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Home Buyer s and Seller s Guide. Some things you need to know to make buying and selling easier, and to help you get a great result.

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and Seller’s Guide

Some things you need to know to make buying

and selling easier, and to help you get a great result.

(2)

Welcome

Your home is one of the largest financial

investments you have – and it’s a pretty big

emotional investment as well.

Deciding to buy, sell or build is an important step,

and whether it’s your first time or you’ve done it

many times, there’s a lot to know and do – often in

a very short time.

This guide sets out to give you practical advice to help everything run smoothly, so you get the home you want and avoid the pitfalls.

It covers the main steps, from deciding what you want through to organising your moving day. It also includes helpful checklists so you don’t miss something important.

And of course, we explain how home loans work and how to apply them in straightforward terms – especially helpful if you’re buying your first home or haven’t done it for a while! It can all seem a bit overwhelming, but we’re here to help you achieve your dream. And if you’d like to find out how much you can borrow we’re happy to meet when and where it suits you – at home or work, including after hours or weekends.

If you’d like to know more just get in touch. You can call into any of our branches, visit us at www.westpac.co.nz or call us on 0800 177 277 any day of the week.

The information is as up-to-date as we can make it. But obviously things change, which could affect some bits of information – especially prices and phone numbers. The guide is only intended to provide you with general information, and everyone’s situation is different. You should always seek independent legal and financial advice before signing any agreement or contract.

04 Buying a home

36 Selling your home

50 Building and renovating

58 Getting the right advice

68 Your tool kit

In this guide…

Take this guide with you when you’re out looking at homes –

there’s a handy tool kit at the back.

© Westpac New Zealand Limited 2008.

Published by Westpac New Zealand Limited. Written by Lynn Newman-Hall of WriteBrain Limited. All rights reserved. No part of this publication may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the copyright owner/s. New Zealand rights are owned by Westpac New Zealand Limited. International rights are owned by WriteBrain Ltd. The moral right of the author has been asserted.

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06

Where do I want to live?

The first things you need to think about, including location, investment and where you want to live.

08

What type of home

do I want?

Questions to ask yourself about the type of home you want – with a checklist to help you decide. Checklist – page 11

12

How much can I borrow?

This is the first question most people ask us. So here are the basics – plus a handy guide to working out what you might be able to borrow.

Loan guide – page 13

14

Where do I start?

The fun bit is looking at homes. Here’s some practical advice on where to start – and a list of questions to ask the agent.

34

What insurance

do I need?

A quick explanation of the insurance you’ll need and how we can help – plus some tips on home security.

28

How do I apply?

We’ve made applying for your loan as easy as we can. Here’s how to go about it – plus some tips for first home buyers.

16

What should I look out for?

You don’t want to buy a lemon. This section covers things to look out for – with a really useful checklist to help you spot potential problems.

Checklist – page 18

24

What do I need to know

about home loans?

The main things you’ll need to know about different types of home loans and interest rates if you’re shopping around.

20

How do I buy my home?

There are three main ways to buy a home. We explain them here – and give some tips on negotiating.

26

How do Westpac home

loans work?

We’ve kept home loans really simple – you can do just about anything you want with a Choices home loan from Westpac.

32

What’s the legal process?

You’ll need the advice of a good lawyer – this section covers the legal stuff you need to know.

30

What happens next?

An overview of the lending process – from the time you apply until the home is yours.

Buying

a home

When you decide to buy a home

there’s a lot to know and do. It’s

a big investment and you want

to get it right. You’ll find useful

advice here covering each step,

from what to look for to getting

a loan, and more. And you’ll find

plenty of helpful tips and lists to

help you get organised.

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Buying a home is mainly about lifestyle, but it can also be a steady way to build up wealth over time. And owning a debt free home can make life more comfortable later on.

If you’re renting, use our online calculator to see what home loan you could get instead for the same money! www.westpac.co.nz

Buying a home

What will the area be like

in the future?

Check the zoning for the area with your local authority, especially in or around towns and cities, and ask if there are any changes planned. You want to be sure the area is still going to be a nice place to live in the future.

Zoning allows and restricts activities that can happen in an area, such as running factories or businesses. An area may seem quiet now, but if it’s zoned commercial you may find yourself surrounded by businesses later on.

Is property an investment?

Most New Zealanders want to own a place of their own and consider it a good way to save. Over time house prices tend to rise and keep up with inflation, so buying a home can be a relatively good long-term investment for many. But prices can go up or down. If you want a quick growth investment, or think you might want to sell in a hurry, it would be a good idea to get independent professional financial advice about your options.

Here are some of the advantages of investing in property

• if values go up you’ll make a gain • there’s usually no tax on capital gains

(the profit you make if the property goes up in value)

• many people are better at paying off loans than saving

• you could make money by buying carefully, or with some types of renovations

• it’s a relatively low risk investment that should keep up with inflation • you own your home and end up with

an asset instead of just paying rent.

On the other hand

• other investments may earn more • property prices can go down as well

as up

• it may take time to sell – if you’re in a hurry you may have to accept less • you have ongoing extra costs like maintenance, rates and insurance • if you don’t keep your home in good

order its value may go down.

To make the most of your investment

• buy in the best area you can afford (buying the worst house in the best street is still good advice)

• check everything out thoroughly first to avoid problems (there’s a checklist later)

• keep your home well maintained • get advice from a valuer before you

do any major alterations – changes don’t always add value.

Should you do it up?

You may be keen to buy a home you can renovate or do up, thinking it’s a good way to make money.

It’s true that one of the joys of owning a home is making it your own. But it’s not always true that you’ll get your money back when you sell. You need to be careful not to overcapitalise (spend more on a home than it’s worth). Anything you plan to do should be in keeping with the value of the home and the location. If you think you’ll want to do big alterations, talk with a valuer first.

Some things that can add value

• redecorating that makes a home feel lighter, more spacious and cleaner • work that cuts down on maintenance • improving kitchens and bathrooms • extra living space and indoor-outdoor

flow

• easy-care, attractive gardens • simple fittings like heated towel rails • better lighting and skylights.

Some things that may not

• renovations that are out of character with the home and neighbourhood • anything that takes something away,

such as turning 3 bedrooms into 2, or making a garage into a games room • adding unusual features or things

most people don’t want • turning your home into the most

expensive one in the neighbourhood.

Why buy the worst house in the best street?

Being in a good area rubs off on the value of your house and you may make a gain by improving your property to match others in the area. But you need to be realistic. If you won’t have the time or money to renovate, it may be better to look for a place that doesn’t need much work.

We’re here to help.

Have a chat with us

before you start looking

at homes. One of our

mobile mortgage

managers will be happy

to meet you at a time

and place that suits

you. They have a good

understanding of the

local property market –

and can help you work

out how much you can

afford to spend.

Why is location so important?

You’ve probably heard it often – the most important things to look for in a home are location, location, location! Why is it so important?

Your home is one of the biggest assets you’ll ever own – and your home loan is probably the biggest debt you’ll ever have. So you want to make sure the money you’re investing has the best chance of growing over the years. Good location can help. A desirable area holds its value because others want to live there too. When prices rise better areas tend to go up first and faster. Being in a good area should also make it easier for you to sell when you want to move. And you’re more likely to get back any extra money you spend on the property.

How do you find a good area?

• talk to family and friends about the areas they live in

• ask your real estate agent (or valuer) about recent sales and price trends – look for areas where houses are selling well and prices are rising • look for an area with good

facilities, such as transport, shops, schools, cafes, sporting venues and entertainment

• also look for areas that are attractive – with views, established gardens, lots of trees, or attractive homes for instance

• in older areas look for locations where you can see places are being renovated and facilities look cared for • in newer areas look for locations

where there is a variety of home designs – and effort going into planting and landscaping • remember, most people like sun,

shelter, privacy, views and flat land – areas that offer all this usually sell well!

• areas with natural advantages such as parks and beaches nearby also appeal.

What sort of area would

suit you?

Where you choose to live affects your lifestyle and your finances. For instance, living by the beach or out in the hills can be a wonderful lifestyle choice – but you may need to think about the time and cost of commuting to work.

Here are some things to consider

• how close do you want to be to work, family and friends?

• are you prepared to commute – and what will it cost?

• do you like quiet or prefer to be in the heart of the action?

• if you have a family, what services will you need near by?

• are you planning to run a business from home – will the zoning allow it and what support services will you need?

• what sport and recreation facilities do you want near where you live? • do you like old or new homes?

Newer homes are generally in areas further out.

Try to look at lots of houses in different areas to get a feel for what you like and can afford.

Where do

I want to live?

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Buying a home

We’ve been providing banking services in New Zealand since 1861. We’re one of the country’s largest banks, and we’re the bank of the New Zealand Government.

You can reach our migrant banking team by phoning 09 306 1670, or email us at migrantbanking@westpac.co.nz If you haven’t already got a copy, ask us for our Migrant Welcome Pack. It has helpful information about banking and living in New Zealand.

Do you want an apartment?

Living in the city is popular and an apartment can be the ideal first home or retirement unit. An apartment can provide convenience, security and less maintenance, and make it more affordable to live in a good location. On the other hand, a small two bedroom apartment with no parking or outdoor space in town can sometimes cost more than a three bedroom home further out. And not all apartments are good investments.

Choose the right building

Apartments in older converted buildings can be a problem and make finance and insurance harder to get. Why? Because older buildings may need expensive maintenance, and many earlier conversions were poorly done by people out to make quick money. There can also be problems with newer apartments, for example with building quality or sound proofing. And in some areas the large number of smaller, poorer quality apartments built has affected prices.

In general it’s not a good idea to buy ‘off the plans’ in a new complex where you have no proof of the finished quality. Some owners spend years getting problems sorted out.

Get the right advice

Many people say they love apartment living and it’s one of the best moves they’ve made. But there can be pitfalls so it’s important to do your research and get good advice first. Here are a few tips to get you started

• talk to your local authority and ask them if they know of any problems – they do all the consents and inspections

• get advice from an independent valuer with experience of apartments in the area you’re looking – don’t rely on a developer’s valuation

• choose buildings by local architects, builders and developers with a good track record

• be wary of buildings where apartments often come up for sale – there may be problems with the building or the body corporate.

When you’re looking ask

• is there enough space to suit your lifestyle and belongings?

• does the home have the features you want? Use our checklist over the page • does it have storage and parking?

Can you get in and out of the park easily?

• does it have good safety and fire prevention features?

• will noises and smells from the area bother you? Visit at different times to make sure

• what happens to the rubbish? Check it’s not stored near your unit • can you hear the neighbours? Check

for living and plumbing sounds at times others are home

• is there a live-in manager? If there is, meet them and ask how things run • what work has been done recently and is there money put aside for new work?

• have there been any problems with the apartment or the complex, such as leaks, and what has been done about them?

• what are the body corporate rules and the levies you have to pay? • is there a fund or savings plan to

cover large maintenance work? • what are the other owners like – are

they mainly owners or renters? This may affect how quiet and well kept the complex is

• what is the area like – how is it likely to change in the future?

What’s the body corporate?

Most apartment complexes have a body corporate. All the owners belong and pay a levy to cover building running costs and maintenance. The group is responsible for looking after common areas such as stairs, hallways, garaging, car parks and grounds. It also sets the rules for the complex and these can affect what you can do with your unit (for instance you may not be able to alter your unit or run a business from home). Every body corporate is different and it’s important to find out how it works and what the rules are, because it can affect both your use of the property and the value of your investment.

When you buy an apartment you share the ownership of the land and buildings with others so it’s important to understand how things work before you invest – we can help with practical advice.

Would you prefer an

older home?

An older home can provide character in an established setting. Rooms are often large with decorative details. But don’t get carried away with the character and forget to think about the work and money that might be needed.

Here are a few things to consider

• older homes can be hard to heat – they often have no insulation • the layout may not suit modern

living – often the living rooms are at the front, away from the kitchen and private garden

• it can be hard to know what’s ‘behind’ the walls, so alterations can be expensive – builders may want to work for an hourly rate instead of giving a firm price

• the age may mean wiring, roofing, piles and plumbing need replacing • sometimes even if you want to make

small changes you’ll end up having to do other work to get consent • some renovations need special care

– asbestos products were used until about 35 years ago, and some paints contained lead until about 15 years ago.

Still keen? Check everything carefully, get expert advice first, compare as many homes as you can – and ideally find one where the major work has been done for you.

Do you want a new home?

New homes are generally well insulated, need little maintenance and have modern kitchens and bathrooms. But you may have the extra costs of landscaping, buying curtains and carpets, and commuting. A new subdivision can take a while to start to look established. If you’re keen to build, read the section on building and renovating later on.

Are you new to

New Zealand?

If you’ve recently moved to New Zealand you might find the process of buying a home here different to what you’ve been used to. Buying a home or apartment in New Zealand can take as little as 3–4 weeks and is usually done through an agent.

You’ll find a big variety of housing styles ranging from villas built over 100 years ago, to very modern places in different styles. Many homes are built of wood, or have a wooden structure underneath a man-made cladding, and many have metal roofs.

Prices also vary a lot. For example it usually costs more to buy in Auckland than the other main cities – and less to buy in a smaller town or city, although some coastal areas can be expensive. Prices also vary between suburbs in the same city or town.

So it’s important to get good financial and legal advice before you buy. We have a special migrant banking team, who speak many different languages, to help you get established here. We can help with all your banking and lending needs, including international banking services.

Buying a home

Hot tip.

You may want to

arrange a loan with

extra flexibility so you

can afford to make

those alterations or

finishing touches. Ask

about our Choices home

loan – it’s one of the most

flexible loans you’ll find

anywhere.

What type of

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Buying a home

What do I want in a home?

Try to think ahead about what you might want for the next five to ten years. You may have to compromise on some things, so try to visit lots of homes to get a good feel for what your money can buy. There’s also a scorecard in the at the back which covers the main points here, and you can use it to compare different homes.

What do I want in a home? Comments Very important Would be nice Not really important Inside my home

How many bedrooms do you need? How many bathrooms do you want? Do you want formal and informal living areas? Do you want a separate dining room? Would you like open plan family areas? Do you like the living to flow to the outdoors? Would you like a fireplace?

Do you want a separate toilet? Is a separate shower essential? Would you like a bath?

Do you want an ensuite bathroom? Do you want a study or office?

Do you need extra space or storage for hobbies? Do you want a modern kitchen?

Is gas heating or cooking important to you? Would you like central heating?

Do you want a security system? Outside my home

Is a view important to you?

Do you want morning, afternoon or all day sun? How important is shelter from the wind? Do you want a private, quiet or secluded home? How important is outdoor living space? Do you want an established garden? Do want a large or flat section? Do you want to drive on to your place?

Do you need a garage or carport – how many cars? Do you want off-street or nearby parking for guests? Would you like a swimming pool?

Do you need the property to be fenced? Other things

Where do you want to live? What style of home do you like? Do you want a low maintenance property? Are you prepared to renovate?

Do you want the home to have potential to extend? How close to work do you want to be?

Is public transport important to you?

Do you want to live near shops and restaurants? Do you need to be near schools?

Do you need to be near health or medical facilities? What sport or leisure venues do you want nearby? How close do you want to be to friends and family? Anything else?

Looking for a

retirement unit?

If you’re looking for a place to retire there are all the usual things to look for, but there are some extra considerations as well.

You’ll want to know what sort of recreational, health and public transport facilities are available in the area. And you’ll need to know the home or unit you buy will suit your needs as you get older – for instance will the garden be easy to manage, how much maintenance will be needed and how suitable will the home be if your mobility is affected?

Considering a

retirement village?

A growing trend is to buy into a purpose built retirement village. This can be more complex than buying other types of property.

Most villages are set up as trusts and the way you own the property may be different. In some villages you own your unit and a share of the common land. But more commonly you buy a ‘licence to occupy’ (a right to live there for life) instead of directly owning the land or unit itself.

In most cases you pay a lump sum up front for your unit and an ongoing fee to cover services. What happens when you want to sell or move can vary – you need to check what restrictions or costs there may be.

Before you buy you’ll have to sign a contract that covers your occupation rights, and the village must tell you about things like its services, management, finances and fees. If you’re considering buying in a retirement village you need to get your lawyer to check the paperwork before you sign anything – ideally use a lawyer who has experience with retirement villages in the area. You should also ask your financial advisor to check that the village is financially sound.

Here are some other things to consider

• what are the ongoing fees and what do they cover?

• how is the village managed and are the staff helpful and experienced? • do you have a say in how things

are run?

• how is maintenance handled? • what services are available, for

instance cleaning, gardening, emergency meals?

• what recreational facilities are provided?

• can friends and family share these facilities with you when they visit? • is the village close to community

facilities?

• is any transport provided, or is there public transport nearby?

• how much privacy will you have? • what security is provided? • what health facilities are there? • is there a range of accommodation

so you can stay in the village if your needs change?

• what happens if you move out – what money do you get back and do you have any costs, such as refurbishment?

• is any growth in the value of the unit yours when you sell?

• do they belong to the NZ Retirement Villages Association (which sets quality standards for members)? • if the village is still being

developed, what is the reputation of the developers?

Protecting your rights

Retirement villages have to be registered and meet certain standards. They must also have a statutory supervisor, a type of trustee, whose role is to protect the resident’s financial interests in the village.

Selling your home

Before you buy, spend some time at the village, try out the facilities and talk with others who live there.

(7)

Buying a home

What if you already have

a home?

If you already own a home and want to sell it to buy a new one, you can usually use the equity in your current home as the deposit for your new one. Equity is the portion you own yourself after your home loan is paid off.

Or you may be able to keep your current home as an investment and use some of the equity you have in it to buy another home. If you’d like to find out more about investing in property and whether your home might be a suitable rental home, ask us for a copy of our Investors’ Guide to Property.

What loan can you afford?

There’s no easy way to work out what you can afford – because everyone’s situation is different. You might like to start by doing a simple budget so you know what your current situation is and how much you might be able to afford to spend on a home loan. There’s a budget worksheet in the tool kit at the back that you might find useful. Most lenders say your total loan payments (for all debts) can’t be more than about a third of your income before tax. But they also take your other expenses into account and want to know that you have spare income left over for unexpected expenses – and so you can still have a life after buying your home.

Here’s a quick guide… If your annual household income before tax is…

You may be able to borrow… $50,000 $186,200 $60,000 $235,000 $70,000 $287,000 $80,000 $335,700 $90,000 $384,400 $100,000 $433,000 $120,000 $533,600 $150,000 $595,100

This is a very general guide based on a couple without children who already have a deposit and take out a 30 year loan at 8.15% a year interest. We’ve allowed for some basic living costs, including $200 a month for rates and home insurance, and have assumed there are no debts except a $2000 credit card limit. How much you could borrow depends on your individual circumstances, so what you could borrow may be more or less than what we’ve shown here.

How can Westpac help?

If you’re thinking about buying a home or trading up to a new one come and have a chat with us – or we can come to you.

We can work out how much you can borrow and explain how everything works.

We have a wide range of saving and investment products, including KiwiSaver, to help make saving the deposit for your home that much easier. In some cases we might even be able to help you get into your first home with no deposit!

If you already have a home we’ll be happy to explain how you can use your existing home to help you buy another home – either to live in or as an investment.

And if you have a Choices home loan with us you have plenty of options. We’ll be happy to explain how you can transfer your home loan over to your new home, or apply for a top up to help cover things like alterations or new appliances.

Working out what you

can afford.

Everyone’s situation is different, but here’s a quick way to work out what you might be able to borrow. Or you might want to try out our online loan calculators at www.westpac.co.nz

Step 1. Work out what you can afford

If you take a third of your current income and take off any money you’re paying for debts now, you’ll get a rough idea of the amount you may be able to afford for home loan payments.

One third of my income before tax a

fortnight $

Less my fortnightly payments for

current debts* - $ Amount I may be able to pay towards a home loan every fortnight

= $

* Include all your debt payments such as hire purchase, car loans and credit card payments (everything except home loan payments, if you already have a home loan).

Fortnightly or monthly?

We’ve used fortnightly amounts to keep things simple (many people are paid fortnightly and making fortnightly payments can help you save money). But you can pay your loan monthly if you prefer. If you’d like to use monthly figures just multiply the fortnightly amount by 26 then divide the total by 12 (or use our online loan calculators to work it out).

Want to find out more? If you’d like to work out in more detail what you might be able to afford use the charts on the next page, or use our online calculators. You’re also welcome to call us on 0800 177 277 – we’re here 7 days a week to help you.

How much can you borrow?

The amount you can borrow depends on

• the value of the home you want to buy

• how much equity or deposit you have to contribute

• how much you can afford to pay towards your loan.

These things all need to balance, so if you can afford a bigger loan you may need less equity or deposit.

How much is the

home worth?

How much you can borrow is based on the market value of the home. Every lender has different lending guidelines but most will let you borrow up to • 90% of the home’s market value (or

the price you pay, whichever is less) depending on your situation. In some cases you may be able to borrow more.

• 75% for a purpose built apartment, or up to 75% for a converted apartment • 50–75% of the land’s market value for

a section depending on the area and services such as water and power.

What equity or deposit

do you need?

Generally you need to have put in at least 10–20% of the money yourself before you can get a home loan – this is your deposit. It depends on the value and location of the home and your financial situation. This money could come from either equity you already have in a home, from a deposit you have saved, or from being in KiwiSaver. The word deposit is also used to mean the money you pay the real estate agent as the down payment on your home.

What if you don’t have

a deposit?

The more you can put towards your home yourself the smaller your loan will be. And having a deposit shows you are committed, and gives both you and your lender a ‘safety margin’.

But we understand that it can be hard saving enough for a deposit, especially if you’re buying your first home or are paying rent at the same time. So we also have other options to help you get into your own home. (eg: your family could help if they can gift you some money for a deposit or become a joint borrower.)

What about KiwiSaver?

If you have been saving with KiwiSaver for at least 3 years you may be able to take out some or all of your contributions (plus your employer’s contributions) to help you buy your first home. After 3 years of saving you might also get a Housing New Zealand first home subsidy of up to $5,000 depending on how long you’ve been saving. If you qualify you’ll get $1,000 a year for up to 5 years’ saving. Couples who both qualify could up this amount to $10,000 between them. To qualify there are certain income and home price levels.

Buying a home

How much

can I borrow?

Finding it hard to save

a deposit?

Come and have a chat

with us. We may be able

to help you get into your

own home sooner than

you think.

(8)

Buying a home

What should you ask the agent?

Here are some questions you can ask the agent or the owner, to find out about the home you’re viewing

• why are the owners selling the home? • how long has it been on the market? • how much interest has there been? • what is the Rateable Valuation? • how much are the rates?

• what are the properties nearby worth?

• what have other places nearby sold for recently?

• what are the neighbours like – do they have children, pets, or noisy parties? • what facilities are in the area?

• what are the schools like, are they zoned? • is the house north facing (for sun)? • when does it get the sun?

• what is the prevailing wind direction? • is the home sheltered?

• is there noise from traffic, trains, planes? • is there a danger of flooding or erosion?

• are there any major redevelopment plans for the area? • are there any zoning restrictions?

• what type of title (ownership) does the property have?

• are there any covenants (restrictions) or easements (rights) on the title? • are there any protection orders over the trees or buildings?

• where are the boundaries? • is the home suitable to renovate? • could the section be subdivided? • does the home need any urgent repairs? • has this home been a ‘leaky home’?

• have there been any alterations – do these have consents and certificates? • has it been re-piled, re-plumbed or rewired – and when?

• what heating and insulation does it have? • what fittings are being sold with the home?

If you’re looking at an apartment or retirement unit also ask what the body corporate or ongoing fee is, and if there are any restrictions on the use of the property or common areas.

How do you find a home?

Once you know what you want and can afford, you want to get a ‘feel’ for the market. You could start by

• searching the Internet – try trademe.co.nz or realestate.co.nz • reading the papers – weekend papers

often have lots of adverts

• driving around areas you like, looking for ‘For Sale’ signs and open homes • looking at homes in real estate agents’

windows, or on their websites.

Real estate companies

Many people find their homes through a real estate company. Often homes are only listed with one company, so ask agents from different companies to show you suitable homes. If a home is a ‘sole agency’, only that real estate company can show you the home. A ‘general agency’ means the home can be listed with a number of companies.

Private sales

Not all homes are listed with real estate agents. Some people try to sell their homes privately and they may use a ‘private sale’ company to help them with marketing. Don’t assume a private sale means you’ll pay less – the owner may be trying to get more from the sale by not paying an agent – and dealing directly with the owner may be quite stressful.

Finding it yourself

Some homes never come on the market. If you know where you want to live you could put a short note into letterboxes in the area, ask locals if they know of anything coming up, or even put your own advert in the paper.

Buying a home

How can Westpac help?

Before you get started

come and talk with us.

We can give you an idea

of what you can afford

and put you in touch with

the right people, such as

a lawyer and a valuer.

Where do I start?

(9)

Buying a home

Is the home in good order?

Before you buy a place you want to be sure it’s in good order, or at least know what repairs are needed and how much they may cost. Your best protection is to get a report from a building consultant. But you probably won’t want to pay for a report until you’ve done some checks yourself and are fairly sure it’s the home you want.

Here are a few pointers

When you check the home look for structural problems, or things like rotten wood or leaks that can be difficult and expensive to fix.

Signs of movement and sinking include cracks in walls and doors or windows that are crooked or jammed. Rotting or borer filled timber is soft and spongy. Rotting wood sounds ‘dead’ when you tap it and crumbles if you push a key or something sharp into it.

Signs of leaks include mould, mildew and bulges in the wall. Often the place will smell musty as well. Musty or unpleasant smells can also be a sign of problems with the drains or sewerage. Be wary of fresh paint and plaster especially if only some areas have been done up – it could well be covering up a problem. Furniture and pot plants can provide good camouflage too, both indoors and out, so don’t be embarrassed to look behind or under them.

Some common problems include

• poor ventilation and lack of insulation • lead paint and asbestos problems • dangerous wiring

• deterioration in wall claddings and roofs

• rotting timber windows • perishing seals on aluminium

windows

• breakdown of silicon sealers • leaky homes.

There’s a checklist over the page with tips about what to look out for.

How much will

maintenance cost?

The cost of repairs and maintenance depends on the age and condition of the home. But you’ll probably need to allow at least $3,000-$5,000 a year. It doesn’t mean you’ll spend this much every year. But over the years you will have maintenance costs, sometimes quite big ones, and you need to be prepared for this. Here are some rough estimates based on an average size home.

Some typical

costs $ Estimated

New roof (steel) From $10,000 New spouting/

gutters $3,000–$4,000

Re-wiring $12,000–$15,000 Re-plumbing $10,000–$15,000 Re-piling $10,000–$15,000 Outside paint job $5,000–$12,000 New switchboard $3,000–$4,000 Ceiling insulation $1,500–$3,000 Retaining walls $200–250 a metre Storm water drains From 10,000

Fencing From $100 a metre

New kitchen $8,000–$20,000 + New bathroom $8,000–$20,000 + New shower $1,000–$,3000 New toilet $300-$1,000 New carpet $6,000–$15,000 Central heating $3,000–$10,000 New gas or wood

fire $1,000–$5,000

A pre-purchase report from a reputable building consultant can help you decide how much you might have to spend on repairs and maintenance.

A word about leaky homes

Any home can have problems with leaks, especially if maintenance has been poor. But the term ‘leaky homes’ mainly refers to homes and apartments built in the 80s and 90s using untested building methods and products.

Some things to be aware of include

• monolithic wall cladding systems • wall claddings that touch the ground • recessed windows and lack of eaves • complex roofs and hidden gutters • solid balconies and decks jutting

from walls.

If the home you’re looking at has these types of features it’s really important to get a building report done by someone qualified to do a weathertightness report (and preferably using a moisture meter). If you later find a problem you may be able to make a claim, but it’s a lengthy process and there’s a time limit for making a claim.

How can you check

things out?

Once you’ve found a home you’re interested in you’ll want to check it out carefully. It really is a case of buyer beware. You don’t want to end up with a lemon, or costs you hadn’t planned for. Here are some ways you can check out the place you’re interested in.

1. Check the place out

When you visit a place you like, take your time. Go back several times. Ask the agent lots of questions (there’s a suggested list in the tool kit on page 68), and do a thorough check for things you may have to fix or want to change.

2. Contact the council

Ask your local and regional councils for information about the area and any future plans. Talk to the town planners (and ask them if there’s anyone else you should talk to). Ask about the district or resource plan. It sets out the rules for development in the area, including zones and building heights. You can also get things like drainage and building plans and copies of permits for the property from your council.

3. Apply for a LIM report

A Land Information Memorandum (LIM) from the local authority gives you all sorts of valuable information about

drainage, roads, flooding, erosion, consents etc. There’s a charge for LIM reports and prices vary around the country but you can expect to pay around $150–$350 (costs are generally higher in the larger cities and you usually pay more if you need an urgent report).

While LIM reports can contain a lot of valuable information they may also be missing vital bits (such as accurate boundaries, or mention of Wahi Tapu or sacred sites), so it’s a good idea to also talk with the staff and try and find out what other information the authority may have about the property and its neighbours.

4. Get expert advice

Get a report on the property from a licensed building surveyor. Make sure you choose someone with a good reputation and ask them what their report will and won’t cover. Also ask them to give you an idea of what it might cost to fix any problems they find. If there could be any problems with the land or large structures you should also get a report from an engineer.

You my also want to check with the Weathertightness service (see the Useful contacts section) to see if there has been a leaky home claim for the property.

5. Check the title to the property

This will tell you if there are any restrictions that could affect your ownership or use of the property. The agent should have a copy of the title. Also talk to your lawyer about the title and any other checks they think you should do.

You might also want to ask your lawyer about title insurance. It could help protect you if you find later on that the boundaries are wrong or there has been illegal work done on the property.

Buying a home

What should

I look out for?

Keep a record of the homes you visit

Remembering all the homes you visit and which agent you saw them with can be hard. Use the diary in the Tool kit at the back of the guide to help you keep track.

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Outside areas

Roof Check for rust, holes, cracked tiles, signs of leaks.

Outside walls Check for rotten or broken boards, cracks in plaster, rust or other stains. Is the cladding clear of the ground? Plaster and paintwork Is it in good repair? Is it cracked? Look for peeling paint and plaster. But also check new work to make sure it’s not a

cover-up job. Spouting, gutters

and flashings Look for rust, holes, cracks and gaps. Are all doors and windows flashed or sealed to prevent leaking? Check for broken sealants. Sheds, garages and decks Are they in good order? Have they been built with permits? If decks or balconies are fully clad, check carefully for

signs of leaks or repairs.

Banks Is there any sign of erosion? Are retaining walls in good condition?

Boundaries Ask where the boundaries are? Can you see any survey pegs? Are fences in the right place? Is anything over the boundary? If you’re not sure, you could get a plan from the council and measure things out – or get a survey done. Drainage and flooding Are there storm water drains? Is the ground boggy? Are there nearby streams or rivers that flood?

Access and driveways Is there good access to the house? Are steps, paths and drives in good order? If access is shared is it likely to cause problems and who pays for the upkeep?

Other Is there a washing line? Is there an entry porch? Are fences and railings in good order? Is the soil good? Are the grounds well looked after? Look under and behind big pot plants – they may be a cover-up.

Also think about

Noise and smells Check for noises from traffic, trains, planes, neighbours, nearby industry. Check for smells from local businesses, waterways or rubbish collection. Visit at different times of the day to check.

Safety, security and

fire prevention Is the access well lit? Is the street lighting good? Check for fire exits – are fire escapes in good order? Are there smoke detectors? Is there a security system? Do all external doors lock? Do all windows fasten securely? Do decks and balconies have secure railings?

Buying a home

Buying a home

What do I need to look out for?

Once you’ve found a home you like, don’t let emotions carry you away – take a careful look for potential problems. And try to find out what repairs might cost so there are no expensive surprises later on. There’s also a scorecard in the Tool kit at the back which covers the main things to look out for and you can use it to compare different homes you view.

Structural things

Floors Are the floors uneven or do they move when you walk around (try jumping up and down)? It could mean problems with the piles. Check for rot and borer holes. Are the floors spongy or damp?

Walls and ceilings Look out for rust or other stains, mould, bulges and cracks that could indicate leaks or that a house that is sinking. Check for fresh paint and plaster that could be a cover-up. Are walls and ceilings insulated?

Doors and windows Check they open without sticking, that handles and locks work (and have keys). Sticking or crooked windows and doors can mean a home is moving. Check woodwork for rot and borer. Check rubber seals on aluminium doors are not perished.

Under the house Look for signs of dampness, leaks, borer, pests, gaps or rot in floorboards, cracks in the foundations, rotten or sinking piles. Is there good ventilation to keep it dry? Test wooden piles below ground level for soft rot. Inside the roof Look for leaks, holes, sagging roof, cracks in the chimney, bird nests. Check for insulation.

Living areas

Light Is there enough natural light? Do skylights open?

Gas Are the flames strong? Turn all outlets on at once to check flow – if the flames are weak there could be a blockage. Gas fires need to be vented to the outside to prevent condensation.

Power Are fittings, switches and sockets in good repair? Are there enough power points and lights? Is the switchboard old? Fireplace Does it work? Is the chimney old or cracked? Is there a permit?

Black stains above the fire can mean it’s not working well.

Central heating Does it work? Ask to test it. Ideally there should be outlets in most rooms, and several controls around the home. Fittings and chattels What chattels are included in the sale? Are carpets, curtains, lights, heaters, dishwasher and so on in good order? Flooring Check under furniture for worn or stained patches.

TV Is there an aerial? Is the reception good? Kitchen, bathroom and bedrooms

Water Check all taps work – turn them all on at once to test pressure. Is there plenty of hot water? Is the tank insulated and restrained? Fans Do they vent to outside? If they don’t, they can cause fires. Appliances Do the oven, hobs, dishwasher and rangehood work?

Cupboards and wardrobes Look inside them. Is there enough storage? Do they open and shut properly? Check for mould and damp smells. Toilet Does it flush strongly? Are the bowl and cistern cracked or stained?

Bath, shower and

hand basin Are they in good condition? Check the water pressure and look around them for signs of mildew, leaks or rotting surrounds.

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Buying a home

you can’t usually get it back if you want to back out after everything is unconditional.

The deposit is held in a trust account and is protected by law. No one can take it if the real estate company goes broke and there’s a fidelity fund to cover missing money.

If you’re buying privately

The process is much the same if you’re buying privately but it may be more difficult negotiating directly with the seller, especially as they may be expecting more from the sale. It’s very important to use your lawyer at each step. If you buy privately, pay the deposit to your lawyer so they can arrange for it to be held in a safe trust account.

The sale and

purchase agreement

The agreement mainly used these days is a standard one created by the Real Estate Institute and the Auckland District Law Society. It’s about 10 pages long and in small print, so you may want to get a copy from your agent and read it in advance so you understand what’s in it.

It covers things like responsibilities under various laws and what happens if settlement is late – and lets you insert your own dates, amounts and conditions.

Is your offer conditional?

Making your offer subject to

conditions gives you time to check that everything’s okay. If your conditions are not met you don’t have to go ahead, or you can renegotiate – for instance you might be happy to do repairs if the price is lower. It’s very important that your lawyer checks your offer and any conditions you add. The other thing to remember is that too many conditions can put a seller off.

Is your offer unconditional?

If you make an unconditional offer you need to sort out your loan and everything else beforehand because once the offer is accepted you have to go through with the sale. If you break the contract you can be sued.

Sellers can add conditions too

Sellers can also add conditions, although this is less common. One you may see is an ‘escape clause’. This means if they get a better offer they can give you a deadline to make yours unconditional. If you can’t meet the deadline they can accept the other offer.

Important dates

Your offer has several dates in it. The finance date is when you need to have your money arranged by and settlement date is the day you take over the home. We also suggest you put in a date that your offer ends if the seller doesn’t accept it – that way you’re not left wondering while the seller possibly waits for a better offer.

This offer is subject to…

Here are some common types of conditions buyers add to the agreement. • finance – this gives you time to

arrange your loan. Make sure it says finance on terms satisfactory to you or you could be forced to borrow on terms you don’t like

• title search – so your lawyer can check there are no problems with the title, or restrictions, covenants or easements you need to know about • valuation report – so you can check

the market price. Your lender will probably want you to get one anyway • LIM report – so you can check what the council knows about the property and make sure there are no problems with things like consents or flooding • building inspection report – so

you can check the building is sound and find out about any problems that might cost money

• engineer’s report – so you can check any structural or land issues • sale of another home – if you need

to sell one home to buy another. You might also want to add other conditions covering things like repairs they’ve said they’ll make or extra items they’ve agreed to leave.

Your conditions need to state that the report, finance or repairs must be satisfactory to you. Otherwise you will still have to go ahead even if you’re not happy with the results.

Your lender will need to see the sale and purchase agreement after the deal is done. But talk to them beforehand to check if they have any specific clauses they want added.

If you’re building

There may be extra loan conditions if you’re building, so it’s a good idea to talk with us before you sign anything. We strongly advise you to get legal advice before you sign any agreement or contract.

Some important don’ts • don’t feel pressured into

rushing things

• don’t sign anything you don’t understand

• don’t tell the agent or seller your top price.

What are the different ways

to buy?

There are three main ways to buy a home

1. by offer and negotiation – you

make an offer and then negotiate if necessary until you and the seller agree on a price

2. at an auction – you go along on

the day and everyone interested bids against each other until only one bidder is left

3. by tender – everyone interested in

buying puts in a written offer for the seller to consider, usually all at the same time.

Most homes are still sold by the first means. But auctions and tenders are often used in sought after areas, or if a home has a special feature, or needs to be sold by a set date.

Buying by offer

and negotiation

This is normally done through a real estate agent using a standard sale and purchase agreement. You make a written offer using this form, which the agent takes to the buyer.

If the buyer accepts your offer, they sign it and the form becomes your sale contract. But the seller may want to negotiate and make a counter offer (where they change something in the offer then sign it). The agent will come back to you to see if you agree to the change and if you do, you sign the change and the deal is done. Or you might decide to change something yourself and the process is repeated until an agreement is reached or one of you decides to stop.

The big plus about buying this way is that you can take time to think – and you can put in conditions that let you check the place out before you’re fully committed.

Important things to know

Your sale and purchase agreement is a legal contract. You need to have it checked by your lawyer before you sign it – and if any of the conditions change during negotiation. The agreement becomes binding once both you and the seller have signed it and initialled all the changes. You can stop negotiating at any time up until then.

You can take your time. You don’t have to have everything agreed in one day or evening – although this is what the agent may be hoping to do.

If the seller changes something, you can change the offer. So if the price goes up you may want to extend the settlement date or ask for something else to be included in the deal. Or you may want to make your offer more attractive without raising the price by taking some conditions out.

Paying a deposit to the agent

Once everything’s agreed you pay a deposit of 5–10% of the sale price to the agent. The rest of the money is paid on settlement day. The agent pays the money to the seller when your offer becomes unconditional (when all the conditions are met and the sale is definitely going ahead). You get your money back if the sale falls through because the conditions are not met. But Get your offer checked by your

lawyer before you sign it – and again if the seller wants to change any conditions during negotiation.

Buying a home

How do I buy

my home?

(12)

Can you buy before the

auction or tender date?

Often the seller is prepared to look at offers before the auction or tender closing date. In fact you may see the words ‘if not sold prior’ in the advertisement for the sale.

Ask the agent handling the sale what their policy is on ‘prior’ offers. Usually if someone makes an offer that’s acceptable to the seller, everyone else who has registered their interest gets a chance to make an offer too. You won’t know what anyone else’s offer is. So if you’re interested in a place that’s being auctioned or sold by tender it’s important to register your interest straight away and do all your checking as soon as you can. That way you could try to make an offer before other buyers are ready. It also gives you the best chance of being able to make an offer yourself if someone else gets in early. If you want to try to buy the place before the auction or tender date you’ll probably have to make an unconditional offer.

Have you got your

deposit ready?

If the money you need

to give the agent or

auctioneer as your

deposit is tied up,

perhaps as equity in

your current home or in

an investment you can’t

break yet, talk with us.

We may be able to help

by lending you the money

you need for a short

time – or by guaranteeing

your deposit.

4 tips to improve your chances 1. Get your loan pre-approved so

you have more negotiating power 2. Talk with a lawyer early on, so

you can act promptly if you find a good opportunity

3. Know exactly what you’re prepared to pay and be ready to walk away if you have to 4. Shop around so you know the

market and can recognise a good buy.

Buying a home

Buying by auction

Auctions may be used if a property is unusual or hard to value because it has some special feature, such as a great view. Or the seller may want to sell by a set date.

If you buy at auction it’s unconditional, so you need to arrange your finance and do all the legal and other checks beforehand.

How does the auction work?

If a home is being auctioned, the buyers go to the auction and bid against each other until there’s only one bidder left. The auctioneer runs the auction and tells you what amounts they will accept. They’ll try to start high but towards the end they may accept bids of $1,000, or even $500 or less.

The seller usually sets a reserve price and tells the auctioneer what it is. If the final bid is over the reserve, the home is sold and the buyer pays a deposit, usually 10%, to the auctioneer. Settlement (the day you get ownership) is usually set for 20 days later, but can often be negotiated.

If the reserve isn’t reached, the home is ‘passed in’, meaning it didn’t sell at auction. Often it sells by negotiation straight after the auction. If you are the highest bidder you have the first chance to negotiate and can add conditions to the contract at this stage if you need to. It’s a good idea to go along to a few auctions first to get a feel for the way they work.

What’s a good strategy?

Buying at auction makes most buyers nervous, but chances are the people you’re bidding against have never bought a place at auction either. Everyone has their own ideas about how to bid. One strategy is to hold back at first and then come in when some of the other bidders have dropped out. Once you’re in the bidding try to appear calm and determined – so other bidders think you mean to keep going. You can start bidding at any time right up until the auctioneer says ‘sold’. And you can stop at any time. The auctioneer will still give you chances to bid – and don’t worry, they do know a genuine bid from an inadvertent nose scratch!

Before you buy at auction

• register your interest with the agent • talk things over with your lawyer • ask them to do all their checks, like

checking the property title • get a copy of the auction contract • arrange your finance with the bank • get a valuation and any other reports

you need done

• get all the other information you need such as a LIM from the council • make sure you have the money ready

to pay a deposit to the auctioneer • decide on your top price.

Buying by tender

With a tender you make a written bid for the property. It needs to be your best offer as the seller looks at all the offers together and you probably won’t get the chance to negotiate.

The seller may accept the highest offer – or decide to negotiate with the person whose offer they like best. Or they could reject all the offers. You don’t get the chance to find out what the other offers are.

You can put conditions in your offer if you want. But it is better if you check things out beforehand instead because the more conditions your offer has, the less attractive it will be to the seller.

How do you go about it?

• register your interest with the agent • get a copy of the tender document – it tells you how the tender must be made, and gives details like the settlement date

• discuss the tender document with your lawyer and prepare a written offer

• get a valuation and other reports, like a LIM, first so you know the market value

• when you put your offer in you may have to include a deposit – this is refunded if your bid is not successful • if your offer is accepted you are

committed to buying the place and have a set amount of time to meet all the sale conditions.

Tenders are usually arranged through real estate agents. If the tender is ‘closed’ it means offers have to be in by a certain date and won’t be considered before then. An ‘open’ tender means there is no time limit.

Set yourself a firm price limit before the auction and try not to get carried away on the day.

(13)

Buying a home

Or you might want to combine several fixed (or capped) rate terms so not all your loan is due to be ‘refixed’ at the same time. This can help you manage the risk that interest rates are higher when your fixed rate ends.

What types of loans

are there?

There are several different ways of paying off your home loan. Most people choose a table loan because it gives more certainty about payments, or a transactional loan because it’s more flexible.

Table loan

With a table loan your regular payments are the same each time (unless interest rates change). At first most of the money goes towards the interest you owe, but as your loan starts to go down more of each payment goes towards repaying the loan itself. This is the most popular type of loan because it gives more consistency to your payments.

Interest only loan

An interest only loan is where you pay all the interest owing each fortnight or month, but nothing off the loan itself. These are usually short-term loans (up to 3 years) to help keep payments low while you are building, or if you need bridging finance while you try to sell another home. You have to repay the whole loan at the end – or get another loan. An interest only loan will cost you more in interest than a table or reducing loan because the principal isn’t going down.

Transactional and revolving loans

With a transactional loan your loan and everyday banking are combined into one account. There are usually no set repayments as long as your loan balance goes down a certain amount each month.

A revolving loan is where you can keep taking the money out again – so it’s like a large overdraft. There’s usually a set date when you have to repay the loan by.

At Westpac we have a Choices Everyday loan that combines the benefits of both transactional and revolving loans. This type of loan gives you the most flexibility.

Reducing loan

With a reducing loan you pay a set amount off the loan each time plus all the interest you owe. So your payments are a lot higher at the start than later on. This can save you interest because you pay more off the loan earlier on. Get the right loan for you. We’ll

help you work out the best way to structure your loan to suit your finances and lifestyle.

Want to ‘lock in’ the

rate that suits you?

With Westpac you can

lock in your fixed or

capped rate for up to 60

days when you apply for

your loan. It doesn’t cost

any extra to take up, and

it means any change in

interest rates between

when you apply and

pick up your loan won’t

affect you.

With a reducing loan your payments are high to start off with.

Principal

Regular payment amount

Interest

GRAPH TO COME

An interest only loan keeps payments down – but you don’t pay anything off your loan.

Regular payment amount

Interest

With a revolving or transactional loan you can pay off extra and take money out again as you want.

Loan balance

Loan limit

With a table loan you are paying mostly interest at first – but your payments stay the same.

Principal

Regular payment amount

Interest

What do you need to

know first?

When you buy a home you usually need to put in a deposit – either money you’ve saved or equity from another property. The more you can put in the better, because it reduces the amount you need to borrow. Most lenders will ask you to put in at least 10-20% yourself, although here at Westpac we may be able to help you with a low deposit loan.

You can usually take out a home loan for up to 30 years (this is called the loan term). Most lenders will charge you a fee to set up your loan.

Principal and interest

The money you owe is called the principal. With most loans you make fortnightly or monthly repayments and the money is split so that some goes to repay the principal, and some to pay interest to the bank.

Interest is what you pay the lender for the use of their money. It’s always an annual percentage, for example 9% p.a. (p.a. is short for per annum, meaning a year). It’s usually worked out each day and charged to your loan every fortnight or month.

With a long-term loan you often end up paying more in interest than the amount you borrow. But you can make big savings by paying your loan off as quickly as possible.

You can save a lot in interest if you

• pay half your monthly loan payment every fortnight (it means you make two extra payments a year) • make your payments as big as you

can and increase them whenever you can

• keep your payments the same if interest rates go down

• pay off extra when you have spare cash.

To make the most of these suggestions you’ll need some of your loan on a floating rate.

Different types of

interest rates

There are three different types of interest rates – floating, fixed and capped, or you can get a loan with a combination of these.

Floating interest rate – this can go up

and down when the market changes, so you pay the going rate. This type of rate gives you more flexibility to actively manage your loan, for example you can pay off some or all of the loan without having any extra costs to pay.

Fixed interest rate – this type of rate

is fixed at a set level for a certain time. It’s good for people who need certainty about how much their payments will be. If you want to change a fixed rate loan or end it early a ’break cost’ may apply.

Capped rate – the interest rate can go

up and down – but it can’t go over a set level for a certain time. It gives you some certainty about payments and you won’t get caught on a high rate if rates go down. Currently Westpac is the only lender offering a capped interest rate.

Combination of rates and terms –

you can have the best of all worlds by having part of your loan on a floating rate (an amount you think you can pay off quickly) and the rest on a fixed or capped rate so you have more certainty about how much your payments will be.

Buying a home

What do I need

to know about

home loans?

References

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