So, You Think You are Ready to Make an Offer?

Whether it's in relation to the steps that need to be taken, legal terminology or understanding the different types of properties out there. Because first home buyers can incur substantial costs during this process, we often suggest that clients make an offer on a property only once they are truly ready and with a condition that allows them to undertake their due diligence (including legal advice) after any offer is accepted to avoid unnecessary costs.

1. Seek Legal Advice

Before you submit your offer to the vendor, consult your Legal Executive/Conveyancer/Solicitor ("Legal Adviser").

The advice that they will provide will depend on your circumstances and the type of property you will be looking at. There are so many variables, and we can't provide you general advice that will apply to all situations. The firm you instruct can provide you with an estimate about legal fees and a general understanding of the process. If you decide to proceed then terms of engagement will be sent to you, so that advice can be provided once you have secured a property or if you need conditions to be inserted into an offer.

2. Finance Pre-Approval

Before you make an offer, you should, if possible, ensure you have finance approval or an idea of how much a lender is willing to lend you.

If you have finance approval in advance, we suggest that you familiarise yourself with any finance conditions that apply. Most pre-approvals will give your lender the discretion to assess if the property would be adequate security for the loan or not before the loan approval is confirmed. If you are unsure about your finance conditions, get clarity from your broker or the bank.

3. KiwiSaver and Other Financial Assistance Arrangements

It will speed the process up if you have current/valid approval for a KiwiSaver First Home withdrawal in advance of making an offer. If you require any of these funds to pay your deposit, you will need to let your Legal Advisor know very early on, as this will change their advice about any terms of your offer.

However, you can consider the Kainga Ora First Home Loan for first home buyers that are able to service their desired loan amount but may not have quite enough saved for a deposit (e.g. only 5% deposit saved rather than 20%). First Home Loans are only available through certain banks/lenders and are underwritten by Kainga Ora – Homes and Communities.

There are also some co-ownership housing opportunities where another party would be a co-owner, and you would have the intention to buy them out when you have more equity in your home. However, you should seek legal advice in this regard even after receiving approval from your lender as there are usually associated upfront and monthly costs.

Learn More: Buying Property With Others: Things To Be Aware Of

4. Your Circumstances and Timeframes

Consider the timeframes you will require based on the due diligence you will undertake prior to confirming the agreement is unconditional. If applicable, check the turn-around for your KiwiSaver provider to drawdown your KiwiSaver funds (usually 10-15 working days) and consider when you will need to execute those documents.

5. Once You Are Ready to Make a Conditional Offer

If there is an agent involved, you can ask the agent to prepare your offer based on terms suitable and you can seek legal advice to confirm that the agreement is fine for you to sign. Alternatively, you can ask for conditions to be provided to you which have accounted for your circumstances, and you can have these inserted into the agreement. Even though you will be able to seek legal advice after any offer is accepted, there is no guarantee that any amendments to the Sale and Purchase Agreement that your Legal Advisor recommends, will be agreed to by the other party.

Some purchasers prefer to use a well-worded due diligence condition instead of relying on the usual conditions of finance, LIM Report etc which are listed on the front page of the Sale and Purchase Agreement. However, due diligence conditions are not so appealing for vendors as it can be an easier way for the purchaser to back out of the agreement even simply due to changing their mind about the property.

6. Offer is Accepted – Time to Undertake Your Due Diligence

Once the offer is accepted by the vendor, you will need to act quickly. Email the agreement to your lender or broker straight away, and book relevant reports with building inspection companies and valuers. If you haven't already done so, seek advice on the title and agreement from your legal adviser.

Make sure that you read any disclosure provided by the vendor or agent and if there are defects, you will need to advise your broker and lender. Also, if there are any defects you will need to consider if you will have any issues obtaining insurance.

7. If Issues Come Up During Inspection or LIM Report Review

Ask the vendor to pay for the issue to be fixed or you could renegotiate the house price depending on the condition used and the issue raised. In some instances when undisclosed unconsented works are discovered, your Legal Advisor can investigate whether they were undertaken by the vendor and therefore a breach of vendor warranties may have occurred. Your Legal Advisor can advise you about your options in this regard.

Learn More: The Importance of a LIM Report: What You Need to Know

8. What Happens If You Need More Time?

A vendor does not have to agree to an extension of time to allow you to satisfy a particular condition, but your Legal Adviser can certainly try to obtain one. If you are not able to satisfy a condition by the time and date in the agreement, either the vendor or purchaser can cancel the agreement. However, as a purchaser, depending on the condition used you can be asked to prove you used your best endeavours to take all steps necessary to try and satisfy that condition (e.g. finance condition – an email from a bank or broker stating finance was declined).

9. Written Instruction to Your Legal Advisor

The Sale and Purchase Agreement is an important document that you need to understand. Each time you require an extension or variation to a condition or if you would like to satisfy or decline a condition, it is preferred that these instructions are provided to your Legal Advisor in writing.

10. How to Make Your Offer More Attractive

If you find yourself in a multiple-offer situation, you're going to want to find ways to make your offer the most attractive. However, don't get carried away in the heat of the moment and agree to spend more than what your budget allows or insert unrealistic timeframes for the satisfaction of conditions.