Advice for buyers

Posted on 27 OCT

Q: We are a young couple recently returned to NZ from overseas. We’d heard about how prices have increased but weren’t prepared for how little you get now for your money. And the competition at auction! Scary stuff for us first home buyers: Any suggestions? Mark & Rachel

A: Getting a foothold on the property ladder is certainly not easy – particularly these days with property prices above the amount most people’s salaries can cover.
Reports from the property market show that the age of first time buyers has increased in recent years as younger people struggle to get a mortgage, and many just can’t save enough to keep up with the market. There are solutions to this, although they will not work for everyone.
First and simplest, if they have the money/equity (and desire!), is “The Bank of Mum and Dad”. Your parents may be able to lend you some money or may be able to use the equity in the family home to take out a mortgage – more on that below.
Before you do anything else however, have a talk to your mortgage advisor. A good mortgage broker (and like all professions, there are some better than others) can help you figure which bank can give you the best deal, how to use your Kiwisaver, and even give you a guide on where to look for property that may be in your budget.
Another option is a guarantor mortgage. Basically, someone who is more financially secure (often a parent) will undersign your mortgage agreement, promising to honour the debt should you fail to meet repayments. This type of mortgage is often chosen by young first home buyers, who either then pay ‘rent’ to the guarantor, or pay the mortgage directly to the lender. The guarantor should be totally clear about the responsibility they are undertaking, and it’s a good idea to have a legal document written up laying out all terms of the agreement.
You may want to consider taking out a joint mortgage. This doesn’t just apply to couples – two or more people can enter a partnership and apply for a mortgage together. Again, talk to your mortgage advisor about how best you can make this work. If you choose to undertake a joint mortgage you should have a clear legal agreement with the person you are going into partnership with. All the terms should be clearly understood by all parties, and the paperwork should be processed by a solicitor.
If you would like to know more about any of this please just email or call us.

Q: We are looking at buying and have looked at lots of properties in our search. One thing that confuses us is what is included in some sales and what is not. Some contracts include say the dishwasher, and in another it won’t, and when I ask the agent they say “it’s a fixture and doesn’t need to go on the chattels list”. What is a chattel exactly? Noel T.

A: Thanks for the question Noel. A chattel is any (re)moveable item that is not permanently attached to the land or building (i.e. it’s not a fixture). There is a box at the bottom of the second to last page of the Sale and Purchase Agreement, under the Further Terms of Sale (where sellers and buyers conditions are listed) that lists the basic items that stay with the property:  the floor coverings, window coverings, light fittings and stove.
As a buyer it is vital that you ensure that everything you expect to pass with the property that is not ‘fixed’ is included on the chattels list. This includes things like garden sheds, heated towel rails, heat pumps and even dishwashers. If an item is built-in, such as an integrated microwave or refrigerator, or a wall-mounted flat screen TV, you need to check with the agent whether it stays or not – you may consider it a fixture, but the vendor may not, so it pays to be sure. If the wall mounted TV is not a chattel then the seller must make good any damage done when removing it; he can’t leave a hole in the living room wall where the TV was mounted.
In a few rare cases we’ve seen things like expensive drapes replaced with cheaper items right before settlement. The property and chattels must be in the same condition “as inspected” (i.e. at the time you sign the agreement or visited the open home) so what you signed up for is what you should get when you take possession.
Remember too that chattels are often a great negotiating tool. It is often easier for a seller to leave something in place than go through the hassle of removing it and making good any issues left from the removal – you may pick up a bit of a bargain with a new TV or microwave!

Q. We are looking at a cross-lease property and the agent keeps referring to the “flats plan” but hasn’t really explained what that is. Can you help?  John M.

A: We sure can John. A flats plan is simply the plan attached to the cross lease title which shows the outline of the buildings on the land, allocates the building a “flat” or “area” number (e.g. Flat 1 or Area 1), and identifies the “exclusive use” area(s) related to that flat or area.  The exclusive use area is for the use of that particular flat owner to the exclusion of all other flat owners and is marked with a letter. The flats plan also shows any “common area” which is an area shared by all or some of the owners of the fee simple land and is usually a driveway or accessway. Always be sure to check that the building’s outline is the same as shown on the flats plan. If not check with your lawyer as the tile may be “defective”.

Q: What are the implications of making a conditional offer on a property, and what conditions are available to us? Jeremy P.

A: What a great question Jeremy! This is a big subject so we will answer in ‘instalments’ over the next few weeks. Firstly, the more conditions there are in an offer to purchase property, the less attractive that offer will be to a vendor.  Vendors have a natural aversion to contracts with many conditions because each condition introduces more opportunity for the purchaser to cancel the contract and therefore more risk to the vendor that the sale will not proceed. So if you are in a competitive (multi-offer) situation then you either need to be offering a good price or have as few conditions as possible.

The three most common conditions are listed on the front page of the sale and purchase agreement (9th edition): Finance, LIM and building inspection. (It also includes OIA Consent. This is seldom used and applies to foreign buyers purchasing ‘sensitive’ land – and that’s a whole other subject!) And there is then the option to insert conditions in the Further Terms of Sale towards the end of the agreement. These are probably the conditions that you will be more interested in – things such as Due Diligence, Back-up agreement, Escape clause, sale of purchaser’s property, etc. There are plenty of them!

Before we get into what the various clauses mean, just be aware (just stating the obvious here!) any conditions that you put in the agreement are intended to be fulfilled: clause 9.8 (2) of the agreement requires purchasers to “do all things that may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.” So if you put in a subject to finance clause (more on that next week) that means you are expected to at least seek finance from banks and other lenders. If the vendor can show that you haven’t done that you cannot exit the agreement because ‘I haven’t managed to get my finance’.

Q: I am looking at buying a property that is at the end of a Right of Way. The Agent says that I should “check out the easements”. What are these and why are they important? Susan H.

This is a question for our lawyer Nick Birdsey, of Birdsey & Associates and here is Nick’s answer.

A: That is good advice from your agent because yes, the easements are important.

A landowner can grant to another landowner number of rights. These things include important items like a right of way, so that the owner of the “dominant” piece of land taking the benefit can use a piece of the “servient” piece of land, for access to the road, or a right to convey power, water, gas or drainage and communications. All these things typically need access to a road, rather like a landlocked nation needs a corridor to the sea. Important facts to note then, are firstly that easements are registered against the Title, secondly they bind present and later owners, and thirdly you need to be sure what rights or burdens, are involved. Easements are different to licences, which do not “run with the land” or bind later owners.

Because it is registered against the Title, the document that creates the easement can be obtained and studied by your lawyer. This is absolutely essential if you are to know “what you are buying”.

Q: I’m looking to buy a rental/investment property and the builder who did the inspection suggested getting a “P” test done. Should I be doing this? Alister B.

Unfortunately a house could have been used as a P-Lab or have had P users as tenants without the owner, or you as the prospective purchaser, having any inkling.  After 6 months of a house being used as a lab there may be no may be no distinguishable smell at all, but it could still prove hazardous to people living there.

We recommend that you have a ‘surface’ P test done initially (around $200) and if that proves positive you should consider a more comprehensive swab test, at a higher cost of course. This may seem like a waste of money, but if the property turns out to be badly contaminated you could be up for re-instatement costs of up to $50,000. As with everything it pays to do full due-diligence before handing over your hard-earned cash.

If you are a landlord and concerned at having your properties contaminated by tenants there are a number of companies that offer methamphetamine alarm services, for around $30 per month. Not a bad safeguard for your property we think.

Q: We are first home buyers and are wondering what your advice would be re buying an apartment versus a small home or home unit? Our concern is really around which will be best investment for us when we (hopefully) move up to a family home in another 5 or so years. Thanks Jerry D.

A: We are often asked about this, and it’s quite a complex subject, so we will be answering this in two parts - Part Two next week.

In the past we have always said “buy land, because they’re not making any more of it” which would suggest that a unit or house with a bit of land would be a better investment than an apartment.

But let’s look at the facts: House values in Auckland have risen by 60.63% since 2012, while apartment values have risen 57.21% (Source homes.co.nz); not a huge difference really. So in terms of future sale price you are probably ok either way.

What may be of more importance to you is how the two differ in terms of initial cost, and on-going maintenance.

Here’s a real-life example: We recently bought an apartment in Remuera, rather than a house/unit. It suits our real estate lifestyle of course, being secure and low-maintenance. But what surprised us was what we saw at the auction. The apartment came up for auction immediately after the auction for a 75m2 brick and tile unit in Royal Oak with about 60m2 of garden/grounds. Now you should know that our apartment is 115m2 and is located in double Grammar zone. It also has great harbour views from a good-sized terrace, and the complex sports a swimming pool and tennis court, all built in the 1970’s.

Now, back to the auction: The home unit was fiercely bid for and ended up at just over $1.1m! Ours was up next and we paid well under $1m, and were left wondering why we hadn’t had to pay more.

I can hear people saying: Yes, but you will have a body corporate to pay every year. Yes, we do, and next week we will go into the ins-and-outs of body corp fees and general home maintenance costs. We will also talk about other apartment options.

This week we have the second part of our answer for Jerry – wondering whether to buy a unit or an apartment.

One of the perceived downsides of owning an apartment is the body corporate fee. These range in price depending on the apartment: If your block has a swimming pool, tennis court and elevator(s) then of course the body corporate fees are going to be higher – but you get to use the amenities at a fraction of the cost of owning it by yourself. The value of the apartment also affects the BC fee – the more expensive the apartment the more you are likely to pay each year. What many people tend to forget is that with your own home there are ongoing costs such as painting, roofing etc., while all of this, including building insurance and sometimes water rates, is taken care of through the body corporate. The average price to paint a 4 bedroom home in NZ is well over $30,000 every 10 years, while the average cost to maintain a swimming pool in the US is estimated at over US$3,000 per year. So while body corporate fees may sometimes seem high, they are just a reflection of normal property maintenance.

There are quite a  few options when it comes to apartments: City apartments tend to be directed more at the investment market and are often quite small (less than 50m2) and not something we would usually recommend to a first home buyer: Great return on investment but often limited capital gain. Next up are city fringe apartments, in areas like Newton, for example. Some of these are worthwhile considering as first homes, but the newer ones cost up to $16,000 per square metre. Suburban apartments are our personal choice. As we said we bought in Remuera. It’s a 1970’s build, very solid and has a swimming pool and tennis court, meaning the body corp is relatively high but it cost us less than $8,500 per m2, so –pretty good value compared to most newer apartments.

As we said last week, it all depends on what you can get for your money and how concerned you are about re-sale. Units seem pretty pricey at the moment while some apartments really do seem like better value.

Q: My husband and I are almost ready to buy our first home. It has taken a huge effort to get the deposit together and to organise finance, so we want to make sure we buy something that will be right for us. Any advice? Chrissie U.

A: The purchase of your home will probably be the biggest purchase of your life, so the decision of which house to buy should not be made lightly. After all, you’re going to spend years of your life there and once you make your purchase you can’t just return it like those new jeans that didn’t fit properly!

Before you even start shopping for homes, make a list of which features you’d like to have and which features you must have. No house is going to have absolutely everything on both lists, but making a wants/needs list will help you know which features you’re willing to compromise on and which ones you aren’t.

Have you ever made a purchase in a shop and you get that purchase home and it’s not really what you thought it was? Well that can happen with a house too! Make sure you visit the home you are considering at least twice to ensure that you really do love it. If it’s in an unfamiliar neighborhood or street, it may be good to visit at different times of day so you can observe things like traffic, noise levels, and sunlight.

When it comes to big life decisions, it seems like everyone has an opinion. Your family, friends, and co-workers probably have your best interests at heart, but they aren’t real estate experts. And no one knows what will make you and your family happy like you do. It’s okay to hear people out, but don’t let your loved ones talk you out of your dream home.

No matter how much you love a home, if you can’t afford it you won’t love it for long! Remember, once you buy a home you’ll need to budget for things like, upgrades, insurance and and repairs.

And talking of repairs: Does the house need a lot of repairs? When was the last time the roof was replaced? You’ll want to know as much about the home as you can. Make sure you get a building inspection, and have the LIM checked out by your lawyer. A little money spent now could save you thousands in the future. Good luck in your search!

Q: I am looking at purchasing a house and have found that the property includes ‘unauthorised building works’. I’ve been told that plenty of homes in Auckland have unconsented works and that there is a way around it if we buy. Can you explain? Bruce M.

A: You are right that there are plenty of properties around with unconsented alterations, and some of these may not be cause for any concern. We have sold properties that have had, for example, a deck added with no consent. If the work is something that concerns you then you can apply to your council for a Certificate of Acceptance (CoA). This provides a limited assurance that the council has inspected the works and is satisfied, to the best of its knowledge, that the works comply with the NZ Building Regulations (1992). You need to be aware that because they did not inspect the work during construction they will only issue the CoA if you can provide them with evidence from a qualified and independent professional that the work is compliant. Basically what this means is that you may need to get a qualified architect, engineer or building surveyor in to inspect the work and to provide detailed plans or drawings of the alterations for submission to council. Not necessarily an easy task!

Q: I’m looking to buy my first property and I’ve been told I should get a property inspection. I’m sure I will bid at a few auctions before I am successful – is it really necessary to get a building inspection every time? Jasmine V.

A: Great question Jasmine, and one that affects most Auckland buyers given our auction culture. Firstly, your first home will probably be the most expensive thing you’ve bought to date, so you really need to be sure it has no problems – a building inspection can save you thousands of dollars in years to come. A good building inspector will check all aspects of the house including roof, wiring, drainage and plumbing and will often identify issues that you as a buyer will miss, potentially saving you from making a costly mistake. In the scheme of things spending a few hundred dollars to ensure you are buying a sound home is money well spent, even if you have to do this several times - $5,000 spent now to save you $20,000 down the track could prove to be the best money you’ve spent!

Q: Can you explain what a CCC is, and what it means to a person buying a home? Donald H.

A: The full name for a CCC is a Code Compliance Certificate.  A code compliance certificate is issued by your local council at the end of a building project, if the council is satisfied that the completed building work complies with the original building consent. There are a number of steps involved in having the CCC issued - these are described in detail on Auckland Council’s website. What a CCC means to you as a buyer is that it provides a guarantee of the quality of building work done and will help you insure your property or sell it in the future. If you are ever looking to buy a property with no CCC we strongly suggest you discuss the purchase with your lawyer first.

Q: I’ve found the home of my dreams! But I’m tossing up whether to book a pre-purchase meth test. Do I really need one? And how do I choose a reputable company? Mary L.

A: What a great question Mary, it is estimated that up to 40% of NZ homes may contain traces of P (meth). We asked Stephanie Brookes, environmental scientist from Meth Wise Ltd, to give us the answer. Here is Stephanie’s response:

Buying a home will likely be the most expensive purchase you may ever make. Considering Auckland house prices are now averaging $900,000 as reported last month, the cost of a simple methamphetamine (meth) test, is a small price to pay to avoid purchasing a contaminated home, potentially saving you thousands of dollars in remediation costs. Living in a meth-contaminated home may also have serious health implications for you and your children.

Real Estate Agents have commonly included clauses protecting purchasers from buying a meth-contaminated home. Your agent may advise you to conduct a pre purchase meth test which should be included as part of your pre purchase investigation. Bear in mind, your insurance policy may not include cover for chemical contamination of your home and contents.

So, how do I choose a reputable meth testing company?

You want to be assured that the Company you choose is capable of identifying and communicating any significant contamination problems within the property. Be METH WISE and ensure the Company you engage is:

- Suitably Qualified and Experienced

- Independent & Reputable

- Using an IANZ Accredited Laboratory

- Providing you with a Comprehensive Report

A selected committee is in the process of developing a new standard (NZS 8510) covering the testing and remediation of homes contaminated by the manufacture or use of meth. This will include addressing a need for guidance on best practice sampling methodologies and procedures. The standard will ensure a consistent and effective approach is in place to manage the testing and remediation of contaminated homes and their contents. Ensure your Consultant is aware of these future changes.

Be METH WISE – Test Before You Invest.

If you would like to contact Stephanie please go to www.methwise.co.nz otherwise of course feel free to give us a call.

Q: What are some red flags to look out for in plaster homes - are they worth buying? Barry Y

A: What a great question Barry! There is a huge amount of misinformation out there regarding plaster homes. The majority of the buyers in the current market think that plaster means “leaky” and this just isn’t true. While many monolithic-clad homes definitely have the potential to leak and eventually rot, they are not all created equal. The worst-case homes were built between 1995 and 2004, when untreated, kiln-dried timber was often used for framing, and the exterior was clad in a plaster finish that relied on paint to protect it from water ingress.

Most plaster-clad houses built after 2003 were built with a cavity system which most building inspectors say is as good as any building finish. There is also a huge number of monolithic plaster homes built pre-1990 that have the potential to fail if the exterior is not properly maintained on a regular basis (e.g. painting with an elastomeric paint every 7 or 8 years), but if they ARE well maintained I’m told they can last as long as most buildings. According to a report by Pricewaterhouse Coopers in 2008 there were something like 90,000 potentially leaky homes in NZ, so there should be plenty to choose from!

In terms of buying a plaster home there are a few things to bear in mind. Buyers tend to tar all plaster-finished homes with the same brush and often won’t even look inside a home that looks like it may be plaster. That means that an astute buyer can buy with very little competition and potentially get a good buy. And if you are looking for an investment property with a good yield you will find that most tenants will pay the same rental for a home whether it’s plaster or weatherboard. The main thing to remember if you are looking to buy a plaster-clad house then you need to make sure you know when it was built, and have a thorough building inspection undertaken by a reputable inspector. Lastly, if you are thinking of buying with a view to recladding sometime in the future you need to bear in mind how much that is likely to cost, so be aware of site access, number of levels (scaffolding can be expensive!) and any decks over living spaces. Good luck!

Q: I have recently bought my first home in New Zealand and have decided that it is too small, so I would like to sell this and buy a larger home. Will I have to pay tax on the sale of my home under the new tax laws?

A: For this question we asked for a response from our friendly chartered accountant Kirit Lal of Walker Wayland, and here is what he had to say:

The bright line test which came into force from 1 October 2015 will require income tax to be paid on any gains from residential property acquired post this date and disposed of within two years of acquisition, subject to some exceptions. One of the exceptions is that the bright-line test does not apply to a person’s main home. A person can only have one main home. Where a person has more than one home, their main home is the one with which the person has the greatest connection. The owner must have resided in the property as their main home. The main home exception will not apply when only a family member and not the owner has used the property as their main home. Nor will it apply where a person has habitually sold their main home.  A person is considered a habitual seller if they either previously used the main home exception twice in the previous two years or have engaged in a regular pattern of acquiring and disposing of residential property.  If either of these applies then the main home exception is not available for this person and there will be tax payable on the sale of the property.

Next week we will be explaining how pre-auction offers work and how they can work for or against you in different circumstances, whether you are buying or selling.

Don’t forget to email us or call us if you have a real estate question you would like answered. We are happy to help and have access to experts in many property-related fields to help you.

Q: Like many other young people new to the market I’m looking at buying my first home with a friend, just to get a ‘foot on the property ladder’. What do I need to know about ownership options for my property? I hear words like “jointly owned’ but what does this mean for me? Bruce G

A: Well Bruce, this is a very common approach now that prices have increased so much. It’s really more of a legal question so I passed it on to Nick Birdsey of Birdsey and Associates. Here is Nick’s response:

For a residential property, ownership can be held by a private person or persons, in 3 different ways. First, a person can hold the property in their own name, or in their trust. So, looking at personal (non trust) ownership, a person such as Allan, whose spouse or partner is Brenda, can buy in his own name but Brenda still has or may have a relationship property interest.

Secondly, Allan and Brenda can buy the property in (a) joint ownership - the Title will say “Allan and Brenda” are the owners - or (b) as Tenants in common in equal shares, where the Title says ” Allan as to a half share and Brenda as to a half share.” There are important differences. With joint ownership ((a) above), if one party passes on, say Allan, his share goes immediately to Brenda, under “survivorship”. The property does not go through Allan’s will or estate. So there is no control over what happens to the couple’s biggest asset. That may be fine, but there are situations where (b) is better. Say that Allan and Brenda have not been together long, and bring 2 children each, Diane and Eric and Gerald and Hesta. Allan can leave his defined half share to his children with Brenda having occupation for as long as she needs it. Brenda can do the same, and after a time they can change the ownership to joint ownership. (b) is also good where there are unequal contributions to the purchase price, eg one third Allan, two thirds Brenda. Sounds complicated I know, so I suggest you discuss it with your lawyer before putting pen to paper.

Q: I’m looking for an investment property and I’ve been following mortgagee sales. Looks like there are some bargains out there, but what are the drawbacks? Johnny M.

A: Great question, and happy to answer it here but as always, we suggest you get professional legal advice before undertaking any purchase, mortgagee or otherwise. You will probably know that a mortgagee sale occurs when a property owner is not meeting the terms of their mortgage and the lender decides to sell the property to recover its debt. That can mean you get a bit of a bargain with a mortgagee sale (there may not be a huge amount owing on the property), but there are some real pitfalls to watch out for too. The thing to be aware of is that a mortgagee sale and purchase agreement differs from a standard agreement in several ways.

Firstly, all liability transfers to you as the buyer once the agreement is unconditional (i.e. at the fall of the hammer in an auction) and any damage is at your risk from then instead of at possession as with a normal purchase.

Secondly, the chattels (E.g. stove, floor coverings, etc.) are not included in the sale. This means that between unconditional and settlement/possession the previous owner can remove any, or all, of them – leaving just a shell of the building when you take possession. We’ve seen instances where complete kitchens have been removed leaving holes in the floor and walls, handrails on the stairs taken and even in one instance a deck off the living area removed completely! All of that means you need to have insurance in place between then and settlement – not an easy thing as many insurers won’t want to cover you before you have legal possession.

Lastly, the mortgagee sale and purchase agreement does not guarantee ‘vacant possession’ meaning that if the previous owners decide not to vacate it will be your problem to get them out – and that can be a nightmare! Again we strongly suggest you take legal advice before bidding on a mortgagee sale so that you are fully informed of all of the risks involved.

Q: Our agent has suggested that we get a building inspection before we list our home for sale. It seems like a waste of money to me – if a buyer wants one then can’t they just get it themselves? What’s your advice? James L.

Personally, we think it is a sensible idea. It costs money but it could save you plenty, in fact it can be the difference between selling and not selling – especially at auction.

Why? We recommend that all buyers, whatever property they are looking at, get a building inspection before buying or bidding at auction. If we have a vendor’s inspection available for them to view then it can give them the confidence to do their own inspection – this is particularly important for monolithic- (plaster) clad properties. When an agent allows a potential buyer to view the vendor’s inspection report they must be very clear that the inspection was undertaken at the vendor’s cost and that the buyer should do their own due diligence, but it can certainly give the buyer the confidence to move forward in his or her decision making.

Getting your home inspected before you list it for sale can also help you avoid any unexpected surprises. Almost every home, even new builds, are likely to have issues raised in an inspection, so having one done before listing for sale gives you the opportunity to fix anything that may scare a potential buyer off. What most sellers don’t realize is the building inspection is the place where many sales fall apart. A pre-listing building inspection will allow you to get a clear picture about the state of your house – including any problems that may derail your sale. By getting most or all of the problems taken care of you increase the chances of having a smooth and pleasant transaction.

It pays to do this well before you go to market – there are few things as stressful as selling your home, and you certainly don’t want to add to the stress by having to do last minute ‘repairs’, so get an inspection well before you want to go to market and give yourself time to get your house ready for sale.

Q: I know you are both into real estate, but can you give us any advice on what we should invest in, considering the current state of the Auckland market: Property or Shares? Jan B.

A: What an interesting question Jan. We are confident that the Auckland property market has plenty of growth in it yet, especially given the fundamentals of a growing population and lack of new houses being built. Having said that there is certainly a place for share market investment, and I know that most wealth advisors suggest some kind of a mix between the two. There was a great article last year by Mark Lister, of Craigs Investment Partners, in which he compared the relative growth of shares and property. (To see the full article, just google “Mark Lister: Property versus Shares”.) Mark admits to a bit of a bias towards shares, and his figures suggest that shares give a better return than property, however many investors would argue that the sometimes massive tax-free returns some are currently experiencing with property would beat shares any day. Some of the interesting points Mark makes in support of the share market are: Shares are liquid (easily sold) while property is less so, especially in a downturn; It is hard to diversify much in property, whereas there is plenty of spread in the share market; and finally, and to my mind most tellingly, the house sale statistics on price growth don’t take into account what owners have spent on upgrading or modernising their properties.

On the other side, property is tangible and you can play around with it – you can add value yourself, even if it’s just with a paint brush. Property values are less volatile than shares: Shares can drop in value in a single hour, while property values drop a lot more slowly if the market turns. And perhaps most importantly, you can leverage property more than you can leverage shares: You can use equity in one property to buy another.

In the final analysis most astute investors hold some of each: both shares and investment property, and we certainly concur. We’ve really just scratched the surface here - this is far too big a subject to cover in just 400 words – but we hope it has got you thinking!

Q: We have been working with a real estate agent (‘John’) who is a good friend, looking  for a new family home. Last week we went through an open home without ‘John’. The home is being marketed under the same brand but with a different office and different agent. When we told the agent that we are friends with ‘John’ he said that’s fine but John could not be involved in our possible purchase as he hadn’t introduced us to the property. How does this work? We don’t want our friend to miss out on his commission after all the work he has done for us. Jenny Y.

A: What a great question and one we often have to explain to our buyers.  All agents have a very clear understanding of how this works, but most buyers do not. If you go to an open home without your agent having first contacted the listing (sellers) agent then your friend loses any ability to claim commission if you buy the house. Basically what this means is that your agent needs to contact the listing agent prior to you viewing, to get his agreement that he will ‘conjunct’ (share commission).

This is fairly simple when the buyer’s agent and the selling agent are under the same brand, but not quite so when they are with different brands. Some agencies will share commission, while others (surprisingly) will not. It’s a great question to ask your agent when interviewing to sell your home: Do you work with other agencies?. I can assure you that many agents do not, and in our opinion this goes against every agent’s duty of care, effectively closing out potential buyers from purchasing your property.

So in answer to your question: If you go to an open home without your agent friend having first contacted the listing (sellers) agent then your friend loses any ability to claim commission should you buy the house. It’s tough but it’s a rule that protects agents from indiscriminately claiming each and every open home visitor as ‘their’ buyer. Hope that helps Jenny.

Q. It frustrates me, as a buyer, that almost every home on the market in Auckland is for sale by auction. It seems really unfair to buyers, while it just keeps driving prices up for the sellers. David R.

A. A common complaint from many people we meet at our open homes! “Why does everything have to go to auction?” Interestingly auction is a method of sale that has been popular for hundreds of years, not just for property but for art, wine and many other items. In fact web sites like eBay and TradeMe have made auction even more popular in more recent times and almost everything now can be bought and sold at auction. The reason for the popularity is that it is an open and transparent method of sale. There are no hidden surprises - you know the terms and the settlement date in advance, you know that you’re bidding unconditionally, you know who your competition is and you know exactly what other buyers are willing to offer. So while they may appear to favour the seller auctions really do work for the buyer too.

Q: I’m looking at buying a unit in a 1960’s block and it has textured ceilings that a friend has told me could be asbestos. What are the implications of buying a property with asbestos ceilings? Does it affect the value? Thanks Petrina K.

A: Good question Petrina. Asbestos has been used in construction materials until the late 1990’s and was used in external cladding, soffits, corrugated roofing sheets and textured ceilings. There are two forms of asbestos in building: friable and non-friable. Friable asbestos is asbestos in powder form (able to be crumbled into powder by hand pressure) while non-friable is in a form that can’t be easily crumbled e.g. in a cement sheet.

From the 4th April 2016 it became necessary for a trade business to have a licence for the removal of any form of asbestos, but there are exceptions. You do not need a license for up to and including 10m2 of non-friable asbestos, including any associated dust. So if you only have the textured ceiling in one room you may be able to remove it using an unlicensed tradesperson.

Our suggestion would be to get your ceiling material tested before arranging for its removal – it may be that the there is no asbestos present at all. There are a number of companies across New Zealand that will do an inspection, take samples, and provide you with a report at a reasonable cost. If you prefer you can take a sample yourself and send it off for testing – usually for less than $100. Just google “Asbestos testing” and you will get plenty of companies to talk to.

In answer to your second question: Yes, asbestos contamination in a property will affect the value. We strongly recommend our sellers to have any suspect areas tested. If it contains asbestos then they need to either have it removed prior to sale, or expect to negotiate a lower sale price given that the buyer will have to take care of the removal themselves.

We hope this helps: If in doubt, have it tested!