Dodge common mistakes made when buying property

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Buying privately and rushing in without getting proper inspections are common mistakes made by property buyers, say Bay real estate experts.

With low interest rates, stable prices and motivated banks vying for potential purchasers' custom, many feel it is the ideal climate to enter the property market.

Those who decide to should follow some simple rules as the repercussions of making mistakes can be expensive, says Neville Falconer, LJ Hooker Tauranga franchise owner.

Mr Falconer knew of purchasers who had bought an apartment in a body corporate building but requested the body corporate minutes too late. When they did request them, after the contract had gone unconditional, they discovered the building had watertight issues.

Each apartment owner in the block was required to pay $40,000 to help resolve those issues.

The story was an example of "rushing in and not doing your homework", said Mr Falconer.

There were steps potential property owners could take to mitigate problems.

"One element of that is getting a building inspection done but another is to look at the property file at the local council."

The property file should be compared with the property itself to highlight any additions or modifications which might require compliance, as the responsibility for that compliance would fall on the purchaser.

Mr Falconer recommends researching properties similar to the one you are looking at to give an indication of price, to have your finance in place prior to engaging in negotiations, and to not buy privately.

"Somebody selling privately is not bound by the consumer protection laws that apply to registered real-estate agents," he said. "A private vendor can tell a potential purchaser whatever they like about a property and not be held accountable afterwards."

Ross Stanway, chief executive of Realty Services which operates Bayleys and Eves, says buyers should move methodically through a series of steps.

"It should be a checklist. Certain aspects require legal or professional advice. But if the buyer has done that, obtained the right advice and input, that maximises the chances of them being a satisfied purchaser and, best-case scenario, it eliminates any source of ongoing legal or personal angst," Mr Stanway said.

"Technicalities to make sure of include a title search carried out by a lawyer. They will be able to highlight any covenants, encumberances, easements and so on. Buyers need to be aware of the impact of those, if any, on the property.

"A Lim (Land Information Memorandum) report and property file which relates to the property should be obtained. That should highlight issues around zoning of the particular property, planned developments in the area or change of zoning, roading implications and so on.

"A builder's report is becoming a standard which most buyers would seek. That should not be seen as a road block to progressing a sale. A good builder's report should highlight any issues, what remedial work needs to be done and the cost of that remedial work.

"If there have been any additions or renovations to the property, ensure they are compliant and, from a council perspective, the appropriate certificate of compliance, resource consent or building consent has been obtained. It's very important the buyer be aware of that situation."

Mr Stanway said there were a number of "timeframe" issues which could arise. He recommended allowing sufficient time between the signing of the sale and purchase agreement and settlement. "Buyers need to ensure they have their finance in order so they can settle on the agreed date. Do not assume you will qualify with your bank.

"Also make sure if you need to vacate, or even sell, an existing property it is synchronised so that at possession date you are in a position to take possession."

A pre-purchase inspection was also important. "That generally takes place just prior to possession date, either a day or two days before," said Mr Stanway.

"It's important to ensure that what the buyer is taking possession of is in the agreed state, as agreed at the time of signing the sale and purchase agreement. Examples would be completing works on the property, tidying or obtaining a council permit for work that isn't yet compliant.

"If they've been documented and agreed to at the time of being signed, then the pre-purchase inspection is a final chance to check they have all been completed."

Simon Martin, managing director of Harcourts Advantage Realty, said speaking to a mortgage broker to establish finance levels, and getting a building inspection and a Lim report would be near the top of his to-do list for purchasers.

He said the real-estate industry was so regulated that most issues he heard about involved private sales. "There is so much consumer-protection legislation out there at the moment that we have to follow," Mr Martin said.

"Under law we have to disclose information that is pertinent to the purchaser, whereas a private seller doesn't have to do that."


 

- BAY OF PLENTY TIMES

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