Queen City Law is a law firm based in Auckland. We are specialists in providing legal services for conveyancing and property transactions of all descriptions. Our lawyers speak Spanish, Korean, Chinese, Filipino, Indonesian and English. We are extremely experienced in conveyancing in the Auckland region, but for that matter have acted on property deals throughout the country. I have decided to compile something of a Home Buyers Guide with this post, as many new purchasers are entering the property market.
Its a big financial decision to buy a house and you will need to take good legal advice before you sign anything. Be especially careful if you are buying in a partnership or collaboration with other parties. In any event every house buyer will have to cover costs additional to the price of the home and some of these hidden costs can cripple the unwary home buyer, placing them on the backfoot with a new mortgage. However some banks will make a provision for legal fees of $1000 or throw in a flatscreen, and for certain first home buyers there are subsidies, Kiwisaver cashups and so on.
The additional costs you may have to cover include:
1. LIM Report
A Land Information Memorandum or LIM report can be obtained from the relevant city council, the price varies depending on the council and the urgency but is generally between $250 to $400. It is an important condition to include in sale and purchase agreements as a LIM report contains all the information the council has on file for the property including resource and building consents, zoning and more.
2. Structural Building Report
Always obtain a building inspection report to ensure the property is structurally sound and weather tight. A report obtained from a qualified building inspector will cost in the region of $350 to $900 depending on the size of the house and depth of service.
3. LMI and Loan Application Fees
Some banks charge loan application fees of around $400. Also if you are borrowing more than 80% of the value of the property the lender is likely to charge a Lenders Mortgage Insurance Premium (LMI) fee which varies depending on the perceived risk and amount you are borrowing. This is often added to the amount you are borrowing so you don’t have to come up with the funds upfront.
4. Conveyancing Fees
For a standard residential purchase conveyancing may run between $650- $2000 while you will also have to cover LINZ registration costs, search fees and associated costs.
5. Legal Structures
You may decide to set up a Family Trust to own your new property. You may also wish to consider entering into a relationship property agreement or update your Wills. The cost of this would be dependent on your personal requirements,
As a property owner you are responsible for paying city and regional council rates. These vary depending on the value of the property and region but for a typical property in the Auckland suburbs expect to pay $1500 to $3000 to the City Council and a few hundred to the Regional Council. When you purchase a property the rates are apportioned so you will have to pay the Vendors for any rates they have paid in advance.
7. Moving Costs
You will probably need a moving company to transport your furniture and belongings to your new home. Most moving companies charge by the hour so don’t book your movers for first thing in the morning on settlement day as the actual settlement may only take place in the afternoon. Sadly a lot of people get burgled immediately after they settle their new home – consider changing the locks at the property straight away.
A requirement of all mortgages is that you have replacement insurance on the property. It would be wise to also consider contents insurance and life, income or mortgage protection insurance. These are all well worth while but could set you back several hundreds or thousands of dollars. Post the Christchurch Earthquakes the whole issue of adequate insurance, replacement value and so on is somewhat at large so read the fine print and take extra advice if required.
9. Connection fees
You will need to open electricity, gas, phone, broadband, sky accounts and other subscriptions for your new home as required. Connection fees for these can add up to over $1000!
10. Registered Valuation
Another common unexpected cost is a registered valuation which is often required by the bank in order to get finance approval. This usually costs upwards of $400 depending on the size of the property. Getting this done may take longer than expected so make sure the agreement for sale and purchase of real estate condition provides sufficient time for this.
11. Cleaning Costs
Many people like to get the carpets steam cleaned or sometimes the entire property commercially cleaned before moving in. There is nothing nicer than moving into a spotlessly clean new home (and nothing worse than finding the Vendor has left it in a terrible state!). If you want to avoid having to clean the house yourself you can put a clause in the Sale and Purchase Agreement stating that the Vendor has to get the property commercially cleaned on settlement day or before.
12. Contingency Fund
Have a contingency fund for unexpected expenses. There will always be something you need for the new house so it pays to keep some money aside for miscellaneous expenses.
13. Unknowns – Further potentially major traps for the unwary.
We live in times when we have a $20 B leaky building syndrome, everyone so more focused on seismic issues after the Christchurch earthquakes (including banks and valuers) and there are constant changes to the framework of building and construction and property law. For example, the new Unit Titles Act (which is the law that governs people who live in or invest in high rise and other apartment projects ) has recently undergone major changes and is still far from perfect. And when things go bad they can really go bad.
Sometimes people seem to forget that buying or selling a property is often the biggest financial deal they do in their lives and it constantly surprises us that more care and attention to detail is not always evident given what can be at stake. So when you are making your budget for a residential home purchase try to assume these additional costs will run to at the very least $5000, but could very easily exceed this guestimate. In the meantime if you are purchasing an apartment read our Checklist on Purchasing an Apartment.
If you need legal assistance with your conveyancing or property deals don’t hesitate to contact us. Queen City Law is often able to add considerable value to your property deals whether the purchase price is $300,000 or $100,000,000.00 .