Buying a home is a big investment. It’s also a legal process. To ensure it goes smoothly, it’s a good idea to get your head around the process.
You will need a lawyer (or conveyancer) to do the legal stuff. It’s a very good idea to get one on your team early.
Once you find a house you want to buy, there are a number of key legal steps that take place before it becomes yours. It’s important to understand them to avoid making a costly mistake. The key steps are:
Step 1: Get your lawyer to check the documentation, even if it’s an auction. Most property sales in New Zealand use standard ADLS/REINZ Agreement for Sale and Purchase of Real Estate contracts, but may have different clauses included or excluded. Brand-new properties may be sold using contracts that favour the developer. Either way, your lawyer can identify any issues with the property title, contract, or other legal documents such as body corporate rules before you sign.
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Step 2: Sign the sale and purchase agreement. When you win at auction, tender or deadline sale, or agree on a price with the seller, you will be required to sign the sale and purchase agreement, which is a legally binding contract. The agreement will be either:
● “Unconditional”, meaning you cannot back out, or
● “Conditional”, which means there are conditions such as “subject to finance” or “subject to building inspection”. The contract goes unconditional once the conditions are met.
Step 3: Pay the agreed deposit. Typically buyers pay a 10% deposit at the time of signing the sale and purchase agreement. If the seller agrees in advance, the deposit may be reduced to 5%, even with an auction. A lawyer can sometimes arrange for the deposit to be reduced and/or delayed until conditions are met. With an unconditional auction, the deposit is paid when the hammer comes down. If the deposit is coming from KiwiSaver the paperwork should have been submitted at least 15 days prior. If the deposit is late, the seller can withdraw from the offer or charge penalties. The deposit is usually paid into the real estate agent’s trust account.
Step 4: Do a pre-settlement inspection. Usually a buyer will re-inspect the house two or three days before settlement to ensure it is in the same condition it was when the contract was signed. Things to consider include:
● The inspection should take at least an hour. Take your time.
● Use a printed checklist and consider bringing an expert, such as a builder, with you.
● Examine the fixtures and chattels to check they all work and have not been removed.
● Check that the utilities all work, that the toilets flush, showers and sinks drain, and ovens and dishwashers work.
● Walk around both the inside and exterior of the property looking for any new damage.
● Check that all keys, alarms, garage door openers and security systems work.
● If there are any issues, contact your lawyer immediately.
Step 5: Settlement day. This is when the property title, money and keys change hands and you can move in. It can be a long day because the lawyers for the buyer and seller have a lot of paperwork to complete and the money needs to change hands.
Finally, the conveyancing process can cost more than $1000. The money is well worth it because it can save you from buying a lemon, or losing your deposit. Consider the money an investment in ensuring you have bought the perfect home. Check out OneRoof’s first-home buyer guide here.
