Monthly Archives

February 2017

Final Inspections

Q: I purchased a house at auction last week. I have been told I have the right to a ‘final inspection’. What does that mean exactly? Alison M.

A: Congratulations on your purchase! You now have the right to inspect your home prior to settlement (when the exchange of funds and the title takes place). The final inspection entitles you to look through the property to ensure that it is ‘as inspected’ when you last saw it before bidding at the auction. In other words the property should be in the same condition as when you viewed it at the open home. There are a few things to watch out for – do all the lights and appliances work, is everything mentioned in the chattels there and in good order? Basically it is your final opportunity to ensure that you are getting everything you bid for at the auction.

I’ve just bought at auction and I settle in another three weeks. The property is tenanted but will be vacant at settlement. What safeguards do I have that it will be in good condition when I settle? Gary W.

As a purchaser you are entitled to a ‘pre-settlement inspection’. What this means is that you can insist on the agent showing you through the property a day or two prior to settlement. Strictly speaking you can only insist on the property being in ‘as inspected’ condition i.e. the same condition as when you viewed it at say the open home, and that the chattels are in good working condition. When we market a property we ensure all chattels are in good order; if the dishwasher, for example, is faulty, we list it on the sale and purchase agreement as an ‘excluded chattel’, so make sure you check all the included appliances are working and that things like the alarm system and all the lights, are working too. Contrary to popular belief the sellers do not have to clean the property prior to settlement, although most do of course.  Enjoy your new home!

Q: I’ve just purchased a home and am about to take possession. The previous owners moved out last week and I did my final inspection with the house empty… and the place was a pig-sty!  On top of that there were lightbulbs missing, rubbish under the house and piled up in the driveway. What can I do? Garry S

A: Your agent should advise you that you do have some rights around these issues. Firstly, the house must be ‘as inspected’ – in other words, in the condition that it was in when you saw it at, say, the open home. If there was no rubbish at the top of the drive then there shouldn’t be any there now. And if there was rubbish under the house when you first saw it then unless the agent told you that it was staying, you should expect it to be removed. In terms of light bulbs you can certainly insist that these are replaced – however sometimes it’s just easier to replace them yourself! At the end of the day it’s best to talk to your lawyer – he will explain your rights in detail and take the appropriate action on your behalf.

When to buy?

Q: I am looking for a new property and I’m not sure whether to buy now or to wait until after Christmas. What’s your advice? Barry V.

A: Interesting question Barry. I’m assuming you’ve been reading how the Auckland market has slowed: Fewer people through open homes, not as many bidders at auctions, and more properties being passed in at auction. The ‘fizz’ certainly appears to have gone out of some sectors of the market and that could certainly suggest that it’s a good time to be buying property right now. I’m not sure that anyone can really identify why this is.

The Reserve Bank says that its slow-down measures are working, others say that the Chinese are out of the market, and still others think it’s the result of investors having done all their buying before the October rules came into effect. And maybe it’s a bit of all of those, together with many people just having other stuff on their minds rather than buying property. What with Christmas and the holidays looming many people just don’t have the mind-set to go looking for property. Of course no one knows what will happen to the market after Christmas so in my opinion, if you are in a position to buy now, then the time is right.

With fewer buyers in the market you will at least avoid the auction fever that we have been seeing over the past 12 months (although there has been no real indication, as yet, that prices have been affected). And of course you have the added bonus of being able to go away on holiday knowing that you have a new home all sorted for when you get back.

As always, what we do know is what the market is right now, and what we don’t know is what it will be like in the future. We can be sure though that the fundamentals affecting the Auckland market have not changed: Money is cheap and housing is in short supply. Good luck with your house-hunting!

Q: Now that our children have all grown up and left home we want to downsize from our current property in Parnell to a smaller property. We are worried though that if we sell we won’t be able to find anything we like. What options do we have? Margaret B.

A: This is a very common question these days Margaret, especially with the shortage of houses on the market in Auckland right now.

Obviously you have two choices: Sell first then buy, or buy first then sell. If you buy before you sell you won’t really know what your budget is (you can’t be sure how much your home will sell for) and you may very well need bridging finance to get you through the period between when you have to pay for your new home and when you settle on (and get paid for) your current home. (The length of settlement is the time between unconditional date, often the auction date, and the day the new owner pays and takes possession). You can minimise this by asking for a long settlement on your new home, and then be ready to go straight to auction on your current home as soon as you have an unconditional agreement on your new home. This may enable you to get sold and settled before you settle on the new home, but what if your purchaser wants a long settlement too? Either way you do run the risk of being forced to get bridging finance. In the very worst scenario you may have trouble selling your home and end up owning TWO properties – not always ideal!

Alternatively you can do what most people seem to be doing these days: Sell first and then buy. Of course as you’ve said, the risk here is that you can’t find anything to buy once you’ve sold. However, what we have found is that people who have sold get very focussed very quickly on finding their new home, and they become a lot less fussy! And if it takes longer than you expect there is always the option of renting while you search.

Pre-auction Offers

Q: I’m going to auction my home for sale later this year and I’ve been seeing lots of houses being sold before auction. How does a pre-auction sale work and is it a good thing to bring the auction forward? Thanks, Lily W.

A: No problem Lily. When a property is being marketed for auction, provided the agent has advertised it as “unless sold prior (USP) the agent can present a pre-auction offer to the vendor. Once an offer is presented the vendor has three options: (1) Accept the offer, sign it and it’s a done deal (2) say ‘no thank you, we will wait for the auction date’ or (3) say “yes that’s enough for me to sell’ and bring the auction forward. In this case (#3) the reserve is set at the offer figure and the auction starts with that as the opening bid, and if no higher bids are received then the property is sold at the offered price. Of course other buyers can still bid and the property will then sell to the highest bidder.

In our opinion, 99% of the time pre-auction offers only benefit the buyer. And what are those benefits? Firstly, bringing the auction forward means that less potential buyers will view the property (one or two weeks fewer open homes) so the buyer is cutting down on competition. Secondly, most pre-auction offers are not at the maximum the buyer is willing to pay. We have seen many auctions brought-forward where there has been additional bidding and the buyer that made the original offer has bid many thousands of dollars more than their first offer.

The only up-side for the seller is that they get sold earlier, and they don’t have to go through the stress of an auction where they don’t know if they are sold until the day. In our experience most vendors ultimately care more about getting a good price.

Some real estate companies have a policy to automatically bring the auction forward if an acceptable offer is received prior, but we think that it should be the vendor’s choice to decide how they want to handle the offer – it’s their property after all! We are always willing to give advice of course, but that is all it is – advice. Remember that the selling/listing agent works for the vendor, not the buyers, so always bear that in mind when talking to the agent who is selling the property.