How to calculate a mortgage
Buyers | 29 March 2019
By The settled.govt.nz team
Taking a deep breath or a shot of whisky (not recommended!) may fast-track your courage, but ultimately it pays to know what you’re doing when making an offer on a house. Here are a few tips to consider.
You’ll need to have a few ducks in a row before making an offer. This includes:
You can make an offer on more than one property but don’t forget that once you make an offer on a property you’re committed to buying it, subject to any conditions you include in the offer. Given your offer becomes legally binding as soon as it’s accepted we’d advise against putting your eggs in too many baskets without professional legal advice!
One of the conditions of your offer could be ‘subject to approval of finance’. However, we recommend getting pre-approval for a home loan so that you can make your offer with full confidence. You’ll need to confirm the loan before your offer goes unconditional.
In some cases, a seller may add a ‘cash out’ or escape clause to the sale and purchase agreement. This means that they can give notice to the current buyer that they have accepted another offer, and the current buyer has a limited amount of time to fulfil their conditions. If the current buyer is not able to fulfil their conditions in time, you could well be the one receiving the keys to your new home!
You don’t need a lawyer to make a conditional offer. However, we advise both buyers and sellers to seek legal advice before signing a sale and purchase agreement or any written document.
A multi-offer process happens when more than one buyer makes an offer in writing on a property. It’s intended to provide all interested buyers with a fair opportunity to submit their best offer for a property they wish to purchase. It’s important to put your best foot forward in this situation, as you might not get a chance to increase your offer. The seller can choose the offer that suits them best. This won’t necessarily be the one with the highest price. Watch our video to learn more.
If a property is listed as ‘for sale by negotiation’, or ‘offers over $X’ you can make any offer you like – but it pays not to be too cheeky! If your offer is too low, you risk missing out. Find out how long the house has been on the market – if it’s been listed for sale for ages the owners may be open to negotiating a lower price.
You do not have a legally binding contract until your offer is accepted by the seller. That means you can revoke your offer at any time prior to the contract being signed by the seller.
We recommend you withdraw your offer in writing to the real estate agent and have the agent confirm they’ve received your withdrawal before making an offer on another property. You are not obliged to give any reason for revoking your offer.
Home sellers aren’t obligated to accept the first or any other offer made on their property.
A conditional offer means you have conditions that you want to meet before you agree to buy the property. If you make a conditional offer, the real estate agent will negotiate on behalf of the seller. Conditions could include making your offer subject to a favourable building inspection or a valuation, confirming your financial arrangements or selling your own property. The seller can also attach conditions to the sale, for example, changing the settlement date or specifying the details of the chattels that come with the house. Conditions will be subject to time-frames set out in the agreement. If the purchaser is unable to satisfy their conditions within the set time-frame, the agreement may be ended.
An unconditional offer means you do not require any conditions to be met before buying the property. This is sometimes known as a cash offer and can be appealing to sellers. Be sure to complete a thorough inspection of the property you’re keen on first though – and make sure your finances are sorted!
We recommend you get your lawyer or conveyancer to search the record of title, which is often referred to as a title search. The title will be specific to the property you are buying and has a record of things that can have an impact on what you can do with the property and any access you need to provide to others.
A LIM is a report prepared by the local council at your request. It provides a summary of the current property information held by the different departments at council on the day the LIM was produced. It does not provide all information on the property. For example, if the council hasn’t been notified of a weathertightness issue with the property, it won’t show on the LIM.
A LIM provides information about some or all of the following:
Your lawyer or conveyancer can help you get a LIM or you can get it yourself from the local council. Ask them for an application form or apply via the council’s website. You will need to pay a fee, and the process may take several days. Your lawyer or conveyancer can help you understand the report.
Contact your local Council to find out how much they charge for a LIM report.
Contact your local Council to find out how long they take to process a LIM report.
Would suggest adding something about checking the property file too – this is separate to the LIM and provides the actual floor plans (which go with the building consent), so you can see if there have been any physical changes to the property.
There are a few websites, such as Trade Me’s Property Insights and Homes.co.nz that will give you an estimate of what a property is worth, but paying a registered valuer will give you a more accurate view. Visit the Property Valuation NZ website to find a registered property valuer near you.
We recommend that you make a professional property inspection a condition of your offer. If you find out you’ve got a lemon on your hands you can use the report’s findings to get out of the contract or negotiate a lower price.
The cost of property inspection reports varies considerably. We suggest you ask around for recommendations and be sure to get a few quotes before deciding who to engage.
The seller has no obligation to fix anything. If the buyer isn’t satisfied with their independent report their options are to end the agreement or renegotiate if the seller is interested. The seller doesn’t have to negotiate.