However, if you have a strong suspicion (or have been told by police) that a property you’re interested in has been used for methamphetamine production, you may wish to make methamphetamine testing and a satisfactory result a condition of your offer.
• A property that tests below 15 micrograms per 100cm2 is considered safe to live in with no adverse health effects.
• If you plan to have a property tested for methamphetamine contamination, be aware that the testing industry isn’t currently regulated in New Zealand.
• Talk to your lawyer before making an offer on a property if you are concerned that it may be affected.

Confirm your finances

• Getting conditional pre-approval from your bank or lender means you know how much you can spend, and you’ll be able to move quickly to make an offer when you find a home you like.
• Even if you have conditional pre-approval, most banks and lenders will ask for information about the property before confirming the home loan.
• Your bank or lender is likely to need proof that you have arranged property insurance before settlement.
• You may be eligible for government help with a KiwiSaver HomeStart grant, KiwiSaver first-home withdrawal, Welcome Home Loan, First-Home grant or Kāinga Whenua loan.

Understand the sale and purchase agreement

• You must sign a written sale and purchase agreement when you buy a property.
• Always check your sale and purchase agreement with a lawyer or conveyancer before signing. You need to read and understand the agreement before you sign it.
• You should always get legal advice before you sign the agreement and throughout the buying process.
• You can negotiate the conditions in a sale and purchase agreement.
• A sale and purchase agreement becomes unconditional when all the conditions are met.
• The agent helps you and the seller to include the conditions you both want. Even though the agent works for the seller, they also have to deal fairly and honestly with the buyer. They can’t withhold any information, and they must tell you about any known defects with the property.
• Before you sign a sale and purchase agreement, the agent must give you a copy of the REA New Zealand Residential Property Sale and Purchase Agreement Guide. They must also ask you to confirm in writing that you’ve received it.

Buying at auction

• Buyers should register their interest with the agent and ask to be informed if another buyer makes an offer before the auction date.
• Auctions bids are open so you know what everyone else is bidding. If you haven’t been to an auction before, it’s a good idea to attend one as a spectator so you can see how they work.
• If you win an auction, you are committed to purchase the property. You must pay the purchase deposit on the auction day.
• The auctioneer will not reveal the reserve price.

Buying by tender

• The property can be sold before the tender end date if the seller decides to accept offers earlier. The marketing may say ‘for sale by tender (unless sold prior)’ if the seller is accepting early offers.
• Buyers should register their interest with the agent and ask to be informed if someone else makes an offer before the end date, to see if they can also make an offer.
• There may be a price indication from the seller. Buyers can choose to offer more or less than the amount indicated.
• Buyers can attach conditions to their offer, for example, an offer expiry date, making the offer subject to a property inspection report, a valuation or approved finance or selling another property.
• Sellers can attach terms and conditions to the sale like the settlement date and which chattels will be included.
• If a buyer doesn’t meet the conditions or needs more time, they need to talk to their lawyer or conveyancer and the real estate agent as soon as possible.
• A deposit is usually paid when the sale and purchase agreement is signed. The remainder of the purchase price is due on settlement day (when the property is scheduled to change ownership). Check the settlement date and make sure you have all your finances and other arrangements in place before then.

Buying by deadline

• If a property is being sold by deadline sale, the seller sets a date and buyers can make an offer at any time before that date. The seller may indicate a price, and buyers can offer more or less than that price and see if the seller is open to negotiation.
• Buyers can attach conditions to their offer such as an offer expiry date, making the offer subject to a property inspection report, a valuation or approved finance or selling another property.
• Sellers can also attach terms and conditions to the sale, for example, the settlement date and which chattels will be included.
• If you can’t meet the conditions or need an extension, you need to talk to your lawyer or conveyancer and the real estate agent as soon as possible.
• A deposit is paid either on acceptance of the agreement by the seller or on the agreement becoming unconditional (depending on the terms of the offer).
• The remainder of the purchase price is due on settlement day (when the property is scheduled to change ownership). Check the settlement date and make sure you have all your finances and other arrangements in place before then.
• If there is more than one offer, the sale may become a multi-offer process.

Buying by negotiation

• A seller may choose to sell by negotiation when it’s difficult to estimate the market price of a property.
• If a property is being sold by negotiation (also called asking price), the seller sets an asking price or price range and buyers can choose to offer more or less than that price and negotiate the sale. There is no end date for offers.
• Buyers can attach conditions to their offer, for example, an expiry date for the offer, making the offer subject to a property inspection report, a valuation or approved finance, or on condition of selling another property.
• Sellers can attach terms and conditions to the sale, for example, the settlement date and which chattels will be included.
• If a buyer can’t meet the conditions or need more time, they need to talk to their lawyer or conveyancer and the real estate agent as soon as possible.
• If there is more than one offer, the sale may become a multi-offer process.

Understanding a multi-offer process

• There must be more than one offer in writing. An agent can’t say you are in a multi-offer process if there are no other offers in writing.
• In a multi-offer situation, the seller can choose the offer that works best for them from a number of offers.
• If you are a buyer in a multi-offer process, you need to put your best offer forward because you may not have another opportunity to increase your offer.
• If you have any concerns about a multi-offer process you are part of, you can speak to the supervising agent or branch manager about your concerns.

Planning for settlement day when buying

• You should arrange to inspect the property before settlement day. This is the pre-settlement inspection.
• You need to make sure your purchase finance is ready before settlement day.
• Your property insurance needs to be in place for settlement.
• Property settlement is largely a legal process. Your lawyer or conveyancer will help you.

Settling on settlement day when buying

• A number of things need to happen in sequence on settlement day between your lawyer or conveyancer, the seller’s lawyer or conveyancers and your bank or lender.
• Plan for possible delays when organising the move into your new home, for example, you may want to think about booking a moving company for the following day rather than settlement day.
• Settlement is managed by your lawyer or conveyancer, and there isn’t anything for you to do if all documents have been signed a few days earlier. Your lawyer or conveyancer will pay the purchase price to the seller’s lawyer or conveyancer. Your lawyer or conveyancer will also ensure ownership of the property transfers to you and register the change of ownership and any mortgage on the record of title.
• When the documentation and payment has been completed, your lawyer or conveyancer will let you know. You can then collect the keys from your lawyer or conveyancer or from the agent.

Getting help if things go wrong when buying

• Write down the order of events from start to finish, and make sure you have copies of relevant documents (for example, the sale and purchase agreement, listing agreement, LIM, building inspection report), along with emails, letters or photographs.
• Think about the outcome you are looking for.
• Talk with the person or company involved. Explain what happened and when. Remember that the other party will have their own version of what happened. Listen to the other party’s perspective, and give them the opportunity to respond within a reasonable timeframe.
• If this approach doesn’t work, you can talk with the person’s manager or the company’s complaints manager.
• If you are still dissatisfied, there are a number of organisations that can provide further help and advice.

The rules for overseas people buying or building residential property in New Zealand have changed. In general, only residents and citizens can buy homes to live in, but other investment opportunities are available.

House hunting expenses
Buying a property is expensive, and it can cost even more if something goes wrong. That’s why it’s important to have a team of professionals to support you. Here are a few things that will cost money during the house hunting stage.

Lawyer or conveyancer
Buying can be a fast-moving process. We recommend you find a lawyer or conveyancer early on to help you through the buying process. It pays to shop around and get quotes as fees can vary dramatically.

Building inspection report
If you are serious about buying a specific house it is recommended you hire an accredited property inspector to do a pre-purchase inspection. This will highlight any issues with the home.

Council LIM report
It pays to learn all you can about a property. A Land Information Memorandum (LIM) is a report prepared by the local council at your request. It provides a summary of the current property information held by the different departments at council on the day the LIM was produced. Contact your local Council to find out how much they charge.

Mortgage repayments
Mortgage repayments are usually the highest cost of home ownership. Think carefully about what type of mortgage will suit you best – and whether you can afford it.

• Compare the interest rates of all the banks and other institutions that offer mortgages in New Zealand. This is a useful starting point for working out who to approach.
• While interest rates have remained low over the last few years, it won’t stay that way forever. Consider the worst-case scenario as well as current interest rates when using the mortgage calculator, to ensure you’ll still be able to afford your mortgage repayments, even if interest rates rise.

Renovations
Home renovations can be very expensive. While there are many cosmetic improvements you can make to a house – such as painting or replacing the curtains there are many tasks that require you to employ an electrician, plummer or builder.

It may seem boring but you should always prioritise health and safety-related repairs over the more ‘exciting’ stuff, such as décor. Suggested priorities include:

• fixing the roof – making sure there are no leaks
• electrics and heating – ensuring the wiring is sound and that your home is well-insulated and heated
• improving your kitchen or bathroom – particularly if usability is an issue. However, if the renovation is more cosmetic then consider your budget and try to avoid over-capitalising. If you’re planning to live in your new home for many years then it can be worth it.
• Once you’ve got health and safety sorted, then you can start thinking about the cosmetic touches.

Think about increasing home value. Some of the most popular projects that increase home value are:

• kitchen remodelling
• bathroom renovations
• energy-efficient insulation
• patio and deck additions
• new garage doors
• plumbing updates.

Projects that are unlikely to increase home value include:

• pools
• hot tubs
• luxury showers
• built-in electronics.
• Get smart with your landscaping

Landscaping projects that might improve your yard and add value include:

• lawn upgrades
• planting
• decks
• patios
• outdoor kitchens
• retaining walls
• fencing

Maintenance and repair costs
What kind of condition is your prospective house in? Are there repairs that need doing or is there upcoming maintenance that will be likely? Make a note of what work is likely to be needed to get the place up to scratch and find out likely costs. Which takes us to the next point. Consult a professional property inspector or builder about the realistic costs of renovations, repairs and ongoing maintenance.

Furnishings and fit outs
Find out what chattels will remain. Often major appliances such as dishwashers and microwave ovens and other chattels are included in the sale of a home. Make sure you know what will be left behind and whether they will need replacing any time soon.

Think about what furniture you need
Consider whether you’ll need to buy any additional furniture for your new home. You can find budget furniture in second-hand stores, garage sales and on TradeMe and Marketplace. Look online for tips and tricks for fitting out a home on a budget.

There are a few ongoing expenses you need to be aware of when owning a house. By being mindful of these costs upfront, you can better forecast your future house budget.

Council rates
If you’re buying or building a home you’ll need to include rates in your budgeting, Rates are a ‘tax’ charged by local councils to help pay for the services they provide the community. Rates vary from place to place, but they’re always based on the value of the property. Your local council’s website will have more information about the rates you’ll be paying in the area you’re considering.

Body corp fees
Every apartment comes with the additional burden of body corp fees. These help cover the upkeep of the building and its facilities, the cost of power in common areas, insurance, water, and the building manager’s fees. Before buying an apartment it is a good idea to check the body corporate fee.

Insurance
In New Zealand, home insurance is now usually calculated on a ‘sum insured’ basis. This means that if your home needs to be rebuilt, the insurer will only pay out to the maximum sum that you specify when you take out your policy. It means that you need to have a good idea of what it would cost to replace your home if the worst should happen. You may need to get a valuation to decide how much this would be, as a start, most insurance companies websites have links to online calculators. Earthquake damage to homes in New Zealand is covered by the Earthquake Commission (EQC). Its charges will be added automatically to you your home insurance invoice: however, to qualify for EQC earthquake cover you must first have private home or contents insurance. If you’re buying an apartment, insurance for the building will normally be included in the annual body corporate fee. However, make sure you check the details of this before you purchase. You’ll need to provide your own contents insurance.

Maintenance
A house needs to be maintained to prevent it from deteriorating. A few of the larger maintenance tasks include:

• painting the outside of your house (approx. every 10 years)
• painting or replacing your roof
• replacing old boards on your deck or rotten weatherboards
• fixing leaky pipes
• repainting or wallpapering your interior
• replacing carpet.