Before you sign on the dotted line to buy a home, it’s important that you understand the contract. This is called the sale and purchase agreement.
A sale and purchase agreement is a legally binding contract between a buyer and a seller. It sets out all the details, terms and conditions of the sale.
It includes things such as the price, any chattels being sold with the home, whether the buyer needs to sell another property first and the settlement date.
LEGAL ADVICE KEY TO NZ SALE AND PURCHASE AGREEMENT PROCESS
While it’s important to engage a lawyer or conveyancer early in your house hunting journey, they are particularly key when it comes to the sale and purchase agreement. The Real Estate Authority strongly recommends you don’t sign anything before speaking with your lawyer or conveyancer.
Your sale and purchase agreement to buy should include:
- the name(s) of the buyers and the seller(s)
- the property’s address
- the type of title (such as freehold or leasehold)
- the price and any deposit you must pay
- any chattels that will be included in the sale (such as whiteware or curtains)
- any specific conditions you or the seller want to be fulfilled
- how many working days you have to fulfil your conditions (if there are conditions)
- the settlement date (the date you pay the balance of the purchase price, which is usually also the day you can move in)
- the rate of interest you must pay on any overdue
RESIDENTIAL PROPERTY SALE AND PURCHASE AGREEMENT GUIDE
The licensed real estate agent or salesperson handling the sale will provide both the buyer and the vendor with a copy of the New Zealand Residential Property Sale and Purchase Agreement Guide.
This guide explains the sale and purchase agreement, what happens after you have signed the contract and what to do if you have a problem. If the property is being sold privately, it’s still recommended that you read the guide.
Including conditions in your sale and purchase agreement
Before you submit an offer, talk to your lawyer or conveyancer about any conditions that should be included in the sale and purchase agreement.
You can submit an unconditional offer, which means there are no specific conditions to be fulfilled, or you can include one or more conditions.
Some common conditions in an NZ Sales and Purchase Agreement include:
- Title search - This is done by your lawyer or conveyancer to check who the legal owner of the property is and to see if there are any other interests over the property such as caveats or easements.
- Finance - This clause gives you time to organise a home loan for the property.
- Valuation - A bank may require you to obtain a valuation of the property before they agree to a loan.
- Land information memorandum (LIM) - This report provides information about the property such as rates, building permits and consents, drainage, planning and more. It is provided by the local council.
- Satisfactory property inspection report - It’s recommended you use an accredited building inspector to conduct a report on the state of the home.
- Engineer’s or surveyor’s report - Similar to the above but more focused on the entire section and the structure of the property.
- Sale of another home - You may need to sell your existing home in order to buy another.
What Happens after both parties have signed the agreement?
If the agreement includes conditions
Both parties will now work through these until the agreement is unconditional. These must be met by a specific date. Once all the conditions set out in the agreement have been met, you must complete the purchase of the property.
The buyer will pay the deposit
Depending on what the agreement says, you may pay the deposit when you sign the agreement or when the agreement becomes unconditional.
Payment of a commission
The seller will pay the real estate agent or salesperson for their services. The agent cannot ask you to pay for their services if they have been hired by the seller.
Paying the rest
On settlement day, you’ll pay the balance of the purchase price, usually through your lawyer or conveyancer.
This guest article was provided by the Real Estate Authority.
For more helpful information and property resources, visit settled.govt.nz, the independent government website for Kiwi home buyers and sellers.
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