So You're ready to buy a house!....or are you?

karltsmith

When you arrive in NZ, assuming you have successfully negotiated all the idiosyncrasies of the migration process, you thoughts will soon turn to buying a home…or building one. As one who has been looking at the housing market in some detail for some time I must confess that I am more than a little under whelmed by some aspects of the house buying process. A lack of full disclosure laws makes the buying process a little risky to the uninitiated and the caveat emptor (buyer beware) principle should be kept at the forefront of your mind.

Those Brits among you, of which there are many, will soon encounter a minefield of misrepresentation of properties in the popular real estate press akin the Britain in the 1970’s – 1980’s.

I do chuckle to myself when I see some of the “creative” ways in which properties are marketed. Here are a few actual extracts from the NZ Property Press that, with my British sense of humour, I find truly laughable. They range from the sublime to the ridiculous.

VENDORS SAYS SELL! (Well one would hope so……I mean you don’t expect them to still be around when you move in) Rolling Eyes

VENDOR RELOCATING! (Quelle surprise!) Eek

HOT CHOCOLATE! (Very confusing…perhaps this relates to the colour of the roof or is it some sort of café…who knows?) Very Puzzled

MAIRANGI MOCHA! (Hmmmmmm….presumably some kind of confectionary or cake) fingers crossed

JUST WHAT YOU’VE BEEN WAITING FOR! (advertising a deceased estate! Touching….very touching) very sad

Auction (unless sold prior) (So is it? Or isn’t it being auctioned) Hmmm

FOR DEFINATE SALE! (And I thought you were just kidding…..OK I’ll take a look) toff

I’ve even seen a sign proclaiming that the agent is a “joint sole agent” work that one out if you can! Nutcase

I’ve seen pictures of little yappy dogs used to sell homes…no picture of the house just the a pooch the size of a rat! falling bricks

Now onto things less frivolous
There are four main types of way the Kiwi’s buy and sell there abodes, Auction, Price By Negotiation (PBN), marketed at a set price/or price range and by Tender.

Other less popular ways you will encounter include registering an Expression of Interest (sounds familiar…can’t think where I’ve heard that phrase before), marketed without price (this one still causes me to raise an eyebrow in true Roger Moore style) and Price on Application (POA) (i.e. if you have to ask the price you probably can’t afford it).

Since buying at auction is quite foreign to many I will cover the Kiwi process in more detail so you know what you are in for! Much of the background information in the following also applies to any house buying process and I am sure you can all identify the salient points!

A property selling at Auction is marketed for a set period of time, usually 3-4 weeks to allow potential purchasers to view the property either via “open homes” where the property is open to “Jo Public” for about 1 hour on a Saturday and Sunday each weekend before the auction. In fact open homes are the most popular way of marketing a property no matter what the selling process actually is and this is not confined to just the auction process.

To bid at an auction you must be in a position to settle with the client on the set date, some vendors will allow and extension of time to allow a purchaser to sell their home, otherwise a bridging loan will be needed. Before the auction you may have the dwelling inspected by various inspectors, valuers etc. and your solicitor can examine the paperwork and check the legal descriptions and boundaries.

Usually the details of the property will include a Land Information Memorandum (LIM) report telling you the basics about the property, its boundaries, building permits, codes of compliance etc. These documents are by no means 100% reliable and I strongly advise further research. This can now be done a visit to your local council to view the Property Information File (PIF). This will cost you about NZ$20 to inspect the file and about NZ$2 for every A4 document you want to copy. You can also get a CD ROM for NZ$32 which has just about everything you could possibly want to know about your chosen property right down to the specification of the nails! To check out the value of a property and a report of all the selling prices in the history of the house you can get on-line reports from e-valuer for about NZ$30-40 (very useful site) ( https://www.quotable.co.nz/default.aspx ).

OK now you are ready to bid…….GULP…….No you’re not! Make sure you’ve done your sums and have a certificate from your chosen mortgage provider guaranteeing you a mortgage up to a set figure! OK NOW you are ready! OR ARE YOU? You see one of the idiosyncrasies of the auction process is that if a really keen buyer wants to bring the auction forward, either as a ploy to cut out further competition, or because they don’t want to wait a further 3 weeks for an auction because they’ve seen over 100 houses at open homes and are thoroughly cheesed off at not finding THE ONE and don’t want to waist time………did you guess?......Yes that last one is me!!! If this happens, or indeed if you are the one making the offer, be aware that your offer is unconditional as it would be in the auction process. That is to say the offer you make cannot have any conditions attached…such as subject to a building inspection etc. You, as the prospective purchaser, are deemed to have had sufficient time to carry out your research and are making your offer based on your findings. This offer is then presented to the Vendor who has three options. 1. They can reject your offer and proceed to auction 2. They can call a “mini-auction” whereby all interested parties are informed that an offer has been made and the agent then contacts other parties who have expressed a desire to bid on the day of the auction. This offer is kept in confidence and is only disclosed to the other parties once they /you are all together in a room. The auction then proceeds as normal. 3. The vendor can call tenders in from all interested parties, highest tender wins. This in effect stops the auction and turns it into a tendering process.

Assuming you have made it to auction day the auctioneer will read out the particulars of the property and the binding nature of your bid etc. and the auction will commence. At the auction the auctioneer can sometimes be seen to be calling bids from nowhere! What he is actually doing is taking bids from the vendor (vendor bidding is allowed) to push the price up! If you are the “last man standing”, do not assume you have just bought a house! Oh No! If the reserve price has not been met, and because this is not discussed you will not know what it is, you have only won the right to then negotiate an acceptable price with the vendor! Assuming you do this….you’ve just bought a home!

All you have to do know is pay for it! falling bricks

Here endeth the first lesson!

nisse · I'll Hang Around A Little Joined: 03 Feb 2004 Posts: 31

Firstly, thank you for all that useful information. Am looking forward to lesson 2 Mr. Green

This thing about the vendor being allowed to push up the bids I just find so ludicrous. I know in Australia the real estate agents have people who put in dummy bids to push up the price, but there they are talking about changing the law to stop it. About time that NZ started thinking along the same lines. (rant over) Embarassed

It seems, no matter in which country on which continent one is, buying a house is a minefield and one can only but be very grateful for people like you who are willing to help and give info.

I take it, you haven't found and bought a house yet, then?

Cheers

nisse

Timbo · Posted: Sat Aug 14, 2004 5:55 am Post subject:

Great post Karl, thanks. Do the same rules apply to buying bare land as for a house?

BJ · Posted: Tue Aug 17, 2004 5:28 am Post subject:

Hi Karl
Bit of an eye opener

Thanks great post Clapping

BJ

Raeven · Posted: Tue Aug 17, 2004 5:47 am Post subject:

Hi, karl,

Outstanding and informative, as always! I'll be referring to this and Rich's post re bidding on a house many times after we've arrived in NZ. If we ever get there.

Wah

Thanks, as always, for such superb insights!! - Rae

WannabeeKiwi · I'll Hang Around A Little Joined: 15 Feb 2004 Posts: 15

Great post with invaluable information.

Thanks

karltsmith · Posted: Thu Aug 19, 2004 9:43 pm Post subject:

Some Tips On Playing Estate Agent Games Razz

1. Don’t forget that the estate agent is working on behalf of the vendor and is trying to maximise the price for his client and his commission. Yes

2. Expect follow up phone calls from Estate Agents. Having visited an “Open Home”, they will try to suck out information for THEIR client on what value the market (potential bidders) sees the house. Do not under any circumstances bite and volunteer information on what you are prepared to pay unless you are going to make a pre-auction offer!

Some agents will give you a range that they think will be acceptable for their client. Yes

I have played a game over the past few months with many agents! I have about 4-5 calls a week at present asking me to put a value on their clients properties! Nutcase

So on the ones I’m not interested in I go high Rolling Eyes

and on the ones I like I go low! Wink

I don’t think they’ve figured out I’m playing a game with them! You see I started playing THEIR GAME and soon found that the information flow was only one way….to the vendor! I have asked many Estate Agents “what price is your client expecting?” or “what kind of offer would be acceptable?” and all I get are dumb answers such as Oh definitely over $400K, when every man and his dog knows the land alone (in AKL, ECB’s) is worth that (Full c1000m2 section with sea views). What they are trying to do is feed your info back to their client to help set a reserve price and ultimately this may count against you as it raises the vendors expectations and then they get gready Mr. Green

. So say nothing…if you are interested let them know you wish to attend the auction and do your homework! If another offer is made they must contact you to either attend a mini auction (see my previous posting) or to ask if you would like to submit a tender. Nice One

3. The person with the least desire has the strongest hand! Be prepared to walk away if the price/deal is not right! That extra $20K you bid over your limit could cost you dearly in the long run! Eek

4. Salespeople will try to discover who has the greatest desire to make a deal! Hmmm

5. The progression of desire Desire>Need>Want>Want Really Bad> Fear of loss love

. In the sale process this sequence of events can be fed by the salesperson leading you to the “Fear of Loss” mindset. This is a very dangerous area and you can feel pressured into a wrong decision very easily. Always be aware of how your desire is progressing and allow a cooling off period…even view as many other homes as you can to convince yourself that 1. It’s the one for you 2. The price is right and 3. That all is not lost if you are not successful and that such things are just a part of life…Que Sera Sera! fingers crossed

6. Avoid being pressured! Very Puzzled

7. Remember WHY you are buying a home and try to satisfy your needs and wants! whip

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8. Take notes and make a list of pro’s armchair

and cons

about possible properties so you can objectively assess them against your needs and wants later. typing

9. Always take a second look! When I first view a house I am looking for location, style, construction, flow, ambiance, development potential and amenities. I always view a second time to a) look more closely at the property and make sure I have not missed anything, good points and bad…this is all too easily done when you only have ½ hour to look around a property, and b) to gauge overall interest in the property prior to auction. If you view later during the open home just before it closes you will see a list of all the parties that have attended. toff

10. FINALLY, I’M NO EXPERT IN THESE MATTERS AND I’M SURE THERE ARE SOME BORN NEGOTIATORS OUT THEIR WHO WOULD HAVE THE RATHER NICE “NEXT” SHIRT OFF MY BACK. rain cloud

BE CAREFUL……..IT’S A JUNGLE OUT THERE…….AND YES TIGGERS DO LIKE JUNGLES…..IT’S WHAT TIGGERS LIKE BEST!
elephant

Tara Sage · Posted: Fri Aug 20, 2004 2:01 pm Post subject:

Thanks Karl

We are in a FF rental which is quite expensive and so we have started the should we rent somewhere else or should we buy questions?????

As yet we haven't found the answer, but all your information will definately come in handy.

The real estate people are so secretive to back in the UK, fingers crossed

we will work out the bestway to play the game. Confused

Will keep you posted and If I have any questions will send them yourway hope you don't mind Confused