Home Buyer’s Tips
Buying an average house is easy. A great house takes a bit more effort.
At Tommy’s, we love working with buyers as much as with sellers. We’ve put together this guide to help you answer those important questions when it comes to buying. Please note that this guide is not intended as legal/financial advice. Whatever your next property move is, we hope this guide is helpful.
That Deposit
The first thing you’ll need is a deposit. We suggest starting the initial process by looking into lending before looking at houses. Most lenders require a 20% deposit, however there are instances where this is not the case. For your first home you might consider using your KiwiSaver as part of your deposit, too. However, it’s not always the right thing to do. Here is an interesting article to help you navigate the topic: Is tapping KiwiSaver for a first home even a good idea?
When buying a property, if someone refers to a ‘deposit’ it may mean two things:
- A deposit required by the bank. To get a loan, you may be required to provide a 20% deposit or down payment.
- A deposit paid when you confirm an agreement to buy a property. This is normally 10% of the purchase price and goes towards that 20% deposit the bank requires.
Arranging a Loan or Mortgage
Most buyers will need a mortgage to buy a property. Looking into different loans and mortgage options gives you an indication on what you can borrow, what the repayments will be and what the bank’s requirements are. An important tip is to look at how much you have to pay back over the life of the loan - the interest you pay on the amount you borrow might surprise you. Use online calculators like this one to help you work out how much your home loan repayments on a property may be.
If you’d like advice on lending, talk to your Tommy’s agent. We can recommend some great mortgage brokers who can work with you to ascertain which lenders and mortgage deals will be most appropriate for your situation.
Shopping for a mortgage
Buyers often approach their current bank first, but it pays to shop around - there are a lot of options out there. We recommend speaking to a mortgage broker you trust. It won’t cost you anything. Many buyers do not know that mortgage brokers are paid by the banks! Explore more in depth on this topic here.
What your lender needs from you
Your lender will need to check your ID, normally your passport and a proof of address such as a bank statement or utility bill. They will also want to see a proof of deposit, a proof of income and they will conduct a credit check. You can check your credit score here.
Loan pre-approval
Now your aim is to ensure you obtain a pre-approval letter from your bank, as this gives you an idea of what you can buy and borrow and the confidence you need to start taking the next steps. Having pre-approval makes the next stage that much faster, which is important especially during peak periods; more on this below. A pre-approval is normally valid for three months. Even with a pre-approval for a loan, it is likely your lender will want to investigate the exact property you’re offering on.
Loan types
The type of loan you need will be confirmed once you’ve secured your new property. However, it is a good idea to start exploring around for options now. We recommend that you understand the different types of mortgages and how they work here.
Lawyers
Tommy’s tip: Build a buying team you trust; agent, broker, valuer & building inspector.
‘It’s even easier when you build a good buying team: your agent, a lawyer and a mortgage broker can all help you nail your forever home’
Seeking good legal counsel at the start of your home buying process can protect you and save you a fortune down the track. Find a lawyer or conveyancer before you start looking at properties. During peak periods, the sales process will move quickly especially on popular properties. Ask a friend or colleague if they know a lawyer they trust; who is timely and helpful.
Before a lawyer can act for you, they are required to conduct a little homework on you. Essentially, they need to confirm your identity and address. A good lawyer will never say ‘she’ll be right’ on an issue. If they do, change lawyers! Their job is to safely advise you through the contractual process of buying a home, completing paperwork with your lender, and processing the settlement.
Your lawyer should also check over the Sale & Purchase Agreement, certificate of title, council information and/ or body corporate information before making an offer unconditional. Once you have reached an agreement with the owner, you will sign documents with your lawyer to transfer the title or ownership certificate and loan documents into your name.
If you need a great lawyer, talk to your Tommy’s agent for recommendations.
Planning for the future
Before buying a property it’s sensible to get sound legal advice on how you will own your new asset. There are several ownership options available for different people at their different stages of life. On a side note, now is also good time to update your will - your lawyer can help you with this.
Title types
There are various title types in New Zealand. This is something your lawyer will go into more detail with you about. A great summary on the different title types can be found here.
Work out what your top priorities are and rank them.
Use a checklist with every house you view. And don’t be afraid of going to view houses you don’t like, because it helps you clarify what you do like. Make sure you see each house on your terms. You can ask for a viewing before the next open home. And try it on different days - if you like it on a bad day, you’ll love it on a good one.
If there’s a Tommy’s property you would like to view outside open home times, let your Tommy’s agent know. We show lots of buyers through homes during the week, and often will give our buyer’s a lift from town. However, it pays to be mindful that if a home is rented, or if the owners have dogs, small kids or they work from home, we may not have the flexibility on viewing times. Talk to your Tommy’s agent’s and see what’s possible
Doing Your Research
With so much money involved, there is a list of things to check before committing to a purchase. Some of these options cost to investigate which might make it seem like an expensive exercise, however the cost of not doing your homework can be far greater.
Your lawyer, building inspector and lender will also be able to help. It is important to note that no property is perfect (even brand-new ones). Almost every property you look at will be flawed in some way or have an area that requires more investigation - and almost every property in Wellington will be close to a fault line, coastal area, wind zone, flood area, slip hazard, or will require some kind of maintenance. The research phase of buying a property should be about knowing what these are and then making an informed decision - you don’t want to find out something is wrong after you’ve bought it!
Sales Methods
There are several sales methods that are available to owners. Owners and their agent will work out what method they think will best suit the owners’ circumstances, taking into account the type of property for sale and the current market conditions. In Wellington, it is most common for a home to be sold through some form of tender. There are two main types: Closed tender, and a tender where the owner has the option to sell early. Whatever the method of sale, if you have interest in a property, it is important to let your Tommy’s agent know, then if another offer is made, they will know to contact you.
Closed tender
gives buyers time to get their finances, legal checks and homework done before offering. Buyers can choose to make an unconditional or conditional offer. Most owners will prefer to work with unconditional offers first (more on these later). An overused but appropriate cliché, ‘it is time for buyers to put their best offer forward’. The second highest offer might not get the opportunity to negotiate. The owner can choose to work with one, all or none of the tenders submitted.
A good resource to explore: Settled.govt.nz
Tender (if not sold prior)
This means an offer can be made before the tender date. This method of sale gives the owner and buyer more flexibility with the process. Sometimes the best buyers are around in the first weeks of a property being on the market - buyers who have their lending, legal advice and everything else in place. This method allows the buyer to engage with the owner early if they wish. Normally we find an owner may be interested in considering an offer early if it is unconditional and at a price they are happy to sell at before the tender closes. Put yourself in the owner’s position and consider what you would do if an offer came in early. Buyers can choose to make an unconditional or conditional offer. Again, most owners prefer to work with unconditional offers first.
Auction
Auctions can be exciting to watch. The property is sold to the buyer with the highest bid after the seller’s reserve price (minimum sale price) is reached. At an auction all the bids are out in the open so you know what everyone else is bidding. If you haven’t been to an auction before, it’s a good idea to attend one as a spectator so you can see how they work. If you win an auction, you are committed to purchase the property. You must pay the purchase deposit on the auction day. All bids at an auction are unconditional, so all your homework must be done before hand. This method of sale is not particularly popular in Wellington - we don’t see the same number of auctions as the likes of Auckland or Sydney, so buyers aren’t as familiar with it in Wellington.
By negotiation
This is when a property is on the market with no deadline for a sale. It means a buyer can make an offer at any time, with or without conditions.
Price Guides
Some properties are listed for sale with a price guide and some without. We have found most buyers prefer some price indication rather than no guide at all. It is not an asking price, not a highest price, but a guide. Buyers will decide what they think each property is worth to them.
BEO (Buyer Enquiries Over)
This is a price guide set at a minimum level the owners would consider selling at after a marketing campaign.
RV (Rateable Value)
This is a value used to calculate local council rates, formerly known as Government Valuation or GV. The RV is not the market value for a property, because it may be several years old and may not reflect local market changes and any recent renovations to a property.
Making Offers
Tommy’s tip: Like a house on a bad day? You’ll love it on a good day.
All offers must be in writing. It is important to get legal advice on all aspects of your offer before signing anything.
Seeking good legal counsel at the start of your home buying process can protect you and save you a fortune down the track. Find a lawyer or conveyancer before you start looking at properties. During peak periods, the sales process will move quickly especially on popular properties. Ask a friend or colleague if they know a lawyer they trust; who is timely and helpful.
Sale and purchase agreements
A Sale & Purchase Agreement is a legally binding contract between you and the seller. As an agent we must give you a copy of the New Zealand Residential Sale & Purchase Agreement guide. It does a great job of explaining in simple terms how this process works. Read the resource here
Conditional vs unconditional offers
A conditional offer is when you include one or more conditions to be fulfilled by a specified date e.g. a building report or arranging finance. An unconditional offer means there are no specific purchaser conditions, so when the owner signs the agreement the house is sold.
When the real estate market is quiet we see more conditional offers. If the homeowner has one offer to look at, it is far more likely the owner will work with the purchaser who submitted the offer. If the market is busy and the home receives multiple offers, it is likely the owner will prefer to work with an unconditional offer first. Having an unconditional offer is attractive to the owner because it provides certainty of a sale, the deposit is often payable immediately and it means no more open homes.
If a buyer makes an unconditional offer, this does not mean no research is done. When a buyer makes an unconditional offer, it normally means the lender has approved the house, the buyer is happy with the building report, insurance is organised, and the buyer’s lawyer has checked the title, council information and anything else that needed checking.
Conditional Offer
Unconditional Offer
Once the Offer is Made
Deadlines
When an offer is made on a property, a deadline is set by the property owner as to when they will look at any offers. It might be later on the day the offer was made, or in the following days, depending on the owner’s availability and how new to market the property is. Your agent can guide you here.
Multiple Offers
Whichever sales method the owners choose, a good property in a busy market is likely to attract multiple offers. This is an area of the sales process where there is often confusion which can lead to people being upset when they miss out, which is understandable. Buying a property other people want can mean it’s a quality property that will also get good interest from buyers in the future should you ever decide to sell.
Some key points are:
- An agent cannot say you are in a multi-offer process if there are no other offers in writing. There must be at least one other offer in writing.
- In a multi-offer situation, the seller can choose the offer that works best for them from a number of offers. It might not be the highest offer.
- If you are a buyer in a multi-offer process, you need to put your best offer forward because you may not have a opportunity to increase it later.
- An agent cannot discuss details of any other offers.
When the Owner Sees You After
Once offers are presented the decision is then up to the owner. They have three main options:
- Accept the offer.
- Countersign the offer asking for more money or different terms, conditions or dates.
- Reject the offer.
Some owners are decisive, others will have to seek professional or family advice before deciding. The response times here can vary a lot - your agent will keep you informed as to what is going on. We know each hour waiting for a response can feel like a week. The owners have a lot to think about when looking at offers. The main points are normally price, conditions and settlement date.
From Tommy’s Perspective
All offers must be in writing. It is important to get legal advice on all aspects of your offer before signing anything.
If you are buying a good property in a busy market, chances are someone else likes that property, too. When this is the case, you will have a greater chance of owning the property if your offer is unconditional. This is the case with every method of sale.
Agents are paid commission by the homeowner. The only way agents get more business (properties to sell) is by doing a good job for the owner, and that owner tells their friends who tells their friends and so on. Agents are only paid on a successful sale so they will work with buyers they think are more likely to buy a house - those who are pre-approved for finance, have a lawyer lined up and have been making offers. Agents are less likely to invest time with buyers who are not ready to go. If you tell an agent you’ve been quietly looking to buy a house for five years, don’t have finance arranged and have never made an offer, there is a good chance the agent will invest more time with a different buyer who is ready to go.
Listing vs selling agent?
The listing agent is the agent whose name is on the advertising for the property. A selling agent is another agent from the same office who has a buyer for the property. Some agencies work more as individual salespeople, where you’ll be directed back to the listing agent. Unlike other companies, we operate more as a team. If you have a relationship with an agent you like who is helpful and provides good advice, they can help you buy any Tommy’s property.
Choose an agent that values what you value
At Tommy’s, we value good relationships, people and the community. All Tommy’s agents, are community-minded which is why Tommy’s has built up a reputation for giving back. We work hard to do what we’re best at for Wellingtonians, so for us it’s also about finding a way to give something back to our community, because we really do care.
Thank you for taking the time to read this guide. We hope this guide has given you a better understanding of how to kickstart your home buying journey. If you need any real estate advice, talk to Tommy’s agents - we’re here to help and will be able to point you in the right direction.
