Step by Step Homebuyer Checklist

Handout for 10/11/2020 Homeviews New Buyer Workshop  https://homeviews.org

This is a general timeline for buyers in the search for a typical home. If you are going to Auction, you must perform all your due diligence on legal, property and financing BEFORE you go to Auction and make an offer. If you are buying by auction, tender, offer, negotiation, or off-plan, the contracts and process are different, but share the same basic steps. The differences are largely procedural and quite specific to the property so be sure you hire a lawyer early in your search who will take the time to explain what you need to know. Similarly, a good mortgage adviser (broker) will assist you to target your financial expectations and walk you through getting your preapproval to final funding. 

Please appreciate that if you sign a contract at Auction, you are legally bound to proceed and may lose your deposit if for any reason the property or financing does not work out. It is VERY important that you engage your broker and lawyer upfront in many of these steps. We are here for you. We do not advise you what to buy or why. As buyers, you must be aware of your responsibilities of homeownership and this workshop is a good start along your path. Always feel free to ask questions of your mortgage adviser, lawyer and other consultants.

 

1. VISION PHASE - PLANNING

  • Establish your priorities:
    • Who will be on the title and/or sharing the home with you
    • What kind of home and attributes for your family are needed
    • Will you have flatmates, need extra living space?
    • Is your family growing or likely to need less space?
    • Is your income going up, stable or likely to reduce?
  1. Draw up a ‘wants’ list and prioritize your top requirements
    • Neighbourhood, schools, proximity to work and family
    • Size, number of bedrooms, baths, parking, storage
    • Oudoor garden/places to play and enjoy your hobbies
    • Consider extra time/energy if you will improve a home you buy
      • Do you have the skills and the time to do this work
      • Can you afford to pay a builder to do this work
      • Set aside a budget for projects
  2. Develop a home budget – now and future maximum spend to include:
    • Cash resources and any family funds you are counting on
    • Mortgage (compared to rent now) will be the main cost each month
    • How much more can you comfortably afford per month/week?
    • Discuss budget and current/projected means with your broker/partner/family
    • Include in your budget:
      • Rates, Insurance, potential Lease or Body Corp fees
      • Home applicances, lawnmowers and maintenance costs
      • Contingency fee for moving and redecorating
      • If renovating, get quotes and actual costs from master builders
  3. Establish a timeline:
    • When you ideally want to move into your new home
    • Plan to give notice to landlords
    • Plan packing and moving schedule

 

2. ORGANIZE FINANCE – PREAPPROVAL PHASE

  • Savings and Cash Accounts – Tally what you have now
    • Establish how much you need for a 20% deposit with an 80% LVR l
  • Learn if you qualify for Kiangaora/First Home grants or First Home Loans
    • Find out what 85% and 90% loans will cost (extra fees)
  • Gift funds or family loans – discuss options with parents/whanau
    • Explore guarantor role
    • If loans, how to be repaid/when
    • Get legal advice on contracts for family guarantors, or equity release loans
  • Kiwisaver – apply to your providers for permission for First Buyer Withdrawal
    • The letter is good for 60-90 days
    • Clarify if both parties qualify and how much $ you can expect
    • Be ready to request funds 2 weeks prior to settlement
  • Hire a Broker who understands your goals
    • Prepare your financial package of documents
    • Update as you go: all bank statements, debts, loans, household costs.
    • Review your free credit profile with advice by your broker
    • Consider debt consolidation if you have multiple debts - ask your broker
    • GET PREAPPROVED BEFORE YOU GO OUT HOUSE SHOPPING!
      • Update all your documents monthly during the process
      • Payslips, credit card and bank statements must be up to date
      • Your broker presents Bank CONDITIONAL OFFER of FINANCE

3. SEARCH PHASE

  • Set up email or text alerts for homes in your search category on various websites
  • Go to open homes
  • Research Trademe
  • Look at Property.co.nz sites and others.
  • Set up a map in the target zone, record your notes
  • Do NOT sign up with one exclusive Sales Agent (limitations per agency)
  • Research neighbourhoods: proximity to work, schools, friends and family
  • Reconsider each home on its merits against your priority list (vision phase)
    • Decide if you will conduct due diligence on a home prior to Auction
    • Conduct Building reports, LIM report and Title reviews with your Lawyer
    • Present the property to your Bank (via broker) for approval before bidding at Auction

 

4. MAKING AN OFFER – LEGAL DUE DILIGENCE PHASE

  • Make an initial offer to purchase via Solicitor or Sales Agent (if not an Auction)
  • Your Solicitor/Lawyer MUST review all contracts BEFORE YOU SIGN
  • Seller may respond with a new offer – back and forth
  • Solicitor/lawyer negotiates a price and terms, settlement dates, etc.
    • Speak to your lawyer about other conditions/terms/due diligence:
      • Finance contingency
      • Inspection contingency
      • Bank review contingency
      • General due diligence
    • Sign agreement (once your lawyer has given OK) with contingencies
    • Negotiate price/conditions/terms with the Vendor until all r agree.
  • Conduct Building Inspection – for your purpose – at your expense
    • Review the LIM Report and Property File – with your lawyer and mortgage adviser
    • May recommend Toxicology report for Methamphetamine/P
    • May recommend moisture readings if construction is suspect
    • Negotiations may happen if the builder’s report shows defects
      • Get builders quotes to rectify issues
      • Consider if costs are worth the risk and effort
      • Consult your accountant on financial/tax benefits
  • Confirm financing via your broker for the specific property
    • Update your bank application adding the property details, rates, etc
    • Satisfy other conditions of the lender – provide documents to your broker
    • Evidence of deposit/sources/gift letters/verifications/agreements
    • Clarify any property specifics required by your Assessor
    • Rental appraisal presented by Estate Agent (if applicable)
    • Present Boarder or Flatmate – signed agreements (template from broker)
    • Neighbourhood review – visit different times of day/week.
    • Perform your own due diligence on other issues as they arise
  • Purchaser’s solicitor, vendor’s solicitor and your broker confirm Contract is UNCONDITIONAL NOTE: things start to move quickly now. 

 

5. FUNDING PHASE (happens simultaneously with Legal Phase)

  • Mortgage adviser submits details of the property, LIM, Title, Property docs to your bank for final Security Approval – meeting conditions of Conditional Offer letter to your preferred bank:
    • Update your income, assets, liabilities and expenses or changes
    • Disclose any anticipated changes in income or job changes
    • Your mortgage adviser will confirm all details with your assessor
    • Always speak with your broker as things change during this phase
  1. Early on during the Legal/Finance phase, you perform your own inspections of the property to be sure it meets your full approval in all ways and to clear the legal contingencies. Your broker can refer to an independent Building Inspector.
  2. Valuations are ordered if required by the bank at your expense
  3. You may also need to get firm builder quotes for issues that come up.
  4. Do not rely on the Vendor’s inspection report. Always get your reports in writing.
  5. Broker presents your Bank UNCONDITIONAL OFFER OF FINANCING to you
  6. Broker informs your lawyer that your Finance Approval Condition has been met
  7. Lawyer declares the Contract is UNCONDITIONAL* after all contingencies are met
  8. Broker discusses your loan options and costs/payment structure with you
  9. You decide how long you want to fix loan(s) and if you are offsetting or floating some funds for specific reason with your mortgage adviser
  10. Broker requests pricing and cash offer for your preferred terms
  11. You confirm the terms and your mortgage adviser orders your documents from the bank
  12. Documents are sent to your Lawyer directly from the Bank
  13. Get Insurance quotes and confirm details with your mortgage adviser
  14. Certificate of Coverage goes to your Lawyer listing the bank as the insured party
  • You meet Bank Manager at your preferred branch to set up account and payments
  • Any bank cash contributions will be received by you post settlement into your account

 

6. SETTLEMENT PHASE

  • Purchaser decides what entity to hold title  (ie do you nominate a Company/Trust)
    • Purchaser informs broker/bank of entity details and the bank sends loan documents to lawyers. Documents take a couple of days once ordered ALLOW ENOUGH TIME to prepare, schedule review and sign date.
    • The lawyer prepares loan documents, A&I, resolutions (if appropriate) to sign
    • The client either comes in to sign or we email/courier if out of town
    • Loan documents (and any conditions) are sent back to the bank
    • Vendor (seller’s) lawyer sends your lawyer a settlement statement
    • Your conveyancing lawyer checks settlement statement
    • Your lawyer requests money from you if there is a shortfall (between the amount of the purchase price and what is required to settle, less deposit paid and bank loan) to balance the transaction
    • Any shortfall in funds must be showing in your lawyer’s trust account before settlement
    • Your lawyer will require certain undertakings from seller’s lawyers
    • Your lawyer will make payment to seller’s lawyers/other parties
    • Seller’s lawyers ‘release’ documents into our space in landonline
      • Seller’s lawyers send notice of change of ownership to local council (by your lawyer)
      • LAST TIME TO SETTLE is 4:30 pm – Reserve Bank shuts off
      • If you settle after 4 pm penalty interest charged may be due.
      • Broker and Bank inform all parties when the funds are drawn down.
      • Your lawyer informs you when are now on title and own the home.
      • The lawyer informs the real estate agent we have settled
      • Real estate agent gives you the keys to the property. YAY!

Before you move into your property it’s important that you have alerted your utility companies what services you need at least a week or two before arrival as 10 days may be standard for services.

Ask for our Tips Sheet and more details on our blogs for the Auction process, Renovation and New Construction Loans of if you are buying Off Plan (new build). Each situation is unique.

More details on these stages and specifics at  https://settled.govt.nz

 

 

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