In part-one of this two-part series on the property purchase process, we finished up by explaining the ‘Due Diligence’ phase that is designed to provide the opportunity for the purchaser to investigate the property and secure finance while locking in an agreed purchase price.
If you’re interested in learning more, our partner for first home purchaser legal services, House Me Legal, has produced a document to guide home buyers through the key components of the Due Diligence phase which you can access here.
In part two of this series, I am going to cover the final stages of the property purchase process- going unconditional, and settlement. Read on below.
4. Going Unconditional
This is the phase following due diligence. At this point, you have researched the property to the extent that you are happy that there are no outstanding issues and often have secured appropriate bank finance. Your bank finance approval may have conditions attached to the offer so you will need to make sure that these conditions are going to be met to secure the lending. Best practice would be to ensure all bank conditions are met prior to going unconditional on your purchase contract, effectively resulting in an unconditional offer of finance to align with your unconditional property purchase.
An unconditional offer means there are no longer conditions attached to the purchase, so you are obligated to see the agreement through. As highlighted in part one, there will usually be a 10-day conditional offer period. In some instances, you may be able to have the conditional phase extended if there is significant evidence to suggest you are working to fulfil the commitment to the offer.
Want more information on the property purchase process? Check out our free First Home Buyer’s Guide here.
Turnkey/ Off the plan properties:
If you have signed a contract for a property that is not going to be built for 12+ months and you are required to commit to the purchase without securing finance, then it is recommended that you seek appropriate advice (from a solicitor and mortgage adviser) prior to going unconditional. This is because you can only obtain a bank approval for up to a maximum of 12 months (not with every bank however), IF you have a specific property contracted. You will also need to acknowledge the terms of the Sale and Purchase Agreement and ensure you have an understanding on concepts such as what happens if either party does not meet their obligations i.e the developer does not complete the build in the proposed timeframe or to the proposed quality standard etc.
To achieve an unconditional offer of finance, you will need to work through the bank's conditions set out in the approval letter. Most often, these are a list of items that still need to be evidenced to show the bank that everything declared in your application is true. If you are a first home buyer (and have chosen to access your KiwiSaver for the purchase), the bank will need evidence that your KiwiSaver has been withdrawn from the provider via a request from your solicitor. If you are buying a new build property, often the bank will condition the approval to evidence of the property’s value in the form of a valuation report conducted by a registered valuer.
The bank’s list of conditions can contain anything that is reasonable for them to request as evidence about your financial situation or details of the property. This information is required to meet their obligations set out by responsible lending standards, as well as ensuring the property meets the required standard of a suitable security.
Want more information on how Lateral Partners can help with your property purchase process? Get in touch with us here.
This is the final stage of the property purchasing process. The date for settlement is generally outlined on the first page of the Sales and Purchase Agreement (next to the deposit required and conditional agreement notes). If you have met all conditions in your finance approval and the Due Diligence completed on the property found no issues, then the next step is to prepare for your settlement. This includes making sure that all the funds that are being contributed to the purchase (cash, KiwiSaver, any gifts, bank loan etc) are arranged to be with your solicitor to make the transaction on the agreed settlement day.
It is important that you are engaged with your Solicitor and Mortgage Broker during this period as they will make sure that the bank issues the funds in time for settlement. Your Mortgage Broker will coordinate the handover with the bank and arrange the loan agreement documents to be sent to your solicitor. You will then meet with your solicitor to sign the documents which will be returned to the bank. Once this is completed, and the transaction takes place you can look forward to receiving the keys to your new property.
Ready to take the next step in your property purchase journey? Get in touch with us here, we are always happy to help.
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