New to Real Estate?

New to Real Estate? Where to begin…

 

- Working with real estate agents
- What you need to know about a property
- Making an offer on a property
- Expected behaviour of real estate salespeople
 

There are several methods of buying and selling property in New Zealand. It is important that you understand the particular process for the property you are buying or selling. Practices also vary between agencies so make sure you confirm details with the salesperson. Here, we have made some information easily accessible to you for instances that you will come across when considering buying or selling property. The following information is obtained from the Real Estate Agents Authority.

 

WORKING WITH REAL ESTATE AGENTS

Buyers and sellers have choices about the agents and salespeople they choose to deal with. It is important to check that a salesperson is licensed and whether they have had any complaints upheld against them.

Selecting an Agent

Sellers - You can contact as many agencies as you like for an appraisal of your property before you decide who to list with. If there is a specific salesperson you would like to use, you can contact them directly.

Buyers - You do not have to deal with the salesperson a property is listed with. You can contact any salesperson from the agency the property is listed with and ask to deal with them.

Contacting Salespeople

There is an online public register, including contact details of all licensed real estate agents and salespeople in New Zealand. You can search the public register on this website www.reaa.govt.nz. Always check that any salesperson you are planning to deal with is licensed, even if you know them.

 

WHAT YOU NEED TO KNOW ABOUT A PROPERTY

It is important to find out as much as possible about the property you are considering purchasing before the sale and purchase agreement is finalised.

Ask the salesperson questions

You can ask the salesperson anything you want to know about the property and they cannot withhold any information they know. However, you should not rely only on their information.

Find out about the property’s title and council records

Important legal information about the property will be held by the local council and by Land Information New Zealand.

You should:

- Do a title search through Land Information New Zealand to check who legally owns
the property and if anyone else has a claim over it
- Get a Land Information Memorandum (LIM) from the local council, this contains all
the current and historical information the council holds about the land and property
- Your lawyer can help with both of these

Get a builders report

Before signing a sale and purchase agreement, find out as much as you can about the condition of the property through a builders report. This is a property inspection carried out by a New Zealand standards compliant property inspector. You will need to pay for this inspection.

Property inspectors are listed in the Yellow Pages. Ask if they comply with the New Zealand Standard (NS 4206:2005 Residential Property Inspection). This means they adhere to the Standards New Zealand requirements for residential property inspections.

Depending on the property, you may also want to hire other specialist advisors such as a valuer or structural engineer to help you decide whether you want to buy the property and how much you would be willing to pay for it.

Buying and selling by auction

An auction is an open process where buyers bid against one another to purchase a property.

Buying and selling by tender

When a property is being sold by tender, prospective buyers submit confidential written offers for the property to the agent.

Buying and selling at an advertised price

This is when the property is marketed with a selling price – the amount the seller wants to be paid for it.

 

MAKING AN OFFER ON A PROPERTY

When you want to make an offer on a property, the salesperson will draw up a sale and purchase agreement and ask you to sign it. They must give you a copy of the Sale and Purchase Agreement Approved Guide and ask you to confirm in writing that you have received it. You should read this guide before you sign the sale and purchase agreement. This guide is also available in a number of languages from the website www.reaa.govt.nz.

The sale and purchase agreement will contain conditions you are attaching to the offer

You can make your offer subject to certain conditions. Common examples include making the offer subject to:

- The buyer selling their own property
- A property inspection report
- A valuation
- A satisfactory Land Information Memorandum (LIM) or title search
- Finance

 

You can negotiate when the deposit is paid

You can negotiate when you pay the deposit i.e. when your (conditional) offer is accepted or when the agreement goes unconditional.

The agreement may also contain conditions from the seller or amended clauses

The sale and purchase agreement is legally binding, read it carefully and if you don’t agree with anything, raise it with the salesperson. Have your lawyer check the agreement before you sign.

The salesperson will then present the offer to the seller for consideration

The property will remain available for sale to others during this process, and until the offer becomes unconditional.

If the price or conditions are not acceptable to the seller

You can negotiate with the seller, through the salesperson, with the aim of reaching a mutual agreement. The sale and purchase agreement may be amended a number of times during this process. The salesperson will ask you and the seller to initial any amendments to show you agree with them. Read any changes and make sure they are acceptable to you before initial them.

Once you have reached agreement with the seller on acceptable price and conditions

Then both you and the seller will be asked to sign the final version of the sale and purchase agreement. Have it checked by your lawyer before you sign. It will then be dated at this time.

You cannot change your mind once you have signed a sale and purchase agreement

Sale and purchase agreements are legally binding. Once you and the seller have signed, you will have a contract; the process of working through any conditions towards settlement will begin; and, once conditions are satisfied, you will have to go ahead with the purchase.

What’s in a sale and purchase agreement?

The sale and purchase agreement sets out in writing all the agreed terms and conditions of sale/purchase.

Terms and conditions in the agreement will include:

- The agreed price
- Chattels that are to be included in the sale – such as fixed floor coverings, oven, light fittings or curtains etc
- The type of title – for instance freehold or leasehold
- Any conditions the buyer or seller want fulfilled before the contract is agreed
- The date the agreement will become unconditional
- The settlement date
- Any deposit the buyer must pay

The agreement will also set out obligations and conditions that the buyer and/or seller must abide by. These may include what access the buyer may have to inspect the property before settlement and ensuring the property remains insured until the settlement date.

What happens if the buyer or seller ‘defaults’

The agreement will also cover compensation costs that must be paid if buyer or seller defaults on the terms of the agreement, for example by delaying settlement. Your lawyer can explain these conditions to you.

Buyer’s deposit and agent’s commission

A deposit – usually five to 10 per cent of the purchase price – is normally paid by the buyer, either when the offer is made or when it goes unconditional. The salesperson will usually take their commission from this deposit when the agreement becomes unconditional. However, the money has to have been in the agency’s trust account for 10 working days before they can take their commission.

The settlement date

The agreement will also specify the settlement date – the date when the buyer pays the rest of the amount agreed for the property – usually through their lawyer. This is typically also the possession date, when the buyer takes possession of the property.

 

EXPECTED BEHAVIOUR OF REAL ESTATE AGENTS

What is the Code of Professional Conduct and Client Care?

The Code of Professional Conduct and Client Care sets the standards real estate agents must follow. It applies to all areas of real estate i.e. residential, commercial and rural. You should let the Real Estate Agents Authority know if any agent breaches the code.

Salespeople must act in the best interests of the seller and treat the buyers fairly

A salesperson must also act in accordance with the seller’s instructions – unless doing so would be against the law.

Salespeople must not engage in any conduct that will put a buyer or seller under undue or unfair pressure

And they cannot take advantage of any party’s inability to understand relevant documents; and they must keep both the buyers and seller regularly updated on any relevant matters.

Salespeople can’t withhold or give inaccurate information about a property

The salesperson is in contract with the seller and will always work on their behalf. However, they have an obligation to treat the buyer fairly, including not withholding, or giving inaccurate information.

Salespeople can’t breach confidentiality

The salesperson must not disclose any confidential personal information about the seller unless the seller consents in writing or if the salesperson is required by law to disclose it.

Salespeople can’t mislead buyers and sellers about pricing expectations

The advertised price for the property must be in line with the pricing expectations the salesperson has agreed with the seller. The salesperson should not mislead the buyer about the seller’s pricing expectations.

Salespeople must avoid conflicts of interest

The salesperson must not use any confidential information for their own benefit or that of any other person. The salesperson must disclose any conflict of interest to a buyer or seller with regard to the sale or purchase of a property.