So you're shopping for a new home and you plan to make an offer - this is both an exciting and nerve-racking time! How much should you offer? Are you offering too much or not enough? What conditions should you include? Who does what and who should you engage to help?
Entering into a Sale and Purchase Agreement is a legal document, so it pays to make sure that you are fully informed about your legal obligations and at the same time ensure that you include all the conditions necessary to allow you to undertake the right checks to satisfy yourself and the bank about the property you wish to purchase. Remember a major principle of property law is caveat emptor or “buyer beware” (the buyer is responsible for checking the quality and suitability of the property before a purchase is made) so bearing that in mind we recommend you receive detailed advice from appropriate experts before you commit to the purchase.
Before you sign the agreement it is strongly recommended that you ask us to review the purchase agreement – that way we can ensure that all the conditions you require are included in the agreement as well as the correct timeframes. We will ensure the conditions leave you the option of walking away from the offer for an appropriate reason. The conditions you may want to include:
You need to be certain the deposit amount is available to be paid to the seller or their agent on the unconditional date and the balance of the purchase price on the settlement date. I always recommend you have an unconditional offer of finance from your bank or broker in writing. If you have a pre-approval – well-done! But most banks and lenders will require a sale and purchase agreement and information about the property before unconditionally confirming a pre-approval so a finance condition is recommended. Also check there may be other conditions in the pre-approval and that need to be met. If you decide to include a finance condition it will need to be satisfied by a certain date. Contact your bank or broker and ask them to give you an idea of how long it will take to obtain the unconditional finance offer - we suggest a time frame of 5-15 working days. By the condition due date you will need to provide us a copy of your written finance approval, or if more time is needed, we can ask the seller for an extension and it will be their decision whether to grant your request for more time.
I always recommend you obtain an independent builder’s report and that you attend the building inspection to analyse the condition of the property (as a step-in risk mitigation – remember it’s a case of buyer beware when you buy a property). Sometimes open homes are rushed and attending the inspection will give you a good chance to closely look at what you are buying and you can ask the inspector questions. If you decide to include a builder’s report condition it will need to be satisfied by a certain date. Sufficient time will be required for you to engage the building inspector and for them to complete the inspection and deliver their written report - we suggest a time frame of 5-15 working days. By the condition due date you will need to let us know your thoughts regarding the report. If the report has identified any defects we can negotiate on your behalf:
- The seller can arrange for the defects to be remedied by a qualified tradesperson prior to settlement at their own cost.
- If it is touch and go whether the seller can complete the works before settlement - a retention arrangement can be negotiated. Such that if the agreed works are not completed by settlement, then we retain from the settlement funds an appropriate amount to be held in our trust account for a certain period to enable the sellers to complete the works. If the works are not then completed by settlement, you can attend to the works, arrange payment from the funds held, and any balance left overpaid back to the sellers upon completion.
- If you would prefer to remedy the issue yourselves, then an appropriate sum can be deducted from the purchase price on settlement and you can attend to the remedial works after settlement.
A LIM is a report from the Council and gives you all sorts of juicy info about the property, like building consents, what the land has been previously used for, and its zoning. I always recommend you get a LIM and make your purchase conditional on being happy with it. Or if you want your offer to be stronger, I recommend you still order your own LIM once your offer is accepted, but do not make your offer conditional upon being happy with the LIM. You need to order your own LIM to be able to sue the Council for any future losses for any mistakes in the LIM (for example - Council issued a code of compliance certificate for the home when it was not compliant with the building legislation and you are left seriously out of pocket). So ordering your own LIM is like an insurance policy to recover your losses if it turns out the Council have got something horribly wrong.
With the prevalence of methamphetamine production and use in New Zealand, we suggest our clients take a cautious approach, especially if the property has previously been used as a rental. This is because often methamphetamine producers will rent properties on a short-term basis, moving regularly, to avoid detection by the landlord and/or police. If you decide to include a toxicology report condition it will need to be satisfied by a certain date. Sufficient time will be required to engage the appropriate expert and for them to complete the inspection and deliver their written report - we suggest a time frame of 5-15 working days. By the condition due date you will need to let us know your thoughts regarding the report.
The agreement can be conditional upon our approval of the agreement and title. If we have not checked your offer, we recommend you include a solicitors approval condition - with a 3- 5 working day timeframe. But in a seller's market these conditions can weaken your offer - so if we have already checked your offer and delivered our initial advice - on a case-by-case basis we may advise our clients this condition is not required.
As always we are here to help! Call or email us if you need help!