Commercial property investment overtakes pre-GFC levels

Figures from a CBRE investment report shows strong increases in the number and volume of transactions for the New Zealand market.

CBRE New Zealand senior director of research Zoltan Moricz​ said that in the last six months of 2015, 136 commercial properties changed ownership, with transaction volumes totalling $2.831 billion. 

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Getting a LIM

A Land Information Memorandum (LIM) report is a summary of information that the council holds on a property. 

A LIM can alert you to any significant issues and help you decide whether to buy the property or not, or whether you should adjust the price you are willing to pay for it.

 A LIM can have quite a lot of information, or not much – it depends on how much the council has had to do with the property.

A LIM can help you confirm that any alterations to a building have been consented and signed off (code compliance certificate has been issued).  LIMs also highlight any recorded problems with the land, e.g. flooding or erosion hazards.

A LIM will include:

  • Special land features or characteristics (including potential erosion, slippage or subsidence), flooding of any type and possible contamination or hazardous substances
  • Information on private and public storm-water and sewerage drains
  • Rates information including any rates owing
  • Any consents, notices, orders or requisitions affecting the land or buildings
  • District Plan classifications that relate to the land or buildings
  • Special conditions including NZ Historic Places Trust listings
  • Network utility in relation to the Building Act 1991 or 2004.
  • Any other information the Council deems relevant such as compliance certificates
  • Licences

Auckland Council’s standard LIM service costs $275 (incl GST). An urgent LIM costs $380 (incl GST).

By law Council has to provide the information within 10 days of the request (and payment).

What is the difference between a LIM and a property file?

A LIM is a summary of information that is held on a property, whereas a property file will hold additional, detailed information that is not included in a LIM report, such as:

Building and resource consent documentation

Correspondence about the property.

What council has on file depends on what has been done on the property since the original building was constructed, and relevance to the property, e.g. licence and registration information.

How to get a LIM

The process for applying for a LIM depends on where the property is located, but you may have the option to order a LIM online or in person.

Find out more here: Auckland Council

It is a good idea to look over the LIM with your lawyer as they have experience with LIMs and can help you understand the full implications of anything the LIM reveals.

There are limits to what a LIM will tell you.  It will not cover aspects the council doesn’t know about such as unpermitted work or the condition of the property.  Older properties may have incomplete records.

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Getting a Building Inspection

When buying a home it pays to know about its condition, beyond what the LIM tells you. You don’t want to find yourself faced with large repair bills for work you didn’t discover until after you move in.

This is where a pre-purchase building inspection comes in.

A pre-purchase building inspection is an inspection of a property that looks for significant defects, maintenance issues, signs of deterioration or inferior work. An inspection will tell you if there are any signs that the property is a leaky building, for example.

Identifying building issues before making a purchase means that you can choose to pull out or modify your offer. You could include in the sale and purchase agreement that certain issues are resolved before settlement.

When getting a building inspection, ask for a pre-purchase inspection so the inspector includes relevant areas in the report.

A building inspection is a visual examination of the building covering only those things that can be reasonably accessed and viewed. This includes the condition of the building framing, the roof, chimneys, foundations, exterior walls, heating systems, windows and doors, insulation, interior flooring, ceilings etc. They may also check driveways, sheds and garages, retaining walls, verandas and balconies etc.

They may also do non-invasive moisture testing.

An inspector will not do invasive testing such as the removal of wall linings to check for insulation or leak problems. They may recommend further inspection by qualified tradespeople such as Plumbers or Electricians if there is visual evidence of non-compliance or other issues. While they will report evidence of pest damage, unless specified it won’t include checks for pests beyond that which can be detected visually.

Depending on who you use, a building inspection report may include estimates on resolving any areas of concern.

The cost of a building inspection will depend on the size, if there are any additional structures such as garages, where it is located and its age etc

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Buying a house through a private sale

If you want to buy a home or property, does it matter if there is a Real Estate agent involved?  What if you have to deal directly with the home owner to get the property you want?

Some people are happier dealing directly with the property owner than going through a Real Estate agent. As there will be no agent commissions to pay you may be able to negotiate a lower purchase price.

However, Real Estate agents play a role ensuring the process runs smoothly.  An agent will be able to say why the property is for sale, whether there are other buyers etc

You will still need to get a lawyer involved, particularly to check the Sale and Purchase agreement.

If you do purchase a property via private sale, never pay the deposit directly to the Vendor.

If the agreement is cancelled it may be hard to get your money back.  A deposit should only be paid into a trust account so if there is no agent involved it can be paid directly to the Vendors lawyers trust account.

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Buying a house at auction

An auction is when a property is purchased by the interested parties publically negotiating a price.

Houses for sale by auction don’t usually have a price advertised.  This is so that the price can be determined by the market (i.e. people who want to buy it.)  Usually if a house is going to auction, the real estate agent or client has decided there is enough interest to make an auction a good option.  The vendor will normally set a reserve price prior to the property going to auction which is the minimum price they will accept.

Sometimes a property is put up for sale by auction as a way of getting a quick sale, so don’t assume an auction is going to be crowded with motivated buyers.                                                                                                                                     

How it works

The Auctioneer will start by asking for an opening bid.

The Auctioneerwill decide the amount the bidding will be raised by – for example if the opening bid is $350,000 they may call for bids to increase by $10,000 increments – so in this case the next bid will be $360,000 .

To bid, you attract the attention of the Auctioneer – for example, by raising your hand or calling out your bid.

Bids have to reach the reserve price which the vendor has decided before hand.  Once it does, the house is on the market and will be sold to the highest bidder once bidding has stopped.

If your bid is successful you need to pay a deposit on the day – normally 10% of the purchase price so make sure you have that money available. 

Offers at an auction (or prior to) must be unconditional – i.e. you can’t make it conditional on you selling an existing property or other conditions.  Check the terms of sale for that particular auction so you know what you are agreeing to.

An unconditional offer is effectively a cash offer and is legally binding.

If the property is passed in, it means the bidding didn’t reach the reserve price.  If you were the highest bidder, you will be given the first opportunity to negotiate with the vendor futher.

Before you go to an auction

  • Do your research on the property – get a title search and a LIM before the auction.  Check the sales information for similar properties in the same area so you have an idea what the sale price might be.  Go to the auction with a preferred price, and the top price you are willing to pay.
  • Attend some auctions just to watch so you become familiar with the process
  • Talk to your lawyer and get them to check the Contract of Sale before the auction
  • Get a building inspection done
  • Sort out your finances.  You need to know what your limit is going to be on the day, and have the required deposit available.
  • Register to bid: if you register before the auction day, you will be kept informed of progress during the marketing phase leading up to the auction – including if a pre-auction offer is made.

You can also make an offer prior to auction day.  If you do, all other registered parties will be informed.  The auction may be bought forward.

If you find the whole process unnerving, you can get someone to bid on your behalf.  Remember that it is the Auctioneer’s job to get the best offer on the day so stick to the limit you decided prior to the auction.

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Interest in property crowdfunding growing

The Financial Markets Authority says there has been a growing interest in property crowdfunding with promoters proposing various business models, including one offering Kiwis a new way to enter the housing market by buying shares in a house share company.

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