like-house-buy-houseIf you’ve never been through it before the process of making an offer to buy a house or going to auction can be a pretty daunting prospect.

Luckily the process doesn’t vary too much either way and there’s a clear set steps to work through.

By negotiation

This is a time honoured method of buying property and as the name suggests it describes a situation where you rock up to the seller and make an offer to them. Generally you’ll be dealing with a real estate agent so approach them and let them know you want to make an offer. While you’re at it, ask them for any documents they hold on the property like a LIM or title.

Obviously the price to offer is a big consideration. But don’t forget to include other conditions particularly a finance condition, building inspection and any other reports you want to get to ensure you’re making an informed purchase. You also need to allow time to get these things done and I recommend 10 working days for that. I know it’s a long time but if you’re ready to rock with 5 days spare you can always bring things forward. On the other hand I’ve seen plenty of examples when every minute has been needed!

Have the agent put a draft Sale and Purchase Agreement together for your approval including the above then get your lawyer to check it out.

Once your lawyer has given it the green light, sign the offer so it can be put in front of the vendor. At this point you normally get some tooing and froing as you and the vendor negotiate the deal via the agent and hopefully you’ll get to a point where both sides agree.

From here the clock starts ticking and you’re obliged to work toward satisfying the conditions you put into the agreement.

Once the conditions are met, the agreement is declared unconditional and the property is sold.

By auction

In many ways buying at auction is the same as buying by negotiation but with one key difference — you can’t bid with strings attached. Auctions are unconditional sales which means you have to do all your checks upfront and make sure you’re happy with the information you have about the property before you bid.

Clearly you need to be in close contact with us to make sure your finance is good to go. Your lawyer should have been consulted, any inspections required are done and dusted, body corp minutes and council reports read and understood.

On the day the auctioneer will announce the major T’s & C’s of the sale and give the property a thoroughly good talking up! Naturally the highest bidder will win the auction but if the property fails to hit its reserve price it will be passed in. At this point the highest bidder gets first dibs on negotiating a final price.

When do you pay a deposit?

Our suggestion is for you to pay it only if the deal becomes unconditional. In other words you’ll pay at the conclusion of the auction or when you’ve satisfied the conditions of your offer.

How much deposit?

The convention is to pay 10% of the purchase price but the reality is you can decide how much. Show you’re genuine by putting down a reasonable amount. And see if you can pay it when you go unconditional, not before.

Sometimes you might not have much deposit on you (maybe because it’s coming from Kiwisaver) in which case, explain the situation. Banks will often provide a temporary overdraft to help you out which is then taken out by the mortgage itself in due course. We can sort that out for you.

When do you get the keys?

So you’ll have heard the terms ‘going unconditional’ and ‘settlement’.

Going unconditional reflects the point where you’ve satisfied all the checks and conditions of the offer you’ve made on a property. The deal is done and the property is more or less yours. However, you don’t get the keys until you’ve handed over the full purchase price and this occurs at settlement.

Normally there’s a few weeks between going unconditional and settling and this is the time we use to nail down your interest rates and finalise the loan set up with you. It’s also the time to give notice to your landlord, organise insurance and start packing.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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