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The Purchase - May 2011

A 'normal' timeline

We continue to be surprised at the speed of New Zealand property purchases when compared to similar ones in the UK. However, there are some downfalls that prospective purchasers should watch out for.

1. An offer on a property is binding. You will sign a formal contract. So don't make an offer unless you are very serious about purchasing the place, but make sure it has some 'get-out' clauses in it in case there turns out to be something wrong with the property. Always make sure the contract includes 'subject to LIM, building/land inspection, and finance'. Or the wonderful 'catch-all' 'subject to due diligence'. We have had call to use one of these get-outs, when the geosurvey on the section of land we were purchasing came back with some very negative (and expensive to put right) results.

2. Always put 'or nominee' as one of the purchasers. If your solicitor/financial advisor advises you to place it in a family trust, it makes the contracts easier.

3. There are 2 important dates that will end up in the offer contract. When you have the offer accepted, you 'go conditional', then on an agreed date you go 'unconditional'. Finally, you will have the 'completion' date - the date you'll have to transfer the money, and the property is yours.

4. The 'unconditional' date is probably the most important one. This date gives you and your solicitor time to check out all those due diligence things we talked about above. Try and make the time you can stay unconditional as long as possible. The real estate agent will try and get you to make it as short as possible. I'd stay to stick out for 10 working days, and if possible make it longer.

5. When you go 'unconditional' you pay a 10% deposit. A little word here - some real estate agents will try and get you to write a cheque to their trust account at the point you make the offer and go unconditional. I would strongly resist. If possible find yourself a solicitor in advance of the offer, and do everything money-wise through them. We have now been involved in five property purchases and we always pay money into our solicitors trust account and let him do the disbursing. Some real estate agents have gained a bad reputation, and I personally feel safer knowing that all cash transactions have been recorded via this route. Some agents will tell you 'that's not the way it's done in new Zealand'. But I assure you that if it's the difference between a sale and none, they'll accept it. Bear in mind - if you back out after you've gone conditional, you will lose your 10% deposit.

6. On or before the day of completion, all money (cash and mortgage if you need one) needs to be with your solicitor. We usually aim to get it there a couple of days in advance to save delays (you will pay interest on the house value if you are late). The solicitor will tell you when you can go and pick up the keys.

The time from beginning to end can be as quick as 4 weeks - they don't hang about over here!

Our timeline

Having said that you should push for an unconditional date that is at least 10 working days in advance, we broke our own rules. As we said before, this was a bit of an impulse buy - and we put the offer in just 9 days before we were due to fly to Canada for a 2+ week holiday (see Canada - May 2011. So we agreed to go unconditional on the day we flew out of the country, with a completion date over one month after we arrived back - a period of around 7 weeks.

As the house was less than 3 years old, and had been built by Golden Homes, one of NZ's best known builders, we made one assumption - that the 7 year major structural defects guarantee that they advertise would automatically go with the house. Number one tip: don't make assumptions. The guarantee does not automatically go with the house. We discovered this on the morning that we were due to go unconditional. After a flurry of phone calls (during which time we threatened to pull out as the 'due diligence' had uncovered something) Golden Homes agreed to pass the 7 year guarantee on to us. We went unconditional on the way to the airport!

After returning from Canada, we had a whole month to wait before completion. Everything went smoothly.

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