Posts Tagged ‘Conditions’

House Sale and Purchase Agreement – Checklist

You are putting an offer in on a house, the sale and purchase agreement has been drawn up (usually by the real estate agent) it is time to sign - for your own peace of mind check that the sale and purchase agreement is correct.


Your Sale and Purchase Agreement Checklist

  • Date - is the agreement dated correctly (at the top).
  • Purchaser – The name(s) of the person(s) purchasing the house.
  • Property - The Address, Estate, and Legal Description of the property – these should be the same as on the title document which can be provided (and checked) by your lawyer.
  • The price you want to pay for the house – what you are offering - both numerically and in words.
  • Deposit - The deposit amount - these are funds that you must have available to pay if/when the contract becomes unconditional.
  • Possession - Check that this date (the date you want to take over ownership of the property) is correct.
  • Conditions - Check these are correct and agreeable to you.
  • Tenancies – Check to see if there are any
  • Futher Terms of Sale - These are also referred to as 'Conditions'. Check that any conditions you require are present, are worded correctly, and are agreeable to you.
  • Schedule 1 (Chattels) - Are these what you expect to be included - is anything crossed off or excluded.
  • Check that all the pages of the agreement are present
  • Check that no clauses in the agreement have been crossed out  - if they have - find out the reasons and the implications.
  • Check that all the pages and amendments have been initialled.

Who is the Purchaser on the Sale and Purchase Agreement?

Be careful when checking the name of the purchaser(s). You need to correctly name all of the people who will be owners of the property. These names can be people, company’s or trusts.

If you are unsure who the purchaser of the property is going to be – you can add ‘or nominee’ after the purchasers name (i.e. John Smith or Nominee) – this gives you scope to change the name.

It really is best to know exactly who/what is going to be purchasing the property when filling in the sale and purchase agreement. Remember any change to the contract – even a change to the name is considered countersigning.

Adding Conditions to Your Sale and Purchase Agreement

There can be conditions added to the sale and purchase agreement in both the 'Conditions' section on the first page and the Further Terms of Sale section later on in the document.

The 'Conditions' section provides a structure to the way in which the conditions are dealt with in the body of the agreement. Any conditions that are specified in the 'Further Terms of Sale' section can be drafted to meet your requirements - which is often preferable.

Tenancies Noted on the Sale and Purchase Agreement

Tenancies can be an issue – if the property is tenanted check to see what the tenants lease agreement is. If they have a fixed term tenancy they have a legal right to live in the house until the end of the fixed term.

If it is a periodic tenancy – 42 days notice needs to be given to the tenants (if you, or your family) are going to move in. For more info on tenancies check out the tenancy services website.

Check With Your Property Lawyer

It is always best, and we highly recommend, sending your sale and purchase agreement to your lawyer to look over before you sign. Especially if there is some unusual conditions, sections crossed out or anything you are unsure about or have questions about - run them past your property lawyer.

Are You Ready to Sign?

When you have finished checking have one final think - have you done all you possibly can to assure yourself that you know what you are signing?

Are you feeling pressured? Don’t worry about taking a bit more time to do some more checks and research. Don’t sign until you are assured that you know what you are committing to.

Sale and Purchase Agreement Checklist
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The Propertytoolbox Home Buyers Guide

For all you need to know about making an offer on a house – check out the Propertytoolbox house buying guide.




Sunset Clauses – What Are They?

A sunset clause is a clause that you include with any other conditions (like a property valuation, building inspection, or a LIM) in your sale and purchase agreement when buying a house. It is a clause that puts an ‘Expiry Date’ on the offer.

Why Use a Sunset Clause

There are a number of reason sunset clauses are put into sale and purchase agreements - the most common being to put pressure on the vendor to make a decision about your offer, or to ensure you can continue to house hunt, and put offers on houses, if an offer you have submitted is not accepted or rejected within a reasonable timeframe i.e. about 2 days.




If you don’t have a sunset clause your offer remains current until accepted or rejected by the vendor. This can be painful as you may miss out on other opportunities – or you could find yourself having multiple offers accepted if you continue to make offers on other houses assuming old offers were rejected.

When to Use a Sunset Clause

Putting a sunset clause on a sale and purchase agreement is not often done but is a good idea when you want an answer to your offer quickly for whatever reason and especially in tender situations – where your offer may be kept ‘on hold’ until negotiations with someone else are finalised.

How Long Should a Sunset Clause Be?

A good amount of time to make a sunset clause for is approximately 2 working days – with the clause expiring at 4pm on the second day – allowing for paperwork to be processed before close of business if the offer is accepted at the last minute.

If you are making an offer late in the week, try to make sure the sunset clause expires before the open home crowd descends on your potential home on the Sunday – you may not want the competition!

Leveraging the Sunset Clause

The sunset clause gives you some degree of control over the timing of the offer acceptance or negotiations. If the sale and purchase agreement expires – it is not the end - you can always offer again, or extend the sunset clause on the same (or amended) agreement if you want.

If the agreement is accepted after the sunset clause expires, the offer has expired, and no legally binding agreement has been entered into. In this case it is up to you whether or not you want to proceed. You can choose to accept the original agreement or you can resubmit the offer with some changes suitable to you.

Vendors and Sunset Clauses

Sometimes the vendor may put a sunset clause in the sale and purchase agreement – if this is the case – it really pays to get your lawyer to look over it and to explain the implications of the clause.

Sunset Clauses - Get Your Property Lawyers Advice

Don’t forget - like any clause you put in your sale and purchase agreements – whether it is being put in by you or the vendor – get it checked over by your property lawyer!

Sunset Clause All The Details
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The Propertytoolbox Home Buyers Guide

After some more great home buying advice – don’t forget to check out our home buying guide!



House Buying Traps – A Property Lawyers View

There are many things to be aware of when buying a home, it really can be a minefield! One person to carefully listen to the advice of is your property lawyer. They have been through the house buying and selling process with many clients and have lots of great advice - and coming from the legal corner - it is always good advice to pay attention to!

Thanks to the team at Homelegal we have a property lawyers view of 'traps for home buyers'. Read and beware!

Traps

1. Misunderstanding the type of property

There are various types of property including fee simple, crosslease, unit title, company share and leaseholds. Each has advantages and disadvantages that you should be aware of prior to purchasing. Misunderstanding the type of property you are purchasing or the interests in the land may result in an unexpected impact on your enjoyment and use of the property.

2. Misunderstanding the agent's role

Always remember the real estate agent is trying to sell the property at the best possible price for the vendor (the person selling the property). Don't show all your cards to the agent at the outset and don't disclose your financial limit to them.

3. Signing agreement under pressure

Putting in an offer can be exciting. Don't feel compelled to sign an Agreement straightaway. Once an Agreement is signed it is a legally binding contract. Make sure you understand what it is you are signing. Get your lawyer to look over it.  If you are unable to make contact with your lawyer get the agent to include a solicitor's approval clause.

4. Insufficient conditions

You have an obligation of good faith to the vendor. You can't use a finance clause, for example, to get out of an agreement if you have simply changed your mind. Carefully consider the reports you wish to obtain on the property before you sign e.g. builder's report, valuation report or LIM report. If any of these reports do not meet the standard you require you are able to cancel the Agreement. However as soon as the conditions relating to the reports are formally confirmed the Agreement is binding on you.

5. Deemed consent conditions

Avoid conditions that are deemed to be satisfied unless you notify the vendor. These are dangerous. If you don't confirm or notify the vendor that the condition is not satisfied they are deemed to be satisfied.

These house buying traps were provided by the team at Homelegal. Looking for more home buying advice? Check out our home buying guide, or to find out just what a lawyer is doing for you during the house buying process our Settlement section has a lot of interesting info.

The Building Report Says There is a Problem…

It is always a good idea to get a building inspection before you commit to buying a house – either before making an offer or as a condition in your sale and purchase agreement.

When you get a building inspection done you are hoping that everything comes out OK, with maybe the odd minor maintenance issue identified here or there in the building report – but what if there is something unexpected, something big, something that leaves you dazed and confused? Here is a summary of our advice on what to do…

First things first – are you still thinking of buying the house? If not – this is the easy bit – walk away! Tell your lawyer you are not going unconditional, or just don’t make that offer – easy! Or maybe not so easy as you have already invested time, money and emotion into the house...

So you are still interested in buying the house.  Now you need to work out how serious the problem is – a good person to question initially is your building inspector – you need to make sure that you fully understand the problem that they have identified in the building report. Remember, your building inspector is not an expert in all aspects of building so if a particular problem has been identified it is best to speak to, or get quotes from, an expert in the area.

Now that you have the full picture of the extent and cost of the problem you can make a decision with all the facts to hand. Now you can walk away, or continue as if nothing has changed, or begin re-negotiations with the vendor - either negotiating down the price or asking the vendor to fix what is wrong with the house.

If you have obtained this building inspection before even beginning negotiations you are now in a much stronger negotiating position. You can start price negotiations fully armed with exactly what is going on with the house and adjust your price accordingly.

If you and the vendor come to an agreement that involves the vendor having to complete work, or anything changes on a previously agreed sale and purchase agreement, or anything else at all, this needs to be formalised in the sale and purchase agreement by your lawyer.

Finding something wrong during a building inspection is the main reason why you need to give yourself plenty of time to get a building inspection done – at least 5 working days is a minimum! You never know what you are going to find, and what processes you are going to have to go through after getting the building inspection and reading the building report.  So give yourself plenty of time and don't rush any decisions.

For a more comprehensive rundown of your options when there is something wrong with the building inspection – head here.

We have more great advice, tips and information about house buying in our house buying guide - make sure to check out the section 'I've found a house!'
 
 




 
 

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I’ve Got My LIM Report – Now What?

Your LIM Report has arrived from your local council for the house you are looking to buy – now what! There is a lot of information in a LIM Report and knowing what to look for, knowing what it serious and what is minor, and wondering what is missing can make assessing the LIM Report a daunting task – you went to the time and effort of getting it – make the most of it.

Getting a LIM Report

You may have ordered your LIM as part of working through your conditions on an agreed sale and purchase agreement, or you may not have agreed the sale yet - the house may be for sale by auction or tender and you feel that a LIM is important to have before deciding on a price for the house – whatever the reason - the LIM Report needs to be gone over carefully.

Looking Over Your LIM Report

Read through the summary pages – potential issues are likely to be obvious here. Then dive into the main contents of the LIM. Look for outstanding financial obligations, resource consents, building permits, and related plans. Check that all issued consents have been signed off. For building work from 1992 onwards, check that a code of compliance certificate has been issued for works completed.




Take your personal knowledge of the property, its buildings, retaining walls, land use and the surrounding properties and the area and consider that against the information contained in the LIM. You should ask questions of the seller and the council if you find differences.

Getting Expert Help With the LIM Report Analysis

It is always a good idea to look over the LIM report with your lawyer when you receive it. Your lawyer’s experience and expertise regarding LIMs, combined with your knowledge of the property and your thoughts on what you intend to do with the property, will ensure that the LIM is understood and the full implications of any aspects of the LIM are realised.

Get additional expert help from a valuer or builder (the councils ‘on duty’ building officer is a great free resource), or any other relevant professional if you feel you need it to get the full picture.

What To Do With the LIM Report Results

Consider what impact the findings of the LIM report will have on your enjoyment of the property and the value of the property before you make your decision on whether this is the house for you.

Your LIM Report - What You Need to Know
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The Propertytoolbox House Buyers Guide

For all you need to know about LIM’s check out the Propertytoolbox information on LIMs. For everything else there is the Propertytoolbox Home Buyers Guide.




Making a Tender on a House – Putting in Your Tender

Last blog post we talked about just what a tender is.This post is all about putting in a tender. Next post we give you an insight to after the tender.

Thinking of Making a Tender on a House?

If you are interested in making a tender on a property, request a copy of the tender documents from the real estate agent. The tender documents can include any or all of: Never assume that the tender documents include all the relevant documentation with regard to a property. You still need to do your own house buying checks.

Ready to Put in a Tender?

If you have done all your checks, your happy, and you have decided you are going ahead with the tender, read all the tender documents carefully, and fill them in.

The sale and purchase agreement will need to be completed including adding your details, the purchase price, the deposit amount, the settlement date and any conditions. There may also be other documents to sign i.e. acknowledgement that the sale is by tender.

Get in Touch with Your Bank or Mortgage Broker

This is also a good time to run the details of the property you are interested in past your bank or mortgage broker. There may be some issues with the property that could affect the amount a bank is prepared to lend i.e. its condition, title type, location etc.

This can be quickly checked. It is always good to have some mortgage advice at this point and a good mortgage broker, or personal banker can help – take advantage of free advice from a mortgage broker!

Conditions in Your Tender

Deciding on conditions to have in your tender can be difficult. A condition free tender (a cash tender) is always going to be more attractive then a conditional tender if the money is approximately the same.

A tender process often gives you time to work through all your potential conditions prior to the tender date i.e. you can get a building inspection, valuation, LIM, and confirm you finance etc, but whether or not you choose to do this is up to you. Propertytoolbox has a few thoughts on the subject of conditional vs cash offers here.

Help with Your Tender From Your Property Lawyer

It is very important to get your property lawyer or conveyancer to look over the tender documents. In most cases, the vendor will have added conditions and deleted standard clauses in the sale and purchase agreement.

Your property lawyer can tell you the implications of these changes, change the wording of the tender conditions if necessary, add any of your own conditions and check the title.

Done all Your Checks? Time to Submit Your Tender

After all these checks have been done, and you are happy to proceed, the tender can be submitted (usually to the real estate agents’ offices), with a cheque for the deposit, before the tender closes. You will get a receipt to confirm that your tender documents & deposit were submitted.

Working Out Your Chances of Winning the Tender

With a tender situation you may be the only tender, or one of many. You may be able to gauge this by asking the real estate agents office how many copies of the tender documents were sent out, or you can ask the agent – neither is a reliable method.

The reality of a tender is that unless you have reliable information to the contrary, you have to assume you are in a competitive bidding situation and have to put in your best offer.

Houses Sold Prior to Tender

Be aware of the fine print as some houses are advertised for sale by tender (unless sold prior), which means the vendor is open to offers before the tender date. In this situation, you can choose to approach the vendor early or wait to the tender date.

Registering your interest in the property with the agent ensures that if an offer is being submitted prior to the tender date, you get a chance to put an offer in also.

Next Post – Part 3 – Making a Tender on a House – After the Tender Has Been Made Making a Tender on a House |

The Propertytoolbox Home Buyers Guide

The Propertytoolbox house buying guide has lots more helpful stuff for all you house hunters – head there now!

What is Countersigning?

When you make an offer, or place a tender, on a house it will either be accepted, rejected, or you will start negotiations with the vendor. If you start negotiations you will presented with your original sale and purchase agreement countersigned. This countersigned agreement is usually the original contract you submitted with some changes made by the vendor, signed by the vendor. They may have changed anything on the agreement including the price, the settlement date or the conditions.

It is usual for these negotiations to be handled by the real estate agent and you should have any amendments to the sale and purchase agreement approved by your lawyer before signing - especially if the amendments are changes to the conditions of the contract, or parts of the standard contract have been crossed out. You may choose not to accept the changes made by the vendor, and can either countersign the agreement again (making your own changes) or end the negotiations.

Every time the sale and purchase agreement is amended and submitted to the other party it is, in law, the rejection of the previous offer and the making of a counter-offer. This amendment of the sale and purchase agreement is often referred to as countersigning. All changes to the agreement need to be initialled (this can mean a lot of signing!). Only when the countersigned document is accepted without any amendment and signed is a legally binding contract formed.

Just because you have countersigned and countersigned and finally agreed - this does not mean that the house is sold - you may still have conditions to work through before the contract goes unconditional - find out more about going unconditional.


There is a Problem With the Building Inspection! What Should I Do?

The first thing you need to do when your building inspection identifies a problem is to work out how serious the problem is – a good person to question initially is the person who did your building inspection – you need to make sure that you fully understand the problem that they have identified.

Building Inspection Problem? Get a Specialist Building Advice

A building inspector is not an expert in all aspects of building so if a particular problem has been identified and the building inspector has indicated that they cannot tell you the extent of the problem or the cost to fix - it is best to speak to, or get quotes from, an expert in the area.




Say the piles are a problem – speak to a replier – they will be able to assess the extent of the problem and give you a quote for the remedial work.

Now you are in a position to start making decisions depending on your situation...

I Have a Signed Sale and Purchase Agreement

You may have gotten the building inspection as part of working through the conditions on a sale and purchase agreement. If you are not happy with the building inspection:

  • You are now legally entitled to cancel the agreement. To do this you tell your lawyer, and usually the real estate agent that you are not going unconditional based on an unsatisfactory building inspection. This can be a very hard decision to make as by this stage you have invested time, money, and emotion in the house, but in many cases it is the best decision.
  • You can re-negotiation the price of the house with the vendor. Go into negotiations with quotes for remedial work in hand – and bargain hard! Don't forget, it always pays to budget for some extras!
  • You can ask the vendor to fix what is wrong before you buy the house. Especially if the problem is fairly easy to fix i.e. a few hours work by a plumber or electrician this is often a good solution. If the problem is major – the vendor will rarely agree to fix it.
  • You may still be happy to proceed with purchasing the house at the agreed price - and you still can. Perhaps none of what was identified in the building inspection is a surprise, or you now know why the house was a reasonable price from the beginning! Before proceeding double check your numbers, make sure you are happy with the amount you are going to have to pay in repairs and renovation, and add a contingency of at least 10%.

If you and the vendor come to an agreement that involves the vendor having to complete work, or the price changes, or anything else at all, this needs to be formalised in the sale and purchase agreement by your lawyer.

Even if the work agreed is small (i.e. rubbish removal or repairing flashing) and seems insignificant to include – the reality is that it will not be done unless the vendor commits to it via the sale and purchase agreement.

I Haven’t Started Price Negotiations

If you have obtained this building inspection before even beginning negotiations on a house that you are interested in you have similar options:

  • You can walk away – the house is not suitable anymore – move on!
  • You can start price negotiations fully armed with exactly what is going on with the house. This is a much stronger bargaining position then if a price had already been agreed and a reduction was being negotiated. It is hard for people to comprehend that seemly overnight their house price has decreased significantly.
  • You can start negotiations from the beginning with a condition that lists things for the vendor to fix before you will settle on the house – again, if the problems are extensive - this can be a very short negotiation!

Sometimes the extent of the remedial work needed to fix a problem identified by a building inspection can not be worked out exactly by a ‘surface only’ examination by a building inspector or tradesman i.e. extent of rot given evidence of rotten weatherboards.

In these situations you will only be able to get an estimate of the cost of fixing – as a lot will depend on the extent of the problem and this will only be known when the remedial work starts.

It is up to you here to make a decision based on how much of a risk you want to take! In these cases, if you are not comfortable with what can potentially be an unknown, and large, expense it is best to walk away.

Building Inspection Problem - What To Do
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The Propertytoolbox Home Buyers Guide

The information you have just read about building inspection problems has been added to the Propertytoolbox house buying guide - An essential resource for house buyers in New Zealand. Find out more about house buying in New Zealand here.


Should I Get a Valuation, Building Inspection, and LIM Before Making an Offer?

There is a cost to getting all of these reports prior to making an offer on a house - so why should you get them done?

Advantages of Getting Your Due Diligence Done Prior to Offering

The main advantage of having your valuation, building inspection and LIM done prior to offering is you have a full understanding of the house and its worth to you.

Another major advantage is that getting a valuation, building inspection and LIM usually means you can get unconditional finance approval for that house and can then choose to make a cash (unconditional) offer – this sort of offer is very appealing to vendors.




When a cash, unconditional offer is agreed and signed it is binding, the house is sold! A cash offer can give you bargaining power and you can often buy a house for a lower price with a condition free cash offer.

The Disadvantages...

The main disadvantage is the cost. Altogether, these reports will cost well over $1000 – just how much depends on the house itself. This money is potentially being spent on a house you may never buy.

In normal house negotiation situations (not a tender, or auction) putting your building inspection, valuation and/or LIM as a condition in your offer is standard. If a price is agreed on – then you get the reports (do your due diligence).

Houses for Sale By Auction or Tender - Due Diligence

In the case of an auction, if you want them, you need get your valuation, building inspection, LIM and unconditional finance prior to the auction as when you are bidding you are making an unconditional offer for the house; if you are the winner bidder – you have bought the house.

In a tender situation – adding a building inspection, valuation and/or LIM to your tender puts you well below a cash offer in the rankings. Your offer will need to be significantly higher then other tenders to be seriously considered in this situation.

So if you are serious about your tender – try to make as close to a cash offer as possible – this usually means doing your valuation, building inspection and/or LIM prior to the tender date and getting an unconditional finance offer so you don’t have conditions in your tender.

Due Dilligence You Can Do For Free

No matter what you decide to do, we recommend you read our before you put in that offer section, here we have 4 things you can do at minimal cost (free even) that will let you get to know the house you are thinking of buying. You may find that what you discover changes your mind, saving you the cost of hiring the professionals altogether.

Building Inspection Property Valuation and LIM Before Making an Offer - Due Diligence
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The Propertytoolbox Home Buyers Guide

Want more info and advice? Head to the Propertytoolbox Home Buyers Guide for all you need to know about buying a house in NZ. We have comprehensive information about property valuation and building inspection that can help with those pre-offer decisions.



What is in a LIM?

A LIM is a comprehensive report containing everything the Council knows about a property or section and can include:

  • Valuation data
  • Yearly rates payable for the property.
  • If there are any unpaid rates.
  • Any charges for water.
  • Information about Building Permits and Consents for the property.
  • Any information in regards to whether it is a protected or historic building, or site, and if there are any protected trees.
  • Any Resource Consents issued for the property.
  • Any relevant planning issues or planning zones that impact the property.
  • Any Resource Consents issued in the immediate neighbourhood.
  • Information on subdivisions and developments affecting the property and the immediate area.
  • Drainage information relating to both private and public sewer and / or storm water on the property.
  • Special land features including potential erosion, avulsion, falling debris, slippage and possible hazardous substances.
  • Consents, certificates, notices, orders or requisitions affecting the land or buildings.
  • District Plan classifications that relate to the land or buildings.

For further details regarding what a council is required to provide you in a LIM, check out the Local Government Official Information and Meetings Act 1987.

The LIM will be up-to-date and contain a summary of all the information a council has on its files as of the day it is issued.

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