Step-by-step guide to Purchasing a house
If you are new to buying a residential property, this guide will help you through the process of entering into the sale and purchase agreement and completing the settlement for buying a house.
The successful purchase of a house can be largely reliant on the instruction of an efficient and experienced solicitor.
Solicitors, primarily, will act as the intermediary through whom all contacts and transactions will pass, such as the transfer of legal ownership of the property, settlement funds transfers and liaising with the seller's solicitor.
You have to make sure that whatever you sign is right for you before you sign it.
- You usually can’t change an agreement after you have signed it.
- Your agreement might be with your agent (an authority to sell) or with the property buyer or seller.
- You can save money and anxiety by seeing your lawyer first.
- Your lawyer can help you prevent small problems turning into big ones.
- If you are selling a unit title property it is illegal to enter into an agreement (even a conditional agreement) until you have given the buyer a pre-contract disclosure statement.
You must have a clear idea how much you want to spend for buying a house. This might be dependent on how much of a deposit you can get together. You can get some idea from your savings, the "bank of Mum and Dad", the "bank of Granny and Grandpa" and the net proceeds of the price of your current home that you are selling. If you have any savings on long term deposit that you plan to use, you may need to cash them in. You can also discuss with your mortgage broker or your bank what sort of mortgage you want. While you can't get a mortgage before you buy, you will be able to get a pre-approval from your bank for buying a new house and this will put you in a stronger positionStep 3: Find a home
Local property press and real estate agents' windows are a good place to start, but these days, most new homes are found online. Popular property search sites include realestate.co.nz and trademe.co.nz. Hometopia.co.nz is another great online resource centre for buyers
When you inspect the property, check what chattels are included in the sale. Also, check whether electrical appliances are functioning well. You are buying the house as it is at the time of signing the agreement.Step 4: Make an offer that the seller can't refuse
When you found a house that you want to buy, you will usually negotiate over price, conditions, and settlement date. Make sure you have done enough research about the property and the neighbourhood before engaging in negotiations. (you can use information from real estate agents, newspaper advertising, and real estate database like www.qv.co.nz)
This negotiation step may be skipped if you are buying a house at an auction or by tender.
What we do:
- If you have come to us at this stage, we can give you advice to include conditions that suit your circumstances.
- The most common conditions are finance condition, builder’s report condition, and LIM report condition. We strongly recommend that you order LIM report from local council as it provides necessary information about the property.
- Valuation report condition and solicitor’s approval condition are also frequently found.
- If you need to sell a property first in order to buy another, you can put in an escape clause.
- If you are buying an apartment, you may want to insert a Body Corporate minutes condition.
- Also think about whether you want specific promises from the Vendor such as carrying out certain repairs.
When you have reached agreement on the terms and conditions with the Seller, you will sign the contract. At this stage, your contract is usually conditional if you have conditional clauses.Step 6: Arrange a mortgage
If you need finance from the bank, you should organise for a loan through a suitable financial adviser or independently. Once your mortgage is arranged, you will be required to inform us when the approval is given.Step 7: Decide if you want to obtain various useful Reports for the property
If there is a LIM report condition, apply for LIM report at the relevant local council. This should be done as early as possible since it can take as long as 10 working days to receive the report. Forward the report to us for our perusal if you want us to check it.
If the contract has a builder’s report condition, request and receive the report from a builder. The agent may organize this for you if you ask. Notify us when you are satisfied with the report.
Do other things that are necessary to satisfy other conditions that may be included in the agreement.Step 8: Final arrangements and negotiations
When we notify the Vendor’s solicitor that all conditions were satisfied by you, the contract becomes unconditional - meaning you and the seller are both under legal duty to settle as agreed.
*Note: if you are unsatisfied with the reports, you may request appropriate remedy (repair, correction, price reduction). Cancellation may also be possible.
What we do before you declare "unconditional":
- We will undertake title search through LINZ database (Land Information New Zealand) to ensure that the property can be transferred with no defect in title.
- We will peruse the LIM report (if requested by you) to see if the report reveals any hidden problems with the property.
- We will communicate with you to confirm whether each condition is satisfied and notify the Vendor’s solicitor on or before the date conditions are due to be satisfied.
- We may carry out other relevant investigations as required to satisfy conditions in the contract. e.g. we may peruse the Body Corporate minutes to find out if there are any repair problems with the building
You will need to make preparations to move into a new house such as arranging for a truck, packing, and contacting electricity and telephone service companies on the settlement day.
You are required to sign client's authority & instruction form and mortgage documents (if any) about one week before the settlement date.
One day before the settlement date, you should visit the house you are buying once again to have a final inspection.
On the settlement day, you should transfer the settlement amount into our solicitor's trust account in accordance with our projected statement of account. If you have arranged a mortgage from the bank, you will only be required to transfer the remaining portion of the deposit while the mortgage settlement proceeds will be credited to the solicitor's trust account directly from the bank.
Once settlement is completed, you will receive the key from the purchaser or the real estate agent.
What we do:
- We exchange necessary documents with the seller’s solicitor. For example, we send notices of sale and receive the settlement statement. The settlement statement will show how rates are apportioned.
- We receive documents from the Bank and prepare application for loan advance and will contact you to arrange a meeting for signing. Once all required documents are signed by you, we send the application to the bank. We will also get the client authority & instruction form signed by you for our keeping.
- If there is any issue that needs our attention, we resolve it through effective communication with relevant parties.
- On the settlement day, we receive the settlement fund from you/bank and transfer it into the Vendor's solicitor's Trust account.
- We will complete transfer of title and registration or mortgage on LINZ online.