New Zealand Property Buying Guide

New Zealand Property Buying Guide

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New Zealand Property Buying Guide

There are basically two ways to buy property in New Zealand and that’s either at auction or by buying real estate for sale at a fixed price.

Both processes are straightforward if an investor understands the protocol and necessary steps in the entire property buying process. This is a guide to buying property in New Zealand whether it be for sale at auction or at a fixed price.

In New Zealand many vendors operate an ‘open house’ policy where potential buyers can view a particular home for sale without making an appointment. On open days the house is freely available for inspection which means that this is a great opportunity not only for potential buyers but also for property investors to get a feel for what a particular asking price will get them in a given location.

For those interested in the New Zealand property market it’s wise to attend a number of open house viewings in a given area of interest to get a feel for the market.

Armed with this knowledge an investor can then employ the services of a real estate agent to show them properties that match their investment criteria and budget and they can assess what looks like a bargain and what’s over priced for example.

In New Zealand realtors work ultimately for themselves – although officially they work on behalf of the vendor – this is because they work on commission and the more houses they can sell at the highest price the more money they make.

While agents will be polite, courteous and helpful at all times they are ultimately working for themselves and an investor should not forget this and should remain unclouded by an estate agent’s judgment.

In terms of the additional people an investor will need to employ to assist with the sale there is a requirement for an investor to find a lawyer and also a home inspector – recommendations from trusted sources can be taken or alternatively there are many who advertise their services locally in property newspapers in New Zealand – taking a recommendation from an estate agent is not really wise.

If an investor will require finance to purchase New Zealand real estate they should agree this in principal with a lender before making an offer on a property especially if they intend to buy at auction.

When buying at auction it’s a legal requirement that the property investor has the money available to pay for it. Overseas buyers can secure a mortgage locally in New Zealand and current interest rates are attractive – the other alternative is to secure an international mortgage.

Once a property has been identified by a buyer as potentially suitable he should have a full house inspection and survey conducted on the property. And it is at this point that the property buying process begins to differ depending on whether the property is available for sale at a fixed price or at auction.

Fixed Price Property

It’s usual for an investor to make an offer to purchase a fixed price property via their estate agent. This offer is usually below the asking price and should be based on the investor’s personal valuation of the property based on their research into other properties in the area and the state of the property for sale.

This offer to purchase should be conditional to various factors which should include the property having a satisfactory LIM report and inspection report for example. An investor should contact the local council for the LIM report – or Land Information Memorandum report – when their conditional offer has been accepted.

This report will detail all the information about boundaries, zoning, building permissions and permits etc., and it is critical that an investor gets a good report and that they follow it up with a visit to the local council to clarify any outstanding issues.

A home inspection report is also critical as this can highlight any issues like termite damage, damp etc. Once all conditions for the sale have been covered and the title deeds check for accuracy and legitimacy by the investor’s solicitor, the offer to purchase becomes unconditional and legally binding.

At this point the investor will pay a non-refundable deposit and the sale will move to closure. The time this takes depends on the contract signed giving the vendor a certain amount of time to vacate the premises.

Auction Property

If an investor decides to buy a property that is for sale at auction they can actually make an offer prior to the property going to auction – they should be aware however that if an offer is accepted it is treated as though it were made at auction and it is therefore immediately legally binding and cannot be conditional to any terms.

This means that it is critical that anyone considering purchasing property in New Zealand at auction has all their surveys, LIM reports, inspections etc., in place before they make an offer.

If an offer is not made before auction day then it will be made on the day and sometimes a bidder will find they are bidding against the vendor or real estate agent as they try and push up the price of the property. If this situation occurs it’s wise to drop out of the bidding war.

The reason properties go to auction in New Zealand is because real estate agents charge a higher fee for selling properties at auction and because vendors hope their property price will be ‘bidded up’ and they will achieve more money from the sale.

If a property investor is successful at auction they will need to close the sale and settle the balance within days and have to be in the financial position to do so.

And finally, the good news for property investors in New Zealand is the fact that there is no such thing as stamp duty payable on the purchase of property, furthermore estate agents fees are met by the vendor, and solicitors used in the conveyancing process usually charge a fixed fee which can be negotiated before they are employed to assist with the buying process.

If an investor budgets an additional 5% for all their property buying related expenses they should find that they are easily covered.