Real Estate Agent Authority (REAA)
The Real Estate Agency or REAA is the independent government agency that regulates the New Zealand real estate industry. Their job is to promote a high standard of service and professionalism in the real estate industry and help protect buyers and sellers of property. They provide information for buyers and sellers, provide guidance for agents and deal with complaints about agents’ behaviour.
Buying or selling a property is a complex legal process and is probably the biggest financial transaction you’ll ever be involved in, so it’s essential you find out as much as possible about the buying and selling process before you begin.
REAA is also publishing guides to understand these important legally binding contracts. Agents must give you a copy of the relevant guide before you sign an agency agreement or a sale and purchase agreement. We also recommend reading the guides before meeting with agents.
When buying a new home you should also do some careful research into the location, the value of the property, and whether there are any restrictions on the title or the use of the land.
Choose your Sales Consultant - Decide what you're looking for in a home - Work out finances - Determine overall costs involved - Understand current market conditions - Find the right home - Enter into an agreement to purchase - Finalise the legal requirements - Plan your move - Pre-settlement inspection - Settlement and possession day.
Choose your Salesperson
A Real Estate Salesperson will help you find the home you are looking for. They will work with you to fill your key requirements for a home and will most importantly, save you time when looking.
The salesperson should clearly understand your needs and be someone you feel 100% comfortable with.
Decide what you are looking for in a home
There are many decisions to make when buying your home. It helps to have a clear idea of what you are looking for before you set out on a search for your home. For example, you need to consider what type of home and location you're interested in.
Below is a 'Wish List' to help you determine your ideal home. Prioritise these in terms of importance and separate "must have" from "would like to have".
* Price Range
* Number of Bedrooms
* Type of Property: (eg. villa, townhouse)
* Section Size
* Proximity to Schools
* Proximity to Shops/Public transport
* Special Needs
* Other priorities
Work out finances
Now that you have a clear-cut idea of what you're looking for, it's time to work out how to finance your home. After all, buying a home is probably the single biggest investment you'll ever make in your life. This is why it's so important that you understand the cost of a mortgage.
Determine overall costs involved
When working out your finances, please consider that there are a number of extra expenses involved in buying a new home. Unfortunately, the price you pay for your home is not the only cost involved. Below is a list of additional expenses you can expect. Your Salesperson will be able to give you an estimate of these expenses.
* Mortgage Application Fee
* Property Valuation
* Solicitors Fees/Legal Disbursements
* Mortgage Insurance
* Moving Expenses
* Incidentals & Other Expenses
* Property Inspection Reports
* Builders Reports
* LIM/PIM Reports (Land Information Memorandum/Project Information Memorandum)
Understand current market conditions
The housing market cycles between three main stages. These are listed and explained below:
The number of homes on the market is greater than the number of buyers.
Homes usually take longer to sell.
The number of buyers exceeds the number of homes on the market.
Homes sell quicker.
Prices generally increase.
Sellers may receive offers from more than one buyer.
Number of homes for sale is basically equal to the number of buyers.
Sellers will consider reasonable offers.
Homes sell within reasonable time frames.
Prices are generally stable.
Find the right home
You know how much your new home is likely to cost - and what's happening in the market. Now it's time to begin the search for the home that's right for you. It's easy to forget what you think of each home you view, especially after you've seen several. We suggest you keep a booklet with comments and a rating on each property you view.
Understand your rights
Read the consumer information provided by your real estate agent or from the Real Estate Agent's Authority.
Enter into an agreement to purchase
When you find the home you like at a price that you are able to afford, the next step is to make an Offer to Purchase. Your Salesperson will prepare this key document with you, making sure it covers all the details that are important to you.
Conditional vs an Unconditional Offer
What's the difference? An unconditional offer means the buyer is not placing any special conditions on the purchase. The seller has only to accept the offer for the property to be sold.
A conditional offer means that you have placed one or more special conditions on the purchase, such as 'subject to finance' or 'subject to your home selling'. The sale is not completed until these special conditions have been satisfied within the stated time period. In some cases a conditional offer will be rejected. For example, if the vendor does not wish to wait the extra time for the condition to be filled and another offer is received by the vendor.
Below are the five major elements of an offer:
The price you offer may be different from the seller's asking price. This will depend on your opinion of the value of the property and how it suits your needs.
The deposit shows your intent or good faith and will be applied against the purchase price once the sale is unconditional. Your Salesperson can provide guidance on a suitable amount for a deposit - 10% is usually acceptable. The deposit is normally refundable if the sale does not become unconditional. However, once the agreement is unconditional, the deposit is non-refundable.
These are requirements that must be met before the sale becomes unconditional. Conditions are always subject to a stated time and commonly include:
- subject to you selling your home;
- subject to you obtaining finance; or
- subject to you obtaining a builders report; or
- subject to obtaining a LIM Report (Land Information Memorandum).
Your Salesperson will explain all the details relating to these conditions.
Chattels are the items the seller will leave in the home and can include fixed floor coverings, blinds, curtains, dishwashers, stoves and television aerials. It is generally assumed that fixed chattels such as carpet, light fittings, a stove, a washing facility (usually a tub), and any appliances directly wired to the house, for example a waste master, ventilation system etc, are always included. However, other chattels that aren't fixed may be removed. Your Salesperson will know what these items are and will make sure you are fully aware of them.
Settlement & Possession Day
Generally, this is the day that the balance of the purchase price is paid to the vendor and yes, you finally receive the keys to your new home.
Finalise the legal requirements
After an offer has been accepted, your solicitor will need to check all the details of the title and prepare all the necessary documentation. You will then need to sign any mortgage documents and arrange for payment of the balance of the purchase price.
Plan your move
Moving your household can be a very busy time. A time when small (or even big) things can be easily forgotten. To prevent this from happening to you it is often helpful to write yourself a moving checklist. To make planning your move easier.
There is normally the option in your contract for you to have one pre-settlement inspection to ensure that the property is in the state at which you agreed to purchase it. This is particularly important for long settlements.
The pre-settlement inspection is an opportunity to see that any changes or damage, since contract day, are remedied by the seller.
Settlement and possession day
Congratulations! The day has come to move into your new home. We wish you and your family every happiness in the future.
Real Estate Terms in Plain English
The written contract for the sale and purchase of property between the
seller (vendor) and the buyer (purchaser).
A written analysis of the estimated value of a property prepared by a qualified appraiser.
The listed price of the property buy may not always be the selling price.
The owner may be willing to negotiate.
The valuation placed on a property for the purposes of taxation by an authority.
The transfer of a mortgage or lease from one person to another.
A short term loan (usually at a higher rate) taken out to cover the financial gap between buying a new property and selling an existing property.
Local Council regulations that control design, construction and materials used in construction.
When the demand for property is less than supply so the advantages shift to the buyer.
All Salespeople in real estate who have not qualified by exam to be an Associate (AREINZ), who are employed by a licensed Real Estate Agent.
Certificate of Occupancy
A document issued by a local government to a developer permitting the structure to be occupied. This generally indicates that the building is in compliance with public health and building codes.
Certificate of Title
A description of a property with the name of the registered owner, encumbrances, i.e.: mortgages or easements on the property. It must be produced by the vendor before the sale of the property.
Moveable and removable items of personal property. In real estate transactions, chattels included in the sale usually include the stove, television aerial, carpets, blinds, curtains, drapes and light fittings. However, unless chattels are specified in the agreement, they are not sold as part of the property.
Special Conditions in a Sale & Purchase Agreement
Conditional upon a Specialist Report
Conditional upon the sale of the purchaser’s property
Conditional upon an existing agreement
Conditional upon a LIM report
Conditional upon Finance
A title that is free of or legal questions as to ownership of the property.
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
A proportion (usually a percentage) of the sale price of a property paid to a real estate agent for negotiating a real estate transaction.
This is a legally binding contract, but it is subject to conditions being satisfied, usually by the purchaser. The conditions will be detailed in the agreement and may, for example, require that you are able to sell your existing home by a set date or to arrange finance by a certain date. Conditions can also be included by the purchaser that require the seller to do something by a specified date - for example, that settlement will take place only on the conditions that the house is painted, the windows repaired or that rubbish around the section is removed. Note: Purchasers' conditions usually do not prevent the sale-taking place, but may allow the purchaser to delay settlement without penalty or claim damages if the conditions are not met in time.
Terms, conditions and restrictions noted on the title. A covenant may affect future plans or resale of the property.
A record of an individual’s current and repaid debts which is usually used by a lender to assess the risk of a potential borrower.
A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.
This type of ownership is common where there is more than one home on a block of land. You are all owners of the land and you each lease your home. The lease will usually provide for an exclusive use area for each cross-lessee. It's like owning a freehold property but there are some restrictions. Another form of ownership for more than one home on a block of land is a unit title.
A legal document conveying title to a property.
Failure to make mortgage payments regularly or to comply with other requirements of the mortgage.
A percentage of the purchase price given to bind the sale of real estate.
A right that someone has to use the land belonging to another, eg: a water authority may have a sewerage easement across part of your property.
Exclusive Listing/Sole Listing
A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
The greatest possible interest a person can have in real estate.
Fixed Rate Mortgage
A mortgage in which the interest rate does not change during the term of the loan.
Fixed items that cannot be removed without damaging either the property or the fixture itself, eg: cupboards.
The footing supports the building on its foundation.
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually results in the selling the property by auction and the proceeds being used to service the mortgage debt.
An estate in real property which continues for an indefinite period of time. Freehold estates may be inheritable or non-inheritable. Inheritable estates include the fee simple absolute, the qualified fee, and the fee tail. Non-inheritable estates include various life estates which are created by acts of parties, such as an ordinary life estate, or by operation of law.
A thorough inspection that evaluates the structural and mechanical condition of a property.
LIM Report (Land Information Memorandum)
A LIM is a report prepared by the local Council at your request. It provides a summary of property information held by the Council as at the day the LIM was produced.
A LIM provides some or all of the following:
- Information on special land features or characteristics including potential erosion, avulsion (removal of land by water action), falling debris, subsidence, slippage, alluvion (the deposition of silt from flooding), inundation (flooding), presence of hazardous contaminants which are likely to be relevant to land and is known to Auckland City
- Information on private and public stormwater and sewerage drains as shown in Auckland City's records
- Information relating to any rates owing in relation to the land
- Details of approved building, plumbing/drainage and resource planning permits and consents indicating where further action is required
- As required by the Building Act 1991 details are included of
- Code Compliance Certificates: a final certificate of approval for building consents
- Compliance Schedule: required for certain systems or features of commercial and multi-residential properties
- Warrant /Statement of Fitness: in conjunction with compliance schedule -issued annually to maintain compliance standard
- Details of Dangerous Goods, Liquor, Hairdressing and Health Licences (mainly refers to commercial properties)
- Details of Operative and proposed zoning, road widening, height restrictions, view and tree protection, and any Historic Places Trust listing
- Any outstanding requisitions or notifications from Auckland City regarding any matters on that property that do not meet Auckland City specifications and which require action within a certain time frame. Satisfying requisitions is the responsibility of the owner of the property.
The Memorandum may also include:
- Such other information concerning the land which Auckland City considers, at its discretion, to be relevant. Line of Credit
- An agreement by a lender to extend credit up to a specified amount for a specified time for a specified purpose.
The price at which a seller is happy to sell and a buyer is willing to buy. This assumes that there is sufficient activity in the marketplace to generate enough buyers and sellers so that neither party controls the price. Establishing the market value is the objective of an appraisal.
PIM (Project Information Memorandum)
A report giving information on items such as potential erosion, subsidence, hazardous contaminants, stormwater. It may also include classifications under organisations such as the Dept. of Conservation or Historic Places Trust, as well as authorisations required by the Resource Management Act.
A pricing method used by some Real Estate companies, meaning Price On Application.
The amount borrowed or still to be repaid. The part of the monthly payment that reduces the balance of the mortgage.
A buyer who has satisfied a lender that he or she is financially able to qualify for a loan. Qualifying the buyer is one of the primary steps taken by the lender as part of the loan process.
Real Estate Agent
A person or Company licensed to negotiate and transact the sale or lease of real estate on behalf of the property owner.
The process of paying off one loan with the proceeds from a new loan using the same property as security.
When demand for property is greater than supply. The result is greater opportunities for owners who may find someone willing to offer the asking price or even a figure greater than the asking price.
Also called Duplex. A type of construction where two buildings are attached together by a common wall.
Service (the loan)
The period, normally monthly, collection of mortgage interest and principal repayment and other related expenses, such as property taxes and property insurance.
The sale of a property is finalized by the legal representatives of the vendor and the purchaser, mortgage documents come into effect, costs are paid and the new owner takes possession of the property and receives the keys.
A sole or exclusive agency precludes all other agents from working on the disposal of the property, although another agent may approach the sole agent if the former has a suitable client. But even then the sole agent would finalise the deal.
A condition that must be met before the contract is legally binding. For example, if buying a home the purchaser may specify that the contract is not legally binding until the purchaser has obtained a building inspection and been satisfied by the report.
A title to a unit or lot on a plan of subdivision associated with townhouses, units and blocks of flats and based on the horizontal and vertical subdivision of air space. Owners have a certificate of title, are absolute owners of a freehold flat and have an undivided share of the common property.
A legal document evidencing a person’s right to or ownership of a property.
A check of the title records to ensure that the seller is the legal owner of the property and that there are no other claims or outstanding.
The legal contract that binds both the purchaser and the seller to settle on the agreed date at the agreed price. It is either not subject to any conditions or those conditions have already been satisfied. You should only consider entering an unconditional agreement if and when you are absolutely sure you want to buy a particular property and you already have the full purchase price or 'pre-approved' loan finance from a lender. You should also be confident that there are no other issues or requirements that must be satisfied before you are committed to purchase the property. An unconditional agreement commits you to purchasing the property.
Early possession of the property before settlement with the permission of the vendor. This usually involves the payment of rent.
Supports placed under an existing wall to provide added strength.
A loan that is not backed up by assets or guarantee.
The private or public service facilities such as gas, electricity, telephone, water and sewer that are provided as part of the development of the land.
A written analysis of the estimated value of a property prepared by a qualified valuer.
The person or entity legally authorised to sell a property.