Property Transactions
“The three most important factors in buying a home are location, location, location!”
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When you buy and sell property, you are engaging in some of the most important decisions of your life. New Zealanders have a long tradition of home ownership. For most of us, our homes are our biggest assets.In our experience, however, many people fail to do the necessary homework before signing an agreement.

It is a commonly held, but completely erroneous, belief that there is a cooling-off period when a sale and purchase agreement is signed. Many of us fall in love with a property and are determined to get it regardless of the fishhooks that may come with ownership.

    It is highly recommended that you have regard to the following before signing an agreement.        
                                              

Always get legal advice:
For many people, a property purchase or sale is something they do only a few times in their whole lives and, therefore, they are not expert at. Lawyers are trained to look at the repercussions for their clients of entering into agreements, and will advise on suitable conditions or clauses. It is easy to correct a contract before signing; almost impossible afterwards.
           
Some of the matters you should have regard to when purchasing:

How does the purchase price compare with the actual value of the property? 
This is sometimes not easy to assess, particularly in a rising market. Consider getting a  registered valuation (this may be required by the mortgagee anyway) if you are concerned. (Personally, we do not place much faith in Council Valuations (CVs) because they are often far off the real value).

Obtain a building inspection:
This will alert you to items of maintenance that may be required and which you have overlooked. It will also alert you to “big ticket” items, such as whether re-roofing or re-piling is required. Many inspectors now do moisture readings, particularly important in monoclad built houses.

Order a LIM report from the local Council:
LIMs give all the information on the property that the Council is aware of, such as building permits/consents, sign-offs/code completion certificates, rates, outstanding development contributions, swimming pool fencing etc. Council problems with property run with the property, so you will inherit those when you buy.

Financing:
It is common for buyers to get pre-approval for mortgage finance from a bank. However, if you are borrowing a substantial portion of the purchase price, say 75% upwards, the bank is more than likely to require a valuation to support its lending. This means it will not lend the amount on the pre-approval if the valuation doesn’t stack up.

Deposit:
All agreements provide for a deposit to be paid either when the agreement is signed or when it goes unconditional. This usually ranges from 5 to 10% of the purchase price. Make sure you have the ability to pay the deposit when it is due.

Be careful about signing an agreement to purchase if you still have a property to sell:
The prudent and recommended thing to do is to make the purchase conditional on the sale. However, it is not uncommon for buyers to “take a punt” particularly on a heated market, and sign agreements which are not conditional on sale of their existing homes. Be aware that if you do this, and cannot sell, nevertheless you still have a binding agreement to purchase. You should always make sure that you are able to cover the purchase cost if you don’t sell. If you don’t, the agreement can be terminated, in which case you will lose your deposit and may be sued by the vendor.

Be careful over dates for satisfaction of conditions and settlement:
You would be surprised at how often incorrect dates upset matters, particularly if there is another agreement tied in.

Family Trusts:
If you intend to purchase through a family trust, make sure the purchaser includes “or nominee”. 

Some of the matters you should have regard to when selling:

Make sure you are clear with the Council:
If the purchaser’s LIM report throws up a Council requirement, the purchaser will usually require you to remedy that. This could be costly and time-consuming.

Be aware of the terms of appointment of the real estate agent: 
Including commission rates, length of term of appointment, whether sole agent etc. Note also that all agents’ terms contain a provision that if you sell after the expiry of the agency but to a person who was introduced during the period of the agency, you remain liable to pay commission to the agent.

Ensure a substantial deposit is paid:
Nowadays, it is common for real estate agents to write in a deposit which is less than 10%, in which case if the purchaser doesn’t settle, there may be enough to cover the sales commission, but not much more. As a rule of thumb, the larger the deposit, the more likely a purchaser will be to settle.

Be careful over dates, for satisfaction of conditions and settlement:
You would be surprised at how often incorrect dates upset matters, particularly if there is another agreement tied in.  
                              
If you are buying an investment or commercial property,  additional considerations apply as well:

Tax issues:
It is advisable to seek advice from an accountant as to the tax implications. This will include advice on who should own the property (eg a loss attributing qualifying company (LAQC) which will enable losses to flow through to your own income. Ownership by a family trust will not enable that to happen, but may have other benefits).

Tenancy issues: 
If you are buying with a tenant in place and, if so, what are the terms of the tenancy, the details of the lease and so on.

Banks:
Banks have the policy of lending less on commercial property than on residential, because of concerns over satisfactory long-term tenancy arrangements. This means you will need more equity.

Be sure you have done your sums properly:
You will need to pay the mortgage even if the property is untenanted. Since most banks will require as additional security a mortgage over your family home for a commercial investment, there could be serious repercussions if you fall behind on a commercial mortgage.