[welsh_italian]

Hi everyone,

I hope to buy a place for myself and my family when I move to NZ but will be renting for a while. Just to make sure I'm getting a good deal, I'm already scouting out possibilities and seeing what prices they go for (aside: this is not a rigorous study but I compared some asking prices with actual prices and found that the actuals were 4% over asking in 2007, 1% over in early 2008 (Jan-Jun) and 2% under for late 2008 (Jul-Nov). One price was almost 12% over which gave me a shock).

Aside from the BBO/BEO/auction/tender uncertainties, I often see two different prices, one for cash and the other for conditional. A previous post (http://www.emigratenz.org/forum/showpost.php?p=74373&postcount=19) mentioned that a cash offer is one that can be closed within 6 weeks, conditional being more than 6 weeks.

But due to my lack of experience (heh, I'm learning fast), I need to learn!

So my question is would the 'cash' offer be applicable to a first-time buyer with an adequate mortgage already in place? Is that the kind of thing they mean by 'cash'?

[ourquest]

Vendors like as few conditions written into the sale agreement as possible, preferably none, obviiously so that there are no potential stumbling blocks. These conditions are not only financial, but commonly include a LIM report and builder's report. These can be done beforehand which means you could remove them from an agreement, and if you are a cash buyer then you would not require a "subject to obtaining finance" clause which is one less condition.

But reality is a bit different. Vendors are not easily finding buyers at the moment so as purchaser you can decide what to insert into the contract with far less chance of having your offer rejected because of it.

IMO when agents advertise a property at two different prices it's a bit meaningless. Conditional or otherwise vendors want to sell. In a falling/flat market vendors are not usually advised to reject offers which are anywhere close to their asking price. I know of one property which sat for a while and eventually sold for close on 25% less than asking...so there's some more shockingly good news for you...

And to answer your actual question I would not remove the subject to finance clause even if I had prearranged finance because until your solicitor has the final confirming letter from the bank anything could happen. But it's all a negotiation process and if your agent is made aware that your finance clause is a "formality" this must affect the vendor's decision to accept your offer.

[welsh_italian]

Vendors like as few conditions written into the sale agreement as possible, preferably none, obviiously so that there are no potential stumbling blocks. These conditions are not only financial, but commonly include a LIM report and builder's report. These can be done beforehand which means you could remove them from an agreement, and if you are a cash buyer then you would not require a "subject to obtaining finance" clause which is one less condition.

But reality is a bit different. Vendors are not easily finding buyers at the moment so as purchaser you can decide what to insert into the contract with far less chance of having your offer rejected because of it.

IMO when agents advertise a property at two different prices it's a bit meaningless. Conditional or otherwise vendors want to sell. In a falling/flat market vendors are not usually advised to reject offers which are anywhere close to their asking price. I know of one property which sat for a while and eventually sold for close on 25% less than asking...so there's some more shockingly good news for you...

And to answer your actual question I would not remove the subject to finance clause even if I had prearranged finance because until your solicitor has the final confirming letter from the bank anything could happen. But it's all a negotiation process and if your agent is made aware that your finance clause is a "formality" this must affect the vendor's decision to accept your offer.

Many thanks ourquest. The answer was quite obvious really but it's better to be sure. After reading a *lot* of posts here about the estate agents in NZ, I'm going to have to be in very good form.

The good news for us is that my wife and I are in no rush to buy a place (we can walk away quite easily if we want), we should be able to get a reasonable mortgage (my job is in a bank), and we have quite a modest property in mind (we're living in the Philippines in a very modest house). The only thing we need to take care over is making sure there is good insulation. For the right price, we can pay to have it done properly if possible (the feasibility and costs which will form part of any report we have done before we get close to exchanging). Thanks again.

btw, what kind of asking price was the house that went for ~25% less?

[sizzlingbadger]

The 'cash and 'conditional' prices shown by one real estate firm is a gimmick to try and stir sales up and get the market going again, have to say it's to confusing for some buyers and they're put off.

If you end up going for one of those properties I would take no notice of either price and go in under the cash asking price, you'll see many of the properties don't sell in the required '6 weeks' and they sit for a few months after. To us it shows the owners to be very desperate they'll accept anything, great for you.

As ourquest as said definitely have the clauses in for finance, LIM, builders report they're there for a safety net more than anything. Once you sign the sales and purchase agreement it is legally binding, last thing you want to happen is for a builders report to say something major is wrong and you've not got a builders report listed as a clause, you would not be able to pull out and have to go ahead with the purchase.

Keep studying, by middle of next year we're hoping the interest rates will be lower again, not sure which way the property prices will go but it's still a very stuck market at the moment with nothing really selling.

[ourquest]

Many thanks ourquest. The answer was quite obvious really but it's better to be sure. After reading a *lot* of posts here about the estate agents in NZ, I'm going to have to be in very good form.

The good news for us is that my wife and I are in no rush to buy a place (we can walk away quite easily if we want), we should be able to get a reasonable mortgage (my job is in a bank), and we have quite a modest property in mind (we're living in the Philippines in a very modest house). The only thing we need to take care over is making sure there is good insulation. For the right price, we can pay to have it done properly if possible (the feasibility and costs which will form part of any report we have done before we get close to exchanging). Thanks again.

btw, what kind of asking price was the house that went for ~25% less?

A couple more points; as insulation is important to you just note that builder's inspections are non-invasive and so wall insulation is not usually something they comment on at all. They will usually comment on underfloor insulation and ceiling insulation. As an aside I believe it to be far more important to choose a sunny site than to have insulation (obviously you'd like both). You can retrofit insulation, but you cannot get all day sun on a south facing slope.

The first step in the process is a sale and purchase agreement which gets submitted to the vendor for consideration. Once the vendor signs to accept, then you have a certain length of time (usually 5 working days) to fulfil the conditions, and then the solicitors do the rest. Once the contract has gone unconditional there is nothing that can legally halt the process which is good news for both vendor and purchaser IMO. The process here leads to what is termed "settlement" (not "exchange", but equivalent), at which point monies change hands and keys are handed over, often about a month from agreement.

The property mentioned was apparently originally listed at $429K, I first saw it advertised for $409K, it dropped to 405, then 395. It finally sold (while marketed at 395K) for $327K! Good suburb and apparently an OK house, looked decentfrom the outside too although I never viewed it as its position didn't appeal (position was ok but the house had no outlook which I prefer to have).

[bobo]

When we were looking at house buying we contacted a solicitor before we made any offers. She advised that the vendors agent will try to get you to sign the sale agreement there and then, but insist that it is sent to your solictor to check before you sign. Also consider adding solicitor’s approval of title clause.

She was right the agent did try very hard to get us to sign. We had added all the right clauses but it was just piece of mind.

Also note that the finance clause is "suitable finance", not just finance.

[ourquest]

When we were looking at house buying we contacted a solicitor before we made any offers. She advised that the vendors agent will try to get you to sign the sale agreement there and then, but insist that it is sent to your solictor to check before you sign. Also consider adding solicitor’s approval of title clause.

She was right the agent did try very hard to get us to sign. We had added all the right clauses but it was just piece of mind.

Also note that the finance clause is "suitable finance", not just finance.

Absolutely correct, a title search is vitally important. It can be done in a matter of seconds and most solicitors won't charge a big fee for it so it too can be obtained beforehand. It is the document which shows the name of the owner(s) and any interests registered against the property. It will also show covenants, which are clauses preventing certain activities (for example restricted styles of construction).

And equally true about the "suitable finance". In fact the way it is worded you could withdraw from the agreement if the bank did not offer you a favourable interest rate.

[emka]

I’ve got an additional question regarding insulation. If insulation is a crash criterion for a prospective buyer, and given the fact that a building report is non-invasive and won’t tell you whether there is any insulation in the walls, is there any other way of finding out?
For example, can you tell by the age of a property whether it complies with minimum insulation requirements? I have heard that there have been changes to the Building Code that also included upgraded insulation specifications. Would a title check, which should include the year of construction, help buyers assess whether the walls are insulated and what type of insulation materials were used at the time of construction?
Any building cracks in this forum?

[ourquest]

I’ve got an additional question regarding insulation. If insulation is a crash criterion for a prospective buyer, and given the fact that a building report is non-invasive and won’t tell you whether there is any insulation in the walls, is there any other way of finding out?
For example, can you tell by the age of a property whether it complies with minimum insulation requirements? I have heard that there have been changes to the Building Code that also included upgraded insulation specifications. Would a title check, which should include the year of construction, help buyers assess whether the walls are insulated and what type of insulation materials were used at the time of construction?
Any building cracks in this forum?

I'll give this one a stab/crack but I'm no expert.
The age of a house can be determined most easily from the records available from the local council, who will hold plans for each construction stage which will be dated. These plans in most cases will be detailed as far as the construction materials are concerned. The title search won't really help as the date appearing on this would seem to be the date of subdivision of the land, and not related to the building. The title actually has no information regarding the building at all, and it's main purpose is to establish legal ownership and any restrictions.

There are 4 main phases in the context of building regulations. Prior to the building act of 1991 there was little control and AFAIK no regulation regarding insulation. Anything built before this date really has to be accepted now, even if it doesn't appear on plans. Having said that, houses particularly of the 60's 70's vintage have a fairly good reputation for build quality. I forget the reasons for the introduction of the building act in the frst place, but I think it was in reaction to the general (poor) quality of homes in the 80's.

The second phase is between 1991 and 2004, and during this time the "leaky homes" were prevalent and this caused a reactionary change to the building act in 2004.

This next phase is highly regulated and most building work not only required approval to begin with but also required a compliance certificate to be issued at completion, and required inspections at critical times during the construction process, for example prior to cladding, which allowed building officers to establish whether insulation was being used as specified and more importantly in the context of leaky buildings (where internal wood rotting was the problem); whether treated timber was used in the framing.

There is a new phase applicable since October where a relaxation of smaller building work has become exempt from the consent process but this does not have an impact on insulation as none of the exempt work extends to this level.

I'm not totally sure what this means to a buyer. Probably that houses built in the last 4 years will have good insulation, and that the only clues for earlier houses might lie in the original plans and specifications.

The secondary indicators could include the number of heaters, the overall build quality, and the presence of damp (you can smell it). The latter is no real proof of no insulation, but it is a reliable way of removing a house from your shortlist (IMO). If there is underfloor insulation you can also be more confident that there will be insulation in the walls.

Buy a house that gets sun most of the day. While shopping, know where north is, watch out for hills and banks of trees to hide the low angle winter sun, and do a lot of looking for damp. I go on about this a lot, but it is the key to a healthy house, and it's easier to heat (and maintain) a north facing sunny house than any other house with or without insulation.

[aberdian]

Our solicitor recommended that a clause for due diligence be added as well as suitable finance, subject to a builders report and title/LIM.

[emka]

Thank you, ourquest, for your outlining the relevant milestones in the NZ building regulations regarding insulation. As far as damp goes, I agree that this is not only unpleasant because it smells bad but it is also unhealthy. However, I am sure vendors knowing their house has a damp problem will find ways to deodorise the place, e.g. by using scented spray or baking bread prior to Open House times, to cover up the smell. Do you know by any chance whether such moisture meters are of any use (little boxes with to fork-like pins that give you a moisture reading when you touch surfaces, e.g. walls, with the metal pins – a non-invasive device)? This probably wouldn’t be greeted with enthusiasm by vendors or agents, but if it works, why not?

Sorry for kind of high-jacking this thread from price aspects to building quality, but as welsh Italian mentioned insulation as an important criterion, he might find this interesting, too.

[ourquest]

Do you know by any chance whether such moisture meters are of any use (little boxes with to fork-like pins that give you a moisture reading when you touch surfaces, e.g. walls, with the metal pins – a non-invasive device)? This probably wouldn’t be greeted with enthusiasm by vendors or agents, but if it works, why not?


Yes, by all means use one. Building inspection companies all make use of them, so they are certainly appropriate for local conditions.

[welsh_italian]

Thank you, ourquest, for your outlining the relevant milestones in the NZ building regulations regarding insulation. As far as damp goes, I agree that this is not only unpleasant because it smells bad but it is also unhealthy. However, I am sure vendors knowing their house has a damp problem will find ways to deodorise the place, e.g. by using scented spray or baking bread prior to Open House times, to cover up the smell. Do you know by any chance whether such moisture meters are of any use (little boxes with to fork-like pins that give you a moisture reading when you touch surfaces, e.g. walls, with the metal pins – a non-invasive device)? This probably wouldn’t be greeted with enthusiasm by vendors or agents, but if it works, why not?

Sorry for kind of high-jacking this thread from price aspects to building quality, but as welsh Italian mentioned insulation as an important criterion, he might find this interesting, too.

No problem at all Emka - this is all very useful information! :)

[emka]

Ourquest, do you by any chance also know how common thermal imaging is in NZ? You *do* seem to know quite a bit about building ;-) I think these images are taken with infrared cameras. They provide you with detailed information on the invisible, i.e. what is inside the walls, e.g. whether there is any stuff at all, whether batts or loose fillings have sagged downwards, or whether there is only material half way up the walls. It would also be interesting to know how much it costs. Any ideas?
I understand that a regular building inspection costs between 250 and 400 NZD, which is not exactly cheap but probably worth it for one's peace of mind.

[aberdian]

I understand that a regular building inspection costs between 250 and 400 NZD, which is not exactly cheap but probably worth it for one's peace of mind.
Try $700+GST. That's what ours has just cost....... Results by the end of the week, although our offer hasn't been signed.

[bobo]

Try $700+GST. That's what ours has just cost....... Results by the end of the week, although our offer hasn't been signed.


I was not as much as that/. I will check the exact figure but it was about
NZ$350