Buying a House in New Zealand

As Americans who have bought and sold two houses in the US, buying a
house in New Zealand was a whole new experience. In some ways it was a
lot easier, but that made it a lot scarier. The US realty and banking
industries regulate themselves much more stringently than the NZ
equivalents.  A US buyer is protected to some degree by
government
and industry regulations. Here, we found that the entire process was
“buyer beware” and it was our responsibility to
ensure that
the mortgage, the property and the companies we were dealing with were
legitimate.

We will outline the buying process in contrast to the US process,
focusing on those elements that are the most different from our past
experience in these areas:

  1. Finding
    a House
  2. Evaluating
    the Purchase Price
  3. Making
    an Offer
  4. The
    Mortgage
  5. Closing
    dates
  6. Foreigner
    Restrictions

1. Finding a House

In the States, we went to a realtor and contracted with a
buyer’s
agent. We depended upon this agent to help us find available properties
through the Multiple Listing Service (MLS) and arrange viewings. They
also provided resources such as comparable pricing lists to helped us
determine the value. The fees for this agent were paid by the seller in
the closing costs.

In New Zealand there is no MLS, so there is no role of a
buyer’s
agent who could access and sort those for us. Most properties are
listed exclusively with one selling agency, and so to find available
properties you need to review the listings of each agency, such as LJHooker
or Harcourts
or one of many local agencies. They might also list their properties in
online property sites like TradeMe
Property
and Realestate.co.nz,
in newspapers or in local weekly property listing publications, but not
necessarily. We were able to identify all of the sources in this area
by noting the
agencies from yard signs, then finding where they listed their
properties. Even searching in a fairly small market area, we
had to be vigilant to find new listings by checking all of the sources
listed a few times a week and visiting the neighborhoods we were
interested in.

Unfortunately, these listings are sorely lacking in detail. Typically,
the size of the house is not listed, just lot size and the number of
bedrooms and
baths. In our area, land is often subdivided so that you
can’t
see the house without trespassing up a private drive, so drive-bys
aren’t always helpful. When we found mildly interesting
properties, we had to attend the open houses (often as short as 30
minutes!) or call the selling agent and arrange a visit to get any real
sense of the property.

We found that houses here aren’t prepared for sale in the way
they are in the US. Paint is very expensive, so it doesn’t
make
sense to brighten a place with a quick coat when the new owners will
likely want to choose their own colors. The same is true for flooring.
This means that very nice
properties often looked quite shabby to our eye.

More importantly, the US was decades ahead of New Zealand in regulating
residential building requirements. New houses here are being built to
fairly “normal” modern standards (see the Department
of Building and Housing
site for more details), but even
moderately older
houses may startle you with their lack of basic features such as
central heating, insulation, dampness protection, safe wiring, full
pressure hot water, and so on. Be sure to spend time in a number of NZ
houses to experience these quirks before you start shopping so that you
learn what questions to ask.  Also, spend plenty of time on
the ConsumerBuild site, an excellent
consumer education resource run by Consumer.org.

2. Evaluating
the Purchase Price

Pricing here is much more variable than in the US. Typically a US house
is listed with a sale price, and the expectation is that the buyer will
make an offer somewhere in the range of that price. Here, about half of
houses are listed in this manner. The remainder are listed either as
PBN (price by negotiation), Tender, or Auction. All of these methods
rely upon the buyer to offer a price, which might be countered by the
seller, or outbid by another buyer. And yet even with so much riding on
the buyer being informed about the general market, you don’t
have
a buyer’s agent or the MLS to get comparable pricing data.
You
might be able to get the selling agent to get you a list of recent
sales, but only if they feel it’s to their advantage.
 
You can pay an agency like Quotable
Value
 to
perform a valuation. Unfortunately that costs several hundred dollars
and takes several days, so you don’t want to do that unless
you
are very likely to buy. (Your mortgage lender might also require a
formal valuation before giving final approval.)

Fortunately, we did have one resource not available in the US. In
Nelson, as in many NZ communities, the tax rated value of every
property was available in an online
database
.
While this is not directly tied to the sale price of a house, it is
much more accurate than property tax values in the States. The local
city council adjusts these prices every two years based on average
market data, last sale price and the rate of price changes in the
specific neighborhood. So, while you might not buy a house for the
rated value, you can at least see how the rated values of two
properties compare, which direction they changed (up or down) last
time, and the values of the houses on the block. This is of course very
tedious work, because you have to search each property and note the
values to compare. In our case, we estimated that houses were typically
selling for about 7% above the rated value, so that gave us some sort
of baseline.


Comments

Buying a House in New Zealand — 3 Comments

  1. Thanks for the article, good to hear how buyiing a house differs from the USA.

    Sounds like you could have had a better agent that covered the basics. Unfortunately they are rare now days as most are just in for the quick buck then move on…

    The purchase date is normally flexible as is the right to split the costs or ask the seller toput right any fualts found via the inspection. BUT you need them in the contract first! You can try later but a lot harder.

    We have brought a few homes in NZ, most have been easy, all had the subject to inspection clause, a few needed work that the seller sorted as they would have lost the sale otherwise :-)

    Yes the banks have a frinedly face but it can be unclear to what fees , charges “MAY ” be impossed. In one case we needed to sale quickly to avoid a squeeze in income due to moving from a regular job to self empolyed. We took the responsible step of down grading house quickly to cope as the new bussiness started to grow.
    The bank decided to enforce its early repayment fees of $3500NZD with disregard to the fact that we were refinancing with them on the smaller house……….. At the time that was 6 months of payments!

    Have fun in Nelson, it is a magic spot that we hope to move to after a few more years of our OE

  2. Thanks Paul for your thoughts. I think the agent was as helpful to us as he rightly could be, while representing his clients, the sellers. Great idea to be clear in the contract that changes might be made based on the inspection! We are enjoying Nelson!

  3. great work and thank you for all the information and insight.
    Very much appreciated.
    My partner and I have fallen in love with the kiwi lifestyle and country side of the south Island and are preparing to shift countries to enjoy it as well.
    At this stage Wanaka which will give us time to check out the rest of the beautiful country.
    Regards

    jack

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