Buying a property will always have a big impact on your financial future and it’s important that you make sure you gather all the information you need and perform due diligence before you buy. Do your checks and find out if the property is a worthy investment, or if you even have the money to buy it!
Ideally, due diligence is completed before you make an offer on a property, especially when purchasing at auction as bids are unconditional. However, if you need to make a quick offer, you will need to include clauses in the sale and purchase agreement, which will allow you to perform due diligence after signing the agreement.
Firstly, check out the local community and visit the property at different times of the day. Talk to the neighbours about any quirks of the area and find out if the property has been used for unwanted activities in the past. Check out access to public transport, schools, public amenities and shopping as these can affect the future value of the property. Are there major developments planned such as zoning changes or roading projects? Ask the
council for more information.
Obtain a Land Information Memo report from the local Council to know if there are requisitions on the property or if the buildings have all the necessary permits, consent, and certificates. You will also find out if the property is subject to resource consent or if any drains are running through the property, among other important information.
A building inspector must check the property per the agreement. They will look at the structural integrity of the property and inform you of any defects or issues. You can negotiate that the defects be rectified or accept the property with defects, but it will at least give you an idea if you would need to spend on renovation or maintenance soon.
You could also make the agreement conditional on you being satisfied with a property valuation. The bank may require this especially if you are not using a real estate agent. Valuation will also inform you of the rental and resale potential of the property and ensure you aren’t significantly overpaying.
You will receive a copy of the title, so make sure you understand the various types of titles. Do you know what easements or covenants are? If you’re buying with a body corporate, understand the rules and fees. All these can impact what you can do to the property in the future.
You would also need to consider insurance, rates and other expenses like body corporate or association fees. Ask your lender if your finance can be approved in advance, so you have an idea of your working budget. Check special offers and negotiate for the lender to cover the legal fees.
Finally, one of the most important considerations is the ownership structure. Who will buy the property – you as an individual, a company or a family trust? There are various tax and legal implications. Also, make sure you use the correct legal name on the finance application and sale agreement.
Don’t forget that once the sale agreement has been signed and you’ve already made an offer, you won’t be able to back out anymore! It’s vital to spot any problems early on unless you specifically cover these as conditions to be met before your offer goes unconditional.
For advice, get in touch with us by phone or mail! If you’re not sure and are stressed during due diligence, let us help you get organized. Know what you should be ticking off your list
throughout the process.
Your Outside Team
Address: Level 2, 182 Vivian Street,
Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
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