When looking to sell your home it is important that you understand what you are selling and the process that you about to embark on.
This is also known as Freehold and is the most common way to own property in New Zealand. This means you own the land, any buildings on it and have the right to live there as long as you choose.
You own the home and improvements on the property, but you do not own the land. A ‘lease’ gives you the right to occupy the land (also called ground rent). Your lease might also include an option to purchase. Lease hold property may appear attractive as the property is cheaper to buy because land is not included in the sale. Instead there will be an additional payment to the landlord to use the land. A potential downside is that lease costs need to be renewed and current owners have no control over the cost of renewal. Recent examples have seen lease costs increase significantly.
It is very important that you check the terms and conditions of the lease with reference to the ability for the land owner to ratchet up the ground rental charges and in what time frames these increases will occur. If the property is leasehold, check the remaining lease term.
Also known as Stratum Estate or Strata Title, and used when referring to apartments and multi-units. Each owner has freehold title to an apartment or unit and any additional areas, such as car parking or storage units attached to it. A Unit Plan shows their locality. Owners of units and apartments share common areas, such as driveways and lifts, and the cost of looking after them.
This is where there is more than one dwelling on a fee simple title. All owners jointly own the fee simple title and lease the exclusive right to occupy their own property from all the owners. This often means you may need to get permission from the other owners on the title to conduct a range of activities, including renovations to existing structures.
An offer is presented in the form of a Sale and Purchase Agreement. This agreement details the seller and the purchaser, the property details, purchase price, including deposit amount, and conditions. Generally, the real estate agent will assist in completing the following details, however we strongly recommend that you speak to a lawyer before your offer is presented to ensure that all the necessary information and clauses are included:
We would always recommend that you have your lawyer review the Sale and Purchase Agreement before you sign as any suggested amendments can then be made. Once you have signed the agreement it becomes a legally binding contract.
When you are presented with an offer you are able to accept, reject or counter-offer. A counter-offer is a way of negotiating, by returning the original offer with new terms. The buyer is also able to counter-offer any offer made by you. These negotiations are generally handled by the real estate agent. The real estate agent must present all offers to the seller regardless of price or conditions. When a counter-offer is presented, the original offer is legally regarded as rejected and the new offer must be agreed by the other party. It is only when both the buyer and seller have signed the agreement that the contract is formed.
When it comes to choosing a real estate agent we often rely on friends and family for recommendations. While this may be a good idea, it is always best to take a proactive approach before engaging a real estate agent – at the end of the day, you will be paying for their services and you need to know that what they have done for you has been in your best interest. One way of starting is to visit open homes and actually see how the real estate agent operates. How actively do they sell the property? Can they easily answer even the trickiest questions posed by potential buyers? Can they identify those showing signs of interest? How did they follow up the open home?
When you have a shortlist of around three agents you need to contact them directly and understand what they have to offer. It is best to ask the agent some of the following questions to establish their suitability:
With the exception of residential property managers (handling rental properties) all professionals working within the real estate industry are covered by the 2008 Real Estate Agents Act. This act sets the legal processes and principals by which real estate professionals must operate. All real estate professionals must be licensed by the Real Estate Agents Authority and hold the necessary qualifications and/or experience as set out in the 2008 Real Estate Agents Act. They are also required to abide by the Code of Professional Conduct and Client Care.
There are three classes of licence:
When you sign an agency agreement you will be entering into a contract with a licensed agent or company. On a day-to-day basis, it is more likely that you will be dealing with a salesperson. The agent and/or salesperson always work for the client named in the agency agreement – this is usually the seller of a property. While they are required to treat the buyer fairly, it is important to remember that they are accountable to, and paid by, the seller.
A real estate agent’s primary responsibility is to sell a property for the best possible price and consequently they should be knowledgeable in:
The real estate agent will create a plan to market the property that meets your budget and is best suited to your particular property.
When an offer is made on a property, it is the real estate agent’s responsibility to present that offer to the seller – irrespective of price or conditions. Any negotiations in respect of the offer (called counter-offers) are then handled through the real estate agent until such point as an agreement is reached (or not) between the seller and buyer. An offer can be presented in the form of a sale and purchase agreement although some agents prefer to wait until a price has been agreed before drawing up the agreement. Other agents are happy to take the offer to the seller in writing. It is far better to put the offer in writing right at the start as it eliminates any confusion as to the price being offered, any special conditions attached to the offer, deposit required, and so on.
While there is no legal requirement, a buyer in the process is entitled to ask the real estate agent to arrange a pre-settlement inspection. A pre-settlement inspection is carried out shortly before the property purchase is finalised and enables the buyer to check that it is in the same condition as it was when the sale and purchase agreement was signed. Most real estate agents are happy to co-ordinate this. Commission is payable by the seller when the property settlement is complete (the day ownership transfers from the seller to the buyer).
Under the new Act, prior to signing an Agency Agreement to sell a residential property a copy of the approved Agency Agreement Guide must be given to the seller to ensure they understand the buying and selling process. Again, prior to signing a Sale and Purchase Agreement, the real estate agent is required to provide you with a Sale and Purchase Agreement Guide.
Real estate agents are governed by certain duties they are required to perform, including rules about the information that must be provided to consumers, full disclosure of commissions and other benefits, agency agreement requirements, and the disclosure and management of conflicts of interest.
If you have any concerns regarding a real estate agent you should contact the Real Estate Agents Authority Their website contains a public register of all licence holders and allows you to check whether the individual you are dealing with is a licensed real estate person as well as detailing any disciplinary history the licence holder may have.
When you engage a real estate agent you will be required to sign an agreement authorising the agent to act on your behalf in the marketing and sale of your property.
Under the Real Estate Agents Act 2008, before you enter into an agreement with a real estate agent they are required to present you with the New Zealand Residential Property Agency Agreements Guide. We recommend you download this and read it carefully. The guide provides information about agency agreements, what to expect from your agent and what to do if there is a problem, as well as where you can get more information from.
There are two types of agency agreements:
If signing a Sole Agency Agreement, you must be very aware that:
We would always recommend you obtain legal advice prior to signing any agency agreement as this is a legally binding contract.
A sale and purchase agreement is a legally binding contract and as such when selling a property it is important to engage a suitably qualified conveyance lawyer. Conveyance lawyers specialise in property transactions. They are responsible for providing independent advice and acting to protect your interests. A conveyance lawyer understands the purchasing and selling process and is experienced in negotiating for buyers and sellers.
Before signing any sales and purchase agreement, or indeed negotiating any terms, we would recommend you obtain legal advice so as to avoid any potential pitfalls. See the New Zealand Law Society’s Property Law section for further information and a list of conveyance lawyers. Alternatively download the Law Society’s Buying or Selling Property guide below.
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