New REAA booklet - NZ Residential Property Sale & Purchase Agreement

Just got off the phone with the REAA and this is quite an important post so I hope you buyers out there are reading!  Feel free to pass this on also - spread the love...

As the Author of Young & Singles Guide to Property Investment, a book I wrote and designed specifically for newbies to the property market, (you should REALLY think about ordering yourself a copy if you don't have one by the way, especially if you are buying anytime soon), I feel a sense of duty to advise you of your rights as a buyer in regards to this booklet that the REAA have put out.  You, as the buyer, need to read this booklet if you are making an offer on a property, you will then need to sign a form to say you have received and understood the contents of this booklet.

So, with that said, on page 5 of this booklet, I found the wording to be a little bit unclear.  All's I will say is I have researched it and my findings are as follows (always chat to your solicitor though before you sign the agreement - please):

The wording in the REAA booklet reads that you pay your deposit on Acceptance and the commission is then paid to the Agents when the contract goes Unconditional.  Let me start by saying, you DO NOT have to pay a deposit on the Acceptance of the Sale & Purchase Agreement.  In my opinion, I would advise you to pay the deposit on the Unconditional day, you can even hold the whole amount and pay all of it on Settlement day if you really wanted to (might be a bit tougher to get the Vendor to agree to that though).  

Please keep in mind that you as the buyer can be in just as much control as the vendor, you can negotiate the terms of sale too.  So for example, if you only want to pay $10,000 as your deposit on Unconditional day and the rest on Settlement day, as long as the vendor agrees, then you can do that.  This example is common, especially when you have a smaller deposit to start with.

If you have comments to add, please do, be good to get the feedback on this issue.

Right, now I can sleep easy.

;-)

The new Real Estate Agents Act and what does this mean for you as a buyer?

Ok, thought I'd explain a few of the changes in this new Real Estate Agents Act (2008) that came into effect last Tuesday on 17th November 2009 after going unchanged for 33 years.

The nitty gritty of the new act is explained in Alistair Helm's blog who is the CEO of Realestate.co.nz, well worth subscribing to his blog by the way.

There is also good information in Ross Brader's Blog, a successful Agent in Pt Chev.

Of course you can also go to the actual REAA website (Real Estate Agents Authority).

Few bullet points as to the key changes:

1. Cost for agents to stay working in the industry are going to increase. They now need to be individually licensed, this wasn't the case in the past. They had to be qualified of course, but not individually licensed as either a sales person, branch manager or licensee.
2. Agents need to now disclose to the vendor all discounts off marketing/advertising they might be privy to; and the commission they receive from the sale.
3. As a buyer you will need to sign a disclosure confirming you have received 'The New Zealand Residential Property Sale & Purchase Guide' BEFORE you sign the Sale & Purchase Agreement. The vendor will also need to sign one similar.
4. Licensee's now need to produce a market appraisal on each property listed. The price they come up with must be supported by comparative sales and must meet expectations of the Vendor.
5. Fines toward Agents or Agencies are now not in the hundreds they are in the thousands and tens of thousands.

My take on the new Act is that it's definitely been needed. It is going to professionalize the industry even more than it was which can only be a good thing. It is basically going to make everything very transparent, which again, is a good thing.

One thing I would mention is, think really hard if you are going to make a formal complaint to REAA about an Agent... not only will they be taken through a very lengthly battle of paperwork and drama, but they could be fined thousands and thousands of dollars. Ok, absolutely fair enough if what they did was purely wrong and the mistake is valid, but just keep in mind what you could be ruining by making that complaint.

Real Estate Jargon - what does it all mean?!!

Real Estate jargon that is commonly used on listing adverts can confuse and annoy buyers who are searching for the most basic piece of information on a property such as - PRICE. The price in my opinion should be on all listings, especially as people who often search for properties do not live in the area and won't know that the property they are searching for (and possibly fell in love with), is out of their price range. We could all be saved a lot of time, frustration and hassle if prices were on listings!

I must admit that when I am searching for property, I do tend to skip the ones that don't have a price, and I know a lot of other people who do the same.

I would like to shed a bit of light on the following common phrases and acronyms used by Real Estate Agents, instead of putting the price on their listings:

POA - Price on Application

This means you just need to make contact with the Agent to obtain the price or price range. It is sometimes said that POA is used when the vendor is testing the market so therefore may not be too motivated to actually sell.

Buyer Enquiry Over

Obviously this is what the Vendor would like the buyer enquiry to be over and at least with this one, Agents usually give you a figure to work off. However, being me, if I was going to offer, I would still probably offer just under the 'Buyer Enquiry Over' figure, you never know what vendors are willing to accept.

Tender

Tenders are a very good way, from a Vendors perspective, of drawing out the very best offers from potential buyers with minimal mucking around. As the buyer, you will need to make contact with the Agent to find out what the Vendors expected sale price range is. The Agent won't give you an exact figure but should at least give you a range so you have something to work off. If after asking the Agent you are still a bit unsure of the price - go to Zoodle - and purchase a sales report to find out what other like properties in the area are selling for. At the very least, download the free report on the property from Zoodle and check out the Capital/Rateable Valuation.

As a buyer, you need to go in with the leanest offer you can muster. What I mean by that is you need to have your offer look the most attractive to the vendor, so while a cashed up offer would be best, it is sometimes not possible, so what I mean by lean, is having minimal conditions on your offer and going in with your highest price. So, as a buyer, you have ZERO control of this situation and that is why I really really don't like it.

Auction

Auctions are a great way of Vendors relying on emotional buyers competing on Auction day which of course pushes the price sometimes well in excess of the valuation figures. Same goes as above in Tenders, for Auctions, you will need to get in touch with the Agent to discuss prices or check out Zoodle.

As a buyer, you need to have all your reports organised before the Auction day, such as valuation, building reports, LIM etc. Your 10% deposit needs to be on hand too. If you win at the Auction you are expected to pay your 10% deposit that day. If, you decide later that you don't want the property, you may find that you don't get your 10% back, so be very certain when you are bidding at Auction!

Negotiation

Another frustrating one as you will need to get in contact with the Agent to obtain the price expectancy of the vendor. At least with Negotiation you have a bit more control than Tenders and Auctions as it is a Offer and Negotiation process.

All this stuff and more is in my book, Young & Singles Guide to Property Investment - feel free to order yourself a copy.