It’s the start of the New Year again. Amazing how time flies.
What that also means is that it’s a GREAT time to start preparing yourself for buying a house in the Eastern Bays (including Mission Bay, St Heliers, Kohimarama, Glendowie and Orakei) or Remuera in 2019. With the summer weather out in full swing, sellers and buyers emerge refreshed from their Christmas breaks. The warm weather and long days are also extremely conducive for viewings, with plenty of light and perfect greenery (if you have been keeping up with the lawns).
A lot of the people who are currently reaching out to me about buying a home, in our local property market of Mission Bay, St Heliers, Orakei, Kohimarama, Glendowie, and Remuera, are preparing themselves for a purchase in 2019. These folks are the inspiration for this article.
My sincere hope is you will be well prepared to buy your next home by the end of it.
In Real Estate, it’s very common for people to keep their eye on the property market long before they become serious buyers. Searching for the perfect house that is now on sale in St Heliers, Glendowie, Kohimarama, Orakei, Mission Bay or Remuera can take a while.
This is because the purchase of a family home for a significant sum in these prestigious areas requires preparation. The more prepared you are, the more you have set yourself up for success. Regardless of how the property market is doing, real estate remains one of the safest investments you can make, especially if you’re buying in a great and always popular location such as Mission Bay, St Heliers, Kohimarama, Glendowie, Orakei and Remuera where good schools and a fantastic waterfront/beach lifestyle can be so close by.
The biggest mistake people make is that they buy nothing at all. They renew their leases or continue to stay (often unhappily) in their existing home which does not fit their needs, and push home buying off for another year. If you ask the clients I work with this question ‘what is one thing you wish you did differently’, their answer would invariably be: ‘buy sooner.’
This Buyer’s Guide aims to guide prospective home buyers on what they need to do before they even visit the next open home and buy their next home.
Without wasting any more time, let’s get right into it!
When you go shopping, you know what you can afford to buy because you know your credit card limits or bank account balances.
Similarly, before you start looking for a home to buy, you will likely need to get a mortgage lender (i.e. a bank) first. Unless you already have the money in the bank (kudos to you) – in which case you can jump right to week 3!
This step is critical because it lets you know the kind of home you can afford to buy. It saves you the time, money and headaches during the home buying process.
It also makes sense to start a conversation with a mortgage lender well in advance of you buying a home because they can help prepare you for the actual application process. Finding a good mortgage lender is easy, though it requires a lot of effort if you do it on your own.
What I would strongly recommend is to find a good mortgage broker who works and understands current lending guidelines (which are getting tougher as a result of the Responsible Lending Code and the ongoing Reserve Bank of New Zealand’s review), can present your application in the best light and help you with the various options. Different types of home loans (fixed vs floating, offset vs redraw) can become bewildering – let a professional help you decide which one is right for your situation.
Like you, I used to believe that I was better off negotiating individually with each bank and ‘cut off the middleman’. Disregarding the huge amount of effort/time spent, what I also fail to realise is that banks do not offer their best rates upfront. Unless you work in the residential mortgage department, you are unlikely to be able to know and access the best interest rates. Mortgage brokers, however, deal with these banks on a daily basis and therefore will be able to get you such discounted rates ‘upfront’.
Best of all, they do it all for you for free (they are paid by the lenders).
Serious buyers for Eastern Bays (including the various suburbs of Koimarama, Glendowie, Orakei, Mission Bay, St Heliers) and Remuera homes make getting a mortgage pre-approval their first step when buying a home.
This is because they are serious and know that if they are going to buy a house they will need it. As with most popular markets, if you try to buy a house here, you’re going to compete with a lot of other buyers. This is especially so when you are buying in auctions (although that may be declining slightly in the current market with more sellers opting for other methods of sale). When the hammer falls and you are the successful bidder, your offer is unconditional (i.e. you cannot back out if you fail to get finance without losing your deposit or incurring late settlement penalties).
Before you can make your offers to potential home sellers, having mortgage pre-approval simply means that you do not need to have the ‘finance’ condition in your offer. This makes your offer more attractive as it tells the seller you are capable of buying the home in question.
Remember that the mortgage pre-approval often expire in 3 months’ time so just make sure yours is current.
To get a mortgage pre-approval, you will likely need documents such as proof of income (for e.g. tax returns, pay stubs), credit card statements and other proof of expenses. The lender basically needs to know your financial position and have a list of your debts and assets. Lenders are certainly getting stricter nowadays and will scrutinise the documents more carefully
When preparing to buy a house, you should also stay away from new credit cards even if they come with irresistible benefits. This is highly recommended since opening new credit lines can hurt your chances of qualifying for a mortgage (or with lower credit limits), and if by any chance you are eligible for a mortgage, you won’t get the best rate.
A good mortgage broker will certainly advise you on your options, especially if you have a lot of unused credit lines.
Remember, just because you have a pre-approval of $X amount does not mean you have to buy a house for $X. You can certainly spend less than that. You should definitely consider the other costs associated with buying your dream Eastern Bays or Remuera home.
Before you find the house, you really need to find a great real estate salesperson (also known colloquially and in this article as an ‘agent’) operating in the local area. This is more important now than ever. With so much information online, it’s hard to believe what’s real and what isn’t. A great real estate agent will help you navigate the world of real estate and hold your hand through the purchase given that they are in the market on a daily basis.
You may wonder why you should use a real estate agent to help you when you are BUYING a home. Surely you can visit those open homes on your own and purchase one with the help of your lawyer?
Well, here are 3 key advantages of working with an agent (or what is known as the ‘selling’ agent) to view and buy your next dream home:
The seller pays the entire commission anyway so why not use these services for free?
All that being said, it’s only worth working with someone who is good, that has good reviews, than it is working with anyone. Do your research carefully. Understand the local values.
Although it seems obvious, the type of home you buy should reflect the lifestyle you are planning for the future. You would have chosen the Eastern Bays or Remuera for a particular reason.
Think about personal factors such as the following:
Determining your priorities is going to help you find a great house. Have a list of ‘must haves’ and stick to it while being reasonable, especially about price. Understand that most homes are not going to have everything you want and if it does then you should act quickly.
For example: some people may want a full section near to Churchill Park for their fur babies. Others may want to be within walking distance to the St Heliers village and St Heliers beach. But their budget might not allow for a full-section or that the house within walking distance may be a do-up instead of being modern. You would have to consider what truly matters to you and your family. It’s therefore good to sit down with family members and work out every one’s needs, wants and ‘nice to haves’.
Don’t miss the forest for the trees, especially when it comes to a great house that fits your needs. Ask yourself how you would feel if you were to lose that house to someone else over a small % of the sale price.
Also don’t forget that there is no perfect house unless you build it yourself, and even then it might not be perfect in a few years. There are bound to be compromises but so long as those things that you do not like are not major issues, then that’s probably the right house for you.
Importantly, given the new anti-money laundering regulations in force as of 1 January 2019, complying entities such as law firms (and in certain situations, real estate agencies) will need to undertake customer due diligence on their clients (i.e. you as a buyer in this case). This involves obtaining verified copies of identification from them.
What this means is that you should expect a verification process with your lawyer and your real estate agent (especially if you are a new client) – verification of identification documents will need to be undertaken by a ‘trusted referee’ before any transaction can take place. This verification requires the “trusted referee” to view the identification documentation with you in person, to ensure that you are the person in the identification document.
Previously, real estate agents have not needed to collect much of this information.
When you engage with real estate agents, they will ask you for:
To confirm these details, documents such as your passport, and documents that show your address (like a current bank statement or utility bill) will be needed.
In some circumstances (for e.g. where the purchaser is a company or trust) in which enhanced due diligence is mandated, law firms or real estate agents will likely need to ask you for more information about where money came from and the other people (for e.g. directors and shareholders, trustees and beneficiaries) involved.
View the New Zealand Government website which will assist you in understanding the information required and why it is now required – Keep Our Money Clean.
In short, a property transaction time-frame will get extended and that you will expect to jump through a few more hoops and fill up some legal forms to get the transaction completed.
If you are not a New Zealand (or Australian or Singaporean) citizen (i.e. holding passports of these jurisdictions), then the new Overseas Investment Act (OIA) restrictions on foreign investment in residential housing will be applicable and need to be considered.
A purchaser of residential land will now be required to provide (to a lawyer) a Residential Land Statement related to whether the transaction requires consent under the OIA.
If the lawyer has not received such a statement, or has reasonable grounds to doubt the accuracy of a statement, he/she would not be allowed to effect the transfer of the property.
Banks and real estate agents will also now require sign off (either from the purchaser or their lawyer) on compliance with the new OIA restrictions.
When you find a great house, don’t wait, make an offer on it. If you don’t, someone else surely will.
Ask the selling agent whom you should be working closely with (or the listing agent if you do not work with one) for recent sales statistics of similar properties in the area. Nope, not a lazy printout showing every sale in the suburb over the past 6 months.
There are many things to look out for when inspecting a home that’s beyond the scope of this guide. I would be more than happy to guide you along without any obligation.
If the property is going on auction, you will need to obtain a copy of the auction agreement and send it on to your solicitor and mortgage broker (or bank) to get the respective solicitor’s and lender’s sign off. Note that just because you have a $800,000 mortgage pre-approval does not mean that you can buy any house up to $800,000. The bank needs to see the house and ensure that the house is good security for the amount it is lending.
Remember: when purchasing at auction, you must pay a deposit – normally 10% (this can be negotiated , along with settlement date in advance), on the fall of the hammer.
If the property is priced by negotiation and you enter a multi-offer situation, then you can refer to this post where I cover off negotiating tips in such situations!
If you were to work with an agent, then the agent can advise you on the various clauses, bidding strategies etc.
I strongly recommend that purchasers arrange a building inspection before you go unconditional (this can be either written or verbal) and also obtain a copy of the LIM report.
You can also choose to view the property file held by Auckland Council to understand more about the property. A property file provides documents not included in a LIM report, such as (1) building and resource consent documents and (2) any correspondence with Auckland Council about the property. A small fee is payable and this must be ordered in advance.
Some buyers also organise an independent valuation, either at the request of the lender (getting common) or of their own volition.
Even if you are a first time home buyer with a small deposit, you need to remember that bringing money to settlement is often required. Most people don’t realize that settlement costs can be around $2,000 – $3,000 when you include the conveyancing, building inspection, and other fees (check out my article),
Remember, as the buyer you don’t pay any commission.
If you’re buying a home in 2019, you should start the conversation now. Begin saving up for your deposit, your settlement costs, and have a cash reserve for a rainy day (such as unexpected maintenance)!
It’s also important to discuss with your selling agent on ways of reducing settlement costs. However, if you hire a reputable real estate agent, you have nothing to worry about.
If you’re buying a home with a significant other, you will want to start preparing for that as well given the Property (Relationships) Act. There are some additional steps you may need to take – speak to your lawyer.
On settlement date, this is when ownership of the property is legally transferred to you. Prior to settlement day, you can request a pre-settlement inspection of the home to ensure nothing has changed in its status since purchase/signing of the sales and purchase agreement and chattels (for e.g. the dishwasher and rangehood) are in place and in working order.
Don’t be that person who found out during the pre-settlement inspection that there has never been a dishwasher (or connecting water pipes) in the new home, although it’s been listed as a chattel.
Once all settlement procedures have been finalised and confirmed by the vendor’s solicitors, the keys to your new home will be released to you.
Buying a house can be challenging if you don’t understand the process. Hopefully, this guide has made things easier when preparing to buy your dream house in the Eastern Bays or Remuera in 2019.
There are many things you need to consider when buying a home and you’ll find some relevant information on this website (whether you are a buyer or seller) to help you along the way. Whether it’s your first time or your fifth time, it’s always good to brush up on what to expect.