Three top tips for buying a home in todays market

LEGAL ADVICE

BY JULIA INGHAM

7 Nov, 2022

As the property market finally cools off, potential purchasers have an opportunity to move up the property ladder. Making well-researched buying decisions and having a good contract for sale and purchase (the agreement) will help you sail into a smooth settlement.

Here are our top three tips for home buyers navigating today’s market.

1. Methods of sale are shifting

As house prices soften, buyers have more negotiating power. More listings have price indications on them, or are for sale ‘by negotiation’, rather than the more time pressured ‘sale by auction’. This means you have more time to do your research on the property, and put appropriate conditions in the agreement.

2. Make your agreement work for you

Conditions can be added to the agreement and allow a certain number of days in which to satisfy them. Conditions can be for the benefit of the vendor or for the purchaser. The deposit is (usually) payable on satisfaction of all the conditions in the agreement.

In this market, the wording of the conditions of your agreement is important – as a purchaser you want to make sure that the conditions you rely on are fit for purpose and give you the protection you need if you do not want to proceed with the purchase.

As a buyer, some key conditions you might want to consider including in your agreement are:

• LIM (Land Information Memorandum) – A LIM is a report prepared by the Local Council. It may tell you, among other things, if the house has a Building Consent or Code Compliance Certificates, zoning and environmental risk information, any swimming pool compliance information, and may also alert you to unconsented works done on the property. You want the ability to approve the contents of the LIM.
• Finance  – If you’re relying on borrowing money from your bank to purchase the property (even if you are pre-approved), or withdraw your KiwiSaver you will need a finance condition to ensure you’re approved to do either of those things in respect of the property. You do need to be careful relying on this clause to back out of a sale, as you may need to provide the vendor with proof that you were unable to satisfy this condition. If you’re planning on using your KiwiSaver for your deposit, make sure you submit your application in plenty of time (they can take four weeks to process) and be aware that you need to let the vendor know you are planning on doing so, as the funds will be held in trust until settlement and not released beforehand to the vendor.
• Builder’s 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. To rely on this clause to cancel the agreement, or negotiate with the vendor, then your building report must be a written report prepared by a “suitably qualified building inspector”, not just a ‘handy’ mate. The vendor can request a copy of this report too.

• Title – The standard form 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 but the scope for using this clause to cancel the contract is limited. If for example, it’s been disclosed to you that there are land covenants on the title but you’re not sure whether they’ll work with your use of the property, you might be better off having a specific condition to cover this.

3. Cancelling the contract

If you’re not 100 percent sure that you wish to buy the property, but you want to put an offer on the table so you don’t miss out, you’ll need a well-drafted due diligence clause in your contract. These can be worded in a broad way to ensure you can cancel the contract if you find something that makes you change your mind. Talk to your lawyer before relying on a solicitor’s approval clause to do the same job – a solicitor’s approval clause is not a “get out of jail free” card and has limitations.

Happy house hunting!

n To contact WRMK visit wrmk.co.nz or call (09) 470 2459.

As a buyer, there are some key conditions you might want to consider including in your agreement. Talk to your lawyer about covering all the bases. PHOTO/SUPPLIED