Buying a house in New Zealand

This post is a bit of a retrospective on the process of buying a house in New Zealand. It only took us 4 months to find and buy a house here, but the process was not without pitfalls, and we worked at it really hard. We must have seen 50+ houses in total, and of these, only 4 were serious possibilities. We were successful in purchasing the second house that we put an offer in on, and that was a close run thing. The first house that we tried to buy ended up costing us about NZD3000 to no avail.

In principle, buying a house in New Zealand is an easier process than in the UK, for example. A single document, approved by the District Law Society, serves as the contract for sale. This is the house purchase agreement. When you want to make an offer on a house, the estate agent helps you draw one up. You write the price you want, plus any conditions, which should normally include a period to get a building report done, to get a Land Information Memorandum (LIM) from the council, and to get your solicitor to check the title. This offer goes to the vendor, who will typically cross out your offer price and write a higher number. They might add their own conditions such as the so-called 'cash-out clause' which allows them to reduce the amount of time you have to finish your searches if they get an unconditional offer from elsewhere. The document goes back and forth in this fashion until people stop crossing things out and everybody has initialled everything, at which point you have a conditional offer accepted.

Don't relax yet, however. Now you need to get the LIM and the building report, and this is going to cost you in the region of about NZD 1000 in total. If you find something you don't like, you can pull out or try to renegotiate the deal. At the same time, move quickly. You might have negotiated 15 days for all of this to occur, but if the vendor has a cash-out clause and gets a better offer, this period may suddenly reduce to 4. Fundamentally, you can't be gazumped in NZ, because you always have the first chance to 'go unconditional' by crossing out your remaining conditions. But do you really want to, before you have all the information?

So those are the rules of the game. The big problem is that the New Zealand housing stock is of extremely variable quality. In the 90's a lack of regulation of the building sector led to an epidemic of 'leaky building syndrome'. Also, every council has strict and very variable rules about the kind of planning permissions required. Therefore it is necessary to thoroughly research both the permits and the fabric of any house you want to buy. If you start to renegotiate, this costs you extra in solicitor's fees. If you have to walk away, all this money goes down the drain.

This happened to us with the first property we wanted to buy. It was billed as 'two homes on one title', and was actually two houses next to each other. We thought this would be great for visitors. The trouble was, we discovered that the second house wasn't permitted by the council. The owners had gradually converted and added to a garage/studio and weren't aware of the regulatory problems. Because you can't insure an unpermitted building we had to walk away.

As has been mentioned, the big problem with the house that we managed to buy is the 'fibrolite' cladding. We had no idea what this stuff was, but the building inspection turned it up, despite the fact that our builder didn't think that we should regard it as a problem. It does seem to be the case that there isn't a huge amount of asbestos in this cladding, and that as long as it is painted and in good condition, then it isn't a problem. However, nobody really knows how long this stuff lasts before it starts to deteriorate. Also, it is already expensive to dispose of, in a country where many people don't seem to care about asbestos, so we look at it as an increasing financial liability if people wise up to the problem in the future.

So, we went to negotiate the cost of the house down. We got some quotes for recladding the house and knocked that much off the offer. The vendor came back with a counter quote that we didn't like the look of, and so the negotiation began again. We went back and forth again, with even the real-estate agents knocking money off their fee to try to get the deal through (we've generally had a really good experience with real-estate agents here). Finally, in the last minutes of the last day of our due-diligence period (the time we agreed in which we could do the searches, etc.) we seemed to have a deal.

But, in a cruel twist, we didn't. There was some miscommunication and the offer didn't get signed off in time. The vendor took this opportunity to 'consider some other offers' and came back the next day saying that they had a better offer waiting in the wings, but that they'd still consider our offer if we upped it by 10 grand. I thought that I was going to become the first person in New Zealand history to be gazumped! Despite my anger at this situation, negotiation continued for another day and our offer went up by another 2 thousand (not 10!). Finally the vendor admitted that we had a deal and we could breathe a sigh of relief. Moral of the story: when you go unconditional, write the word 'unconditional' in big letters in every communication with the vendor. Then they can't wriggle off the hook.

Ultimately, despite the hard negotiations, and the problems with the house, I am delighted that we got it. It is in a beautiful situation and has the potential to be an extremely comfortable and gracious home. Once we have removed the asbestos. Caveat emptor!