Glenda Whitehead: Race against time for buyers

Glenda Whitehead, property valuer. Photo / Geoff Dale

When purchasing a residential property it has become the accepted norm that conditions included in the sale and purchase agreement are completed in five days. That is, the potential purchaser has five days to obtain finance and gather information on the property before they confirm they will purchase the property (go unconditional), or walk away.

My question is, why only five days? This is a huge financial decision, why put yourself and the experts providing the advice under such pressure? Is such a tight time frame required?

First, let's look at what conditions are normally included:

• Finance
• Valuation by a registered valuer
• Building inspection
• Lawyer's approval of contract and title
• LIMs, PIMs and other checks on property details via council

There may be other conditions you wish to include, such as having the agreement subject to the sale of your existing house. In this instance, we will concentrate on the list above.

Most can be completed simultaneously, but each takes time to arrange. Recently, there has been a notable increase in house buyers wanting a clear building inspection report prior to getting a valuation. Quite understandable, why subject yourself to the cost of two reports if not necessary.

Technology has helped speed up the process. However, time is required to complete a report and provide you with insights.

• Finance - this can be the easiest or the hardest condition to fulfil. Banks' lending criteria has become tighter. It is often subject to the valuation being a certain value, a clear builder's report, as well as your personal and financial information. Banks have a ready team, many mobile, who can meet you. They may be able to approve your loan on the spot or have to refer the decision, which can take a little longer.

• Valuation by a registered valuer - This requires a valuer to visit and inspect the interior and exterior of the property. Access can be arranged through the real estate agent within a day or two of instruction. If the property is tenanted or is a mortgagee sale, access can be more difficult.

Once the inspection is completed, the valuer then reviews recent sales in the area. To determine a value they then consider these alongside the property condition, the title and zoning implications and local market effects, which are presented in a report. For a standard unit, apartment, bungalow or villa the report is typically available within two days of inspection.

However, if the property is more substantial, multi-unit, sub divisible, has weathertightness issues, or other factors that require additional research, there may be a delay. I suggest you make contact with a valuer when looking and discuss time frames based on your likely property choice.

If the valuation report is required as part of your finance, your bank may request you to arrange it or they may organise it on your behalf. In either case, you are likely to pay for it, so ensure you receive a copy. You can then review the information prior to indicating whether or not you go unconditional.

• Building inspection - Today everyone tends to include this condition, which adds time pressure. Many purchasers want this requirement met before getting a valuation. There are many different types of inspection available today, so it's important you investigate your options.

• Lawyer's approval of contract and title - they will also search the title for any interests registered on it, which may have a detrimental effect on the property, financial implications, or affect your ability to enjoy the property.

• LIMs and other checks on property details via council. These may be available from the seller. If not, Auckland Council, for example, will provide a LIM on an urgent basis, four working days' delivery, for $335; non-urgent, 10 working days for $235.

Alternatively, you can attend the council office and pay a fee to review the property file yourself. Council staff can help with any questions.

In all, there is a lot to achieve in a short time, so if you are looking to get good advice, make sure you have enough time before making your property decision.

Depending on the nature of the property, 10 days is a more realistic time frame. This needs to be balanced against what competing buyers may be asking for. If your offer is reasonable, and the market remains relatively slow, a seller is likely to agree to your terms, as these are likely to be similar to other potential buyers.

Be sure to take time out - the purchase of a home is a big financial decision and commitment. Once you have received all your reports and have finance confirmed, you should take time to review all the information.

If you feel all your conditions have not been met, then you should consider either withdrawing your offer, or making an alternative offer that reflects the findings. Consider your options carefully as buyer's remorse can be painful - and have lasting implications.

* Glenda Whitehead, QV senior registered valuer
www.qv.co.nz