For property buying newbies, the world of house buying can seem like everyone else is speaking a language you’ve never heard before, and the whole process can all seem terribly daunting. And rightfully so; there’s a lot to it, from how to make an offer to whether you can even make an offer for the type of purchase you’re entering.
Don’t let it put you off. Get smart and get house shopping. Here are 8 common myths, demystified.
If your offer has been accepted, the house is yours
Generally, sales for first home buyers and also many subsequent home buyers also hinge on finances and insurance being satisfied for the bank. Then, of course, the deposit, which is a pre-determined amount named in the sales and purchase agreement, must be paid.
Once all these boxes have been ticked, then yes - the house is yours on paper (this is called “going unconditional”.) Settlement day, when your money goes to the seller and your lawyer places the keys in your hands, is when you truly own your house.
Once your offer has been accepted, another buyer with a better offer can take your sale
Although your conditional offer has been accepted, the deal isn’t signed and sealed until you’ve gone unconditional, so the property will technically still be on the market.
In some cases a seller may add a ‘cash out’ clause to the sale and purchase agreement. This means that if a better offer is presented before you’ve satisfied your conditions, you’ll be given a set amount of time (e.g. three days) to either satisfy or waive any outstanding conditions and pay the deposit. Even if the other offer is $100k more than yours, if you’re able to satisfy your conditions by the deadline the property is yours - first in first served! As always, go through your sale and purchase agreement with your lawyer before you sign it, so you know what you’re dealing with.
I have to pay the real estate agent
Technically a real estate agent works for the seller not the buyer, so the seller is the one who’ll owe the agent a percentage cut of the final sale, which is agreed in the contract between the vendor and their agent. If you choose to hire a buyers’ agent, which is rare in New Zealand but available in some regions, then yes you’ll have to pay them an amount which you will have already agreed.
Buying privately will save me money
Potentially, entering a private sale can save you money because the seller doesn’t need to account for an agents’ cut. But don’t be fooled. In order to know whether the seller is offering you a genuinely great deal you’ll need to know what other, similar houses are selling for in your area, and why. Educate yourself by going to open homes, looking at recent sale statistics, and rateable values which are freely available on Trade Me's Property Insights. Only then can you be more confident that this private sale is saving you a bit of coin.
I must have a 20% deposit
Not necessarily. First home buyers using the Government’s Welcome Home Scheme only need 10% of the purchase price. Or, using KiwiSaver, you could be eligible for a first home buyers’ grant to top up your savings that allows you to reach those dizzying heights of 20%.
Once I've saved the 20% deposit, I'm set
Sorry, no. You’ll also need to set funds aside for reports such as a building report, LIM and valuation. And those are just the standard reports - you may require more to satisfy your lender. In very hot housing markets, where auctions are the norm or unconditional offers are the only way to get in, you may have to buy more than one report on more than one house. You’ll also need to prove to your lender that you can cover the regular home loan repayments. Then there’s insurance, moving costs and utility set-up bills… keep topping up that swear jar and you’ll have funds for a new letterbox in no time!
I have to fix my mortgage for 30 years
Not necessarily. If 30 years works best for you, then that’s an option. However, using advice of brokers and lenders, many mortgage holders fix for far less than that - and may even have two or more split loans at different interest rates and time periods. This gives them the flexibility to cover their bases with changing interest rates, and also for those who plan to break their mortgage to buy another property, which can incur some pretty hefty penalties.
Problems with my new house are at the previous owner's cost
Once you’ve gone unconditional, the house and any problems with it are pretty much yours. If you bought a lemon, you’re responsible when things go sour. The saying ‘buyer beware’ is a dead giveaway.
To ensure you uncover every problem well before making an offer, ask the agent every awkward question you can think of (they’re obliged to disclose any problems they know about if asked directly), get the experts in and use your gut instinct - houses should not smell, walls should not have cracks, roofs shouldn’t leak and mould is a no-no. This is no time to be quiet and polite; flush toilets, turn on showers, start ovens, stomp on floors, open closets to your heart’s content.
That said, absolutely do a pre-settlement inspection before you settle on the property - if the heatpump’s taken a walk or there are fresh holes in the lounge wall since you went unconditional, your lawyer can negotiate with the vendor’s lawyer for repairs or compensation before settlement.