What does it all mean?
Q: What is a sale and purchase agreement?
A: This is a legal document that the seller and the buyer sign when you are negotiating to purchase a property. We recommend that your solicitor views this first before you sign it.
The Auction Agreement and Tender Agreement are legal documents that include different conditions to a Sale and Purchase Agreement. We recommend that your solicitor also views these before you sign.
Q: What type of lawyer will I need to buy a house?
A: You will need a solicitor who understands conveyancing.
Q: What is meant by the term ‘chattels’?
A: Chattels are the things that the seller will leave behind. These may include fixed-floor coverings, blinds, curtains, heated towel rails, dishwashers, stoves and television aerials. They are itemised in the Sale and Purchase Agreement.
Q: What is a certificate of title?
A: This is a document that details the land dimensions and the owners of the property. It also details any ‘encumbrances’ such as mortgages or convenants.
Q: What is a LIM report?
A: A Land Information Memorandum (LIM) is available from your local council for a fee (there is a standard fee and an urgent fee). We recommend that you obtain a LIM before finalising purchase of your property. It can provide an extensive search of your property for various issues such as outstanding consents or rates, land stability, private and public stormwater and sewerage drains, zoning, and special conditions, including NZ Historic Places Trust listings, etc. For further information:
Q: What does ‘offer accepted’ mean? What happens next?
A: Offer accepted means that you and the seller have reached agreement on all aspects of the contract such as:
- The price
- The deposit
- The conditions
- The date for confirmation (when you go ‘unconditional’ or not)
You and the vendor are now committed to meeting all the terms and conditions.
What happens to my deposit when I’ve paid it for the new property?
A: When you’ve reached agreement to purchase you must pay your deposit, usually 10% of the purchase price, which goes into the real estate agent’s trust account. If any conditions are not met and your purchase does not proceed your deposit will be refunded in full.
Q: What sort of information will a lender want to know about me/us before approving finance for a mortgage?
A: Proof of your income (pay slips or letter of appointment referring to salary package), assets (deposit or existing house), liabilities (HPs, any outstanding loans, credit card limits), account pattern (bank statements for the previous three to six months) and your credit record (the lender will do a check on you).
Q: How do I decide whether to choose a fixed or a floating interest rate on my home loan?
A: There are advantages and disadvantages with both, which you need to consider.
Fixed interest rate
You won’t be affected by increases in interest rates so you can confidently budget for each
repayment during the fixed term. Fixed rates can sometimes be lower than the floating rates. However, if the floating rate drops below your fixed rate during the fixed term you’re still committed to paying the fixed rate. You might also incur an early repayment charge if you make extra repayments or pay off the loan during the fixed-interest rate term. If you think the interest rates may go up before the end of the fixed term then choose a longer-term loan. However, if you think they may go down, then consider selecting a shorter-term loan.
Floating interest rate
This will go up or down to reflect interest rates in the wider market. Some types of loans may stipulate a floating interest rate. The advantage of a floating rate is that you have the flexibility to make lump sum repayments at any time without incurring a penalty fee. However, you will be disadvantaged if the floating rate goes higher than a fixed-term rate.
We suggest you check with your bank/mortgage broker before you start looking at property to buy.
Q: What does a conditional offer mean?
A: You have placed one or more special conditions on the purchase – requirements that must be met before a sale becomes unconditional. They are usually subject to a stated time and commonly include:
- Subject to finance.
- Subject to selling your home.
- Subject to completion of specific work being carried out on the property.
- Subject to a title search.
- Subject to a Land Information Memorandum report (LIM) from the council.
In some cases, the offer will be rejected because the vendor (seller) does not wish to wait the extra time for the condition to be filled.
Q: When is an auction bid considered to be an unconditional offer?
A: An auction bid is an unconditional offer unless conditions have been agreed prior to the auction. Before attending an auction, you should investigate any conditions relating to the purchase.
Q: What does an unconditional offer mean?
A: It means that you as the buyer are not placing any special conditions on the purchase. The seller has only to accept the offer for the property to be sold, subject to the title being satisfactory (10 days).
Q: What needs to happen before I can go unconditional?
A: The following needs to be in place:
- A clean title – approved by your solicitor
- Confirmed finance
- All other conditions have been met
Then your lawyer can confirm to the seller’s lawyer that the contract is now unconditional.