Back on Solid Ground
Land and home damage from the September 4 earthquake left buyers and sellers alike on shaky ground. Time marches on however, and many affected people are ready to shake the dust off and get right back to where things were left.
As the current situation may require a few extra steps to assist in the smooth transaction, REINZ has released a guide with recommendations for a smooth transition back into business for people looking to sell their homes or buy a new one.
Recommendations for sellers:
- Obtain a qualified builder or approved building inspection report to make available to your agent. Make provision for it to be available directly from the provider to the buyer on entering into a contract.
- Ensure a qualified builder undertakes any recommended repairs.
- Advise your agent the name of your insurer and your mortgage lender as they already carry the risk.
Recommendations for buyers:
- Make an offer with the intention to buy. However, make the offer conditional (having a licensed agent help you with the wording) on: finance; approval of qualified builder’s report or approved building inspection report; land information memorandum; insurance availability.
- Fully consult with your proposed mortgage lender and insurer.
- Ask the agent to email a draft of the Agreement For Sale and Purchase together with any reports to your lawyer for approval.
- Consult your lawyer, who will be experienced in resolving issues to help transactions proceed in the current market.
- Banks and other institutions are lending. However, they may have additional requirements. It is likely they will require a qualified builder’s or authorised building inspection report.
- If the report is positive, this should allow lending to proceed subject to insurance being obtained.
- If the report shows building or land has issues, an engineer’s or geo-tech report will be required before finance may be approved. As a buyer, you should be aware of the costs associated with this.
- Otherwise normal lending conditions, including valuations, should apply.
- Insurers are providing cover subject to their requirements being met.
- A qualified builder’s or approved building inspection report will be needed. If problems are identified, further engineering or geo-tech reports will likely be required.
- The seller’s current insurer may be prepared to allow a transfer of the insurance or issue a new policy, as they are already carrying the risk on the property.
- Larger houses and those in excess of $1million may need geo-tech reports to satisfy the insurance company.
- Criteria may differ between companies. You are encouraged to talk to your proposed insurer before completing the Agreement For Sale and Purchase agreement. Insurance companies may require declarations of no damage. A builder’s report could suffice.
- The requirements of insurance companies may differ depending on location.
Allow extra time
The average length of time it takes to sell a home varies depending on the market condition. In more settled times, you could look toward this measure as a guide to the likely time it would take to sell your home. Our advice is that you should allow extra time in your planning to allow for the vagaries of today’s market condition and the additional steps that may be required of the seller, or the purchaser, to meet the extra requirements necessary to complete the sale.
The market is beginning to move
There are positive signs that real estate transactions are now proceeding and sales volumes increasing, says Christchurch-based director of the Real Estate Institute David Rankin. He expects the results of this will show up in the REINZ statistics for December, which record confirmed sales from transactions made in late October and November.
Reports from licensed real estate agents show interest and attendance at open days is increasing. As minor repairs to properties are completed, more properties are expected to be coming to the market.
The report summarises by saying that buyers and sellers can proceed with confidence.
“Without dismissing what has been a challenging time for many people, it is important to recognise that `the market is the market’ and there are always genuine buyers and sellers,” the REINZ says.
There may be additional steps required as a result of the earthquake and existing EQC claims against homes, but this does not need to stop the purchase or sale of property.Tags: earthquake, insurance, mortgage finance, New Zealand, September