Buying your first home is a big deal! It’s exciting, but it can also be a bit of a learning curve. To make the process a little less daunting, we have put together a guide with a breakdown of the process and all the key points you need to know before you start looking to buy.
First things first – the contract. When you put an offer in or sign up to buy a house, the document you sign is a contract called a Sales and Purchase Agreement. As this is a legally binding document we recommend talking to your lawyer before signing.
Before you start looking – get your team together
A couple of key people you will need to have on your side during the purchasing process are a lawyer and a mortgage broker or banker. It’s best to set up appointments when you’re thinking about buying before you start going to open homes – that way you’ll be set up and ready to buy once you start looking.
If you are purchasing a house to rent, you will need an accountant to prepare a tax return for the income, and possibly financial statements if you are purchasing within a company or family trust.
You may want to approach a real estate agent to help you find properties that you are interested in. This is called using a buyer’s agent and does not cost you anything. Whittle Knight offers this service so if you are interested in using a buyer’s agent, get in touch with us on 03 348 4149 or email [email protected]
What’s your budget?
It can be challenging for first-home buyers to get on the property ladder. There are several funding options available aside from your savings:
Find out more about the First Home Grant and if you are eligible here: https://kaingaora.govt.nz/home-ownership/first-home-grant/
There are other costs associated with buying a house so don’t forget to factor these into your budget. Legal fees, insurance, rates, bank fees, and the fees of any professionals you engage are examples of some things you may need to pay for.
Applying for funds
Kainga Ora First Home Grant takes four weeks to process an application and payout funds. If you have applied for pre-approval, Kainga Ora will need two weeks to pay the funds out. This Grant is only available for payment of the balance of the purchase price unless you are building or buying a house and land package. New homes have other rules that apply to them. Your lawyer will be able to tell you what rules apply to you based on your situation.
Withdrawing from your KiwiSaver – most providers will let you withdraw funds to pay your deposit. You can also withdraw funds to help pay the balance of the purchase price on the settlement date. You should apply to your provider as soon as you sign the Sales and Purchase Agreement as most providers require 10 working days to process your application. Your lawyer will be able to guide you through this process.
Know your real estate terms
Deposit This is a portion of the purchase price (usually 10-20%) paid to the real estate company when you sign the Sales and Purchase Agreement, or when the contract becomes unconditional. If you intend to use your KiwiSaver for the deposit, make sure your lawyer is aware of this so they can sort out the documentation required.
Confirmation Date The date that you will need to satisfy the purchaser’s terms in the Sales and Purchase Agreement by.
Settlement Date This is the date that you pay the purchase price and take possession of the property.
Unconditional Contract The status of the contract once you have confirmed all the purchaser’s terms in the contract. It now means that you are legally obligated to complete the purchase.
Putting in an offer on a property
The real estate agent representing the seller will prepare the Sales and Purchase Agreement for you to sign. It is recommended that your lawyer reviews the agreement before you sign it. If you cannot arrange for them to review before signing, you can add a condition to the agreement requiring your lawyer’s approval of the contract.
If it is a private sale with no real estate agent involved, the sellers’ lawyers will prepare the Sales and Purchase Agreement for you to sign.
What conditions should you have in the Sales and Purchase Agreement?
Offers are either conditional or unconditional. If you put an unconditional offer on a property and it is accepted, this is final – neither party can back out.
Some conditions you may want to get the real estate agent to include in the Sales and Purchase agreement are:
What happens after the contract goes unconditional?
This means that all conditions in the contract have been worked through, and you are committed to completing the sale. You will then need to prepare for settlement by arranging a pre-settlement inspection of your new home with the real estate agent.
Settlement day!
Settlement is usually several weeks after your offer gets accepted depending on the date you and the seller agreed. On this day, your lawyer and the seller’s lawyer will exchange the remaining money for the purchase and any necessary transfer documents. You will also need to arrange to collect the keys to your new home from the real estate agent.
If you are a first home buyer and have any questions about the process, please get in touch with us – we would be happy to help!
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