Navigating the Property Purchase Maze: Conditions for Your Sales and Purchase Agreement
Embarking on the journey of purchasing a property is an incredibly thrilling life milestone. It's not just an investment but also a leap into a space that you can call your own. However, this journey also entails a considerable financial commitment, one that requires a keen eye for detail and careful planning. When you put forward an offer on a property, the terms of this offer get meticulously laid out in a critical document, the Sale and Purchase Agreement (S&P Agreement). This agreement is your compass, guiding you through the property purchase process, and its conditions are your shield, protecting your interests from unforeseen complications.
Here I offer brief guidance on the types of conditions you may consider requesting from the real estate agent for inclusion in your S&P Agreement.
1. Finance Condition: A Safety Net for Buyers
Many buyers rely on a mortgage to finance their property purchase. The finance condition acts as a safety net, specifying that your offer is contingent on your ability to secure a home loan of a particular amount by a set date. Should your loan application fall through, this condition empowers you to withdraw from the agreement legally without any financial penalties.
2. Building Inspection Condition: The Seal of Quality Assurance
The physical state of a property is paramount, and the building inspection condition helps ensure you aren't buying into a problem-ridden property. It grants the space for a professional to conduct a thorough inspection of the property, covering possible issues such as structural defects, hidden pest infestations, or concealed dampness. If significant concerns are identified, this condition provides a lever for price renegotiation or offer withdrawal.
3. Land Information Memorandum (LIM) Report Condition: The Encyclopedia of Property Information
A LIM report is a treasure trove of information held by the local council about a property and its land. It reveals potential hazards, rates, building consents and permits, drainage, and zoning. The LIM condition provides a window to withdraw your offer if the LIM report uncovers information about the property that's unsatisfactory to you.
4. Sale of Other Property Condition: Timing the Property Dance
If you need to orchestrate the sale of your current property to facilitate the purchase of the new one, you might want to include the sale of the other property condition. It states that your offer is reliant on the successful sale of your existing property within a defined timeframe.
5. Title Search Condition: Unravelling the Legalities
The title search condition is the right to peek into the legal status of the property. It exposes any restrictions, easements, or covenants that may limit your full use and enjoyment of the property. (note this clause is already included in the Auckland District Law Society & REINZ document and your solicitor has 10 working days from the date of the agreement to check the title and get back to you within this time frame)
6. Insurance Condition: Protecting Your Investment
This condition states that the sale is dependent on your ability to secure satisfactory property insurance. This becomes increasingly crucial in regions prone to natural disasters, where obtaining insurance might present challenges.
These conditions only serve as starting points. Each property and buyer's circumstance is a unique puzzle, requiring bespoke solutions. Therefore, it's essential to customise the conditions in your S&P Agreement to cater to your specific needs. Engaging a solicitor or real estate salesperson assistance can offer invaluable advice on this front.
The number of conditions that can be included in a Sale and Purchase Agreement (S&P Agreement) without making the offer less appealing to the seller is not set in stone. It depends on several factors such as the property market condition, the seller's urgency to sell, and the specific conditions themselves.
In a hot or seller's market, where there is high demand and competition for properties, sellers may have multiple offers and may favour offers with fewer conditions as these can lead to a smoother, quicker sale. In this situation, buyers may limit their conditions to the most essential ones, like the finance condition or the building inspection condition.
In a cooler or buyer's market, where properties might be on the market for longer periods, sellers may be more amenable to offers with more conditions. However, regardless of the market condition, the key is to ensure that each condition you include is reasonable and necessary for your specific situation.
That said, on average, most buyers include two to four conditions in their offers. These typically cover crucial areas like financing, property inspection, and obtaining a satisfactory LIM report.
Remember, the goal is to strike a balance between protecting your interests as a buyer and presenting an attractive offer to the seller. An offer laden with too many conditions might be less appealing to the seller. Therefore, judiciously select conditions that protect your interests while also maintaining the attractiveness of your offer. It's advisable to consult with a legal professional or a real estate agent to tailor the conditions to your specific circumstances and the property you're interested in. They can guide you on which conditions are necessary and how many would be reasonable to include.
This article serves as an informational guide, not as specific legal advice. Always consult with a legal professional when making significant decisions related to property purchase agreements.
Happy buying, please check out checklist