Buying a House

[stolen 0]

We are looking at buying our first home. We are interested in a property that is going to auction this week. The problem is that we are completely green on the buying process.

So far we have:

• Got approved finance from the bank
• Have interest in a property
• Have looked through LIM, consent documents etc.

What we are not sure on:

• the auction process, mainly the post auction process if we get lucky on the day
• Should we have a lawyer already organized prior to the auction?
• Standard process is pay 10% on the day and the rest is organized via bank and lawyer?
• Recommendation on a lawyer?
• Anything to watch out for on the day of the auction?
• Do you ever tell the real estate agent your budget when they ask?

Any information, advise, source material i could get would be much appreciated.

Thanks in advance!

[stolen 0]

I am in auckland by the way.

[sp8s 1]

Talk to your Lawyer first. He/She will tell you just about everything you need to know.

[Guest Simon*]

Be a bit wary of the auction process (not telling you to shy away) but remember this:

Auctions are a big show to try and get people emotional about the sale process. If you have a budget STICK TO IT The whole process is fraught because you have agents (almost alway from the same firm) flitting between buyers and seller, whispering in their ears "just a bit more and it's yours!" There is often a real "staged" feel to the whole thing if they've talked to all involved parties first.

On the other hand, bargains can be had. Occasionally.

5, 10 even $20,000 makes little difference to an agent's commission so they just want to sell it on the spot - it is convenient for the agents more than anyone else.

A lawyer for property conveyancing is easily arranged before or after (you can shop around - they often do it for a flat fee) as it is very easy for them. If you've done all the homework already then they're just an expensive fax machine; they do however read all the fine print (or they should for $1000 plus!)

Others should be able to suggest some lawyers for the job in Auckland, it's been a while since I used one up there.

Your lending bank would probably be able to fill in any blanks for you if you have questions about the process. Their advice is free and they do a lot of them

Good luck

[bravo 35]

You should get the lawyer to look over the sale and purchase agreement BEFORE you go to the auction. This is because if it hits reserve and you win, it's an unconditional sale (usually).

The reasons for holding an auction are usually:

1/ Because the property is perceived as desirable and the auction process will allow people to get emotionally attached and offer more than they would when calm, and in the sterile environment of their office.

2/ Because the vendor wants an unconditional sale without having to wait for the purchaser to sell their existing home (to bid an the auction you need pre-approved finance).

3/ It's a forced sale and the bank or whomever has decided they need the money quickly regardless of whether that equals a lesser amount.

Only option 3 really lets you grab a bargain.

If the above situations do not apply, a vendor would usually be advised not to use the auction process as it will not benefit them.

Have a property lawyer look over the title and LIM for any issues (covenants, consent notices, easements, caveats, limitations, leases, permits, etc).

Spend some time on the property and in the house if you can. Definitely talk to the neighbours. Several hours at different times of the day. That way you find out the sorts of things you can't really tell from a quick visit - like the fact that the 5:15am Airbus from Toronto flies over the house in a southerly.

Besides, if you hate your prospective neighbours after talking to them for 5 mins about the house you may be buying - trust me, you want to find another house.

Get a building inspection, and/or an engineering inspection. These cost a few hundred dollars (or more on larger properties), but this equates to less than 1% of the purchase price and will show up any issues with the house (leaky building, major electrical repairs needed, etc) and the property (instability, poor drainage, faulty septic tank, etc) and usually at the same time you can have the boundaries checked if they are not obvious. nothing like thinking you owned down to the river and then find out a month later that in fact there's public access across your lawn along an esplanade reserve that was not obvious from the start. Or that your neighbour owns half your backyard as the fence was built in the wrong place. Trust me, it happens alot - This morning I showed a lady where her boundary was so she could plant a hedge and it was 2.5m closer to the house than she thought.

PM me the CT number or Lot and DP number if you want. I won't be able to do much from here, but I can check over the title for you. No charge.

[Apex 693]

I would speak with a lawyer first, they will give you all the information you need, its best to pay the premium and get a good one in the outset, their advice and procedures are invaluable so it best to get a good one to start with, cheap lawyers can end up costing you more in the long run. We have had useless lawyers cost us thousands.

Depending on where you are in Auckland I can recommend Rice Craig out south.

[oldskool 4]

Hey Fella,

You do have to make sure you do all your checks & balances before bidding, Auction is legally binding & is deemed to be an unconditional sale upon the fall of the hammer, so if you have the winning bid once the property is over the reserve price, you will indeed be the proud new owner.

Basically buying at Auction is like Private Treaty in reverse, you have to answer all your questions before you bid or make an offer, not the other way round.

Pays to check property file, get building inspection etc etc, property file is important as it will let your builder see if what is on file tallies with what he has seen when on the property.

Also pay to have solicitor check title to ensure it is clear & has no issues.

I would suggest you ask the Agent for a no nonsense indication of the likely sales price, whilst they are as much in the lap of the gods as you, due to not knowing just what someone will pay, if they are worth their salt they will give you a fair & reasonable idea, if they are unable or unwilling to do so, then you will have to base your value by comparing to similar home you kow that have sold recently, ask for a print out from the Agent if you are not sure of recent sales.

Also despite the comments made by other members who are not in the industry, be a little careful if it is a mortgagee sale, the industry statistics are currently showing mortgagee sales to be obtaining 5 - 10% above the median price in their areas, can only put this down to the buyer frenzy over a "percieved" bargain.

The other thing that has made the whole proccess more transparent is the change in Auction rules, no vendor bid can be placed without the Auctioneer stating this, no phantom bids can be placed.

The Auction contract is a straight forward document, however it is weighted in the favour of the seller, 10% deposit & settlement usually at sellers elective. Unless you make prior arrangements & have agreement on those points from the seller you will be bound by the auction agreement form.

e.g. if you want a different settlement date or have requested a certain chattel to remain that is not listed etc.

You do need to stick to your figure, it can be tempting to go that bit more, but only do so if you can afford it. remember there will be another one out there, but also remember that if this is the one you love & will be in for 5 - 10 years, an extra $5k now will be long forgotten in the years to come. Just make sure you are both on the same page & know what your game plan is for the day.

Auctions can be a bit scarry, but remember the Agent needs to be open & honest with you & have earned a degree of trust from you, they will help you through the process.

Auctions can be nerve wracking, exciting, fun & terible all at the same time, depends on who has the bid & at what price as to which one of the above it feels like for you at the time.

If you win, you will be required to sign docs there & then & provide 10% dep, personal cheque is ok, as you dont ultimately know what you will pay for it, most Agencies ok if you say hold onto cheque for 24/48 hrs to shuffle $$ around. I wouls recommend shopping around for a solicitor as the fees can be all over the place.

If the property is paseed in & not sold under the hammer, the highest bidder has the 1st right to treat at the sellers reserve price, if they don't do a deal then it will be opened up to all.

The day of the Auction is the best time to buy, as just as you are there to do a deal so is the seller & you may find that you get them in the best frame of mind to sell, remember it is attractive to a seller to have an unconditional sale & they may be a little more flexible due to this aspect.

Good luck, I hope it goes well, buying your first home should be an enjoyable experience as well as fun & exciting...

Go well, PM me if you want any more background or info ok.

Cheers Grant ( 20 years in the industry & counting )

Edited July 27, 2009 by oldskool

[westy 614]

For gods sake dont buy anything with that fake plaster sh*t on it!

[elmarco 56]

For gods sake dont buy anything with that fake plaster sh*t on it!

Yeah - 2 places close to us have both been reclad in the last 6 months.... Both would be 6-7 years old now.

As above, do make sure you have a lawyer lined up before hand (not sure if you can ask for references from a lawyer or not, but have found mine to be pretty bloody average - I am paying them to speak english, not lawyer!). And do make sure you have an independent valuation and building report done. The building report is important as it should flag up anything that you need to know about - cracks in foundations, mildew, leaky building etc. If there is something they should have seen and not notified you of in the report, they should be liable for it.

The valuation may be required for a loan (depending on your circumstances) - and should give you an idea of it's real value compared with recent sales in the same area. Marsh & Irwin have done all of mine and they seem to be reasonable - with a list of the other properties they have looked at in the area and their sell price.

I would probably not give too much away to the agent about your budget - give them a ballpark but keep the final number close to your chest. The more they know about your budget, the more leverage they have over you.

I personally wouldn't bid on an auction for all of the reasons given above - you are under pressure to commit from the agents and don't have the time to think about it (call me a control freak.... it just doesn't suit my personality). I also don't like the fact you have to lay out all the money on LIM, building report, valuation etc before you even bid - and having spent the money, there is no guarantee you will even get a look in if someone else wants to spend more than you on it.

Having said this, don't let me put you off - for some people it really works (especially if you stick to your guns), and there are some good deals out there. As above, the lawyer should be able to advise you what you need to do, as should your bank. Alternatively, you have an offer of more info from someone in the industry (oldskool) for a bit of advice or you could check out the consumer website.

Good luck - hope you end up getting it for a steal

[M3 Cab 0]

My advice is more about the process rather than the legals.

Builders report is very very very important. You get to find a lot of faults with a property and hence don’t get surprised. You also get to factor this into your offer.

DO NOT go to auction day armed only with what the agent has told you. In my experience most agents are clueless. Most are still struggling to come to terms with the market we’re in. Do your own research on the market, property etc and make sure you’re working with facts.

Play your own game. Make sure you know what you want, what your prepared to pay for it etc. Just because someone else is offering more on the day doesn’t mean the properties worth it. Everyone works through the numbers differently and people’s motives vary. Pays to stick to a plan and not get carried away. On average I only get 1 in 10 properties I go after.

Use someone else. Seriously if being at the auction isn’t something you want to do use a phone bidder. If you would be more relaxed away from it I would recommend you do this.

Overall it is a great time to buy. That said there are a lot of buyers and few properties which is current causing a mini boom in places. Regardless of what agents tell you we are not experiencing the end of the recession nor a rising of property values just simply the standard supply Vs demand blip. The point im making is it still pays to buy smart.

When ya get through all of the crap though it’s a pretty exciting industry

Good luck man

[stolen 0]

Hi Guys,

Thanks so much for all the info. Feel quite unprepared after reading all that now!

Cheers.