You have found a property you want to buy and are ready to make an offer.
Before signing the Sale and Purchase Agreement, however, it is worth slowing down long enough to understand exactly what you are agreeing to.
A Sale and Purchase Agreement is not simply an expression of interest. Once it has been signed by both buyer and seller, it is legally binding, subject to any conditions contained in the agreement.
Getting the agreement reviewed before you sign can help identify potential fish hooks and make sure you understand the commitments you are about to make.
What Is a Sale and Purchase Agreement?
A Sale and Purchase Agreement records the terms under which a property will be bought and sold.
Among other things, it will generally identify the buyer and seller and record matters such as the agreed price, deposit, settlement date and conditions of the transaction.
Those details matter.
The wording of the agreement can affect what needs to happen before settlement and what options may be available if a problem arises.
That is why it is sensible to have your conveyancer review the agreement before signing.
1. Check the Property Details
It sounds obvious, but make sure the agreement relates to the property you believe you are buying.
Your conveyancer can also check the legal title to the property and identify matters registered against it.
These could include easements, covenants, rights of way or other restrictions.
The question is not simply “Is there anything on the title?”
It is “Could anything on the title affect what I intend to do with this property?”
2. Check the Purchase Price and Deposit
Make sure the purchase price recorded in the agreement reflects your offer and understand when any deposit will become payable.
You should also make sure your proposed purchase fits with your financing arrangements.
Finance pre-approval does not necessarily mean your lender has approved every property you may choose to buy, so discuss the particular purchase with your bank or mortgage adviser.
3. Look Closely at the Conditions
Conditions are an important part of many property offers.
Depending on your circumstances, these could relate to:
Finance
LIM approval
A building inspection
Title review
Due diligence
The sale of another property
The appropriate conditions will depend on the property and your situation.
Do not assume a standard condition automatically provides the protection you expect. The wording matters.
Have your conveyancer review the proposed agreement and discuss the conditions before you sign.
4. Understand the Deadlines
Conditions generally need to be satisfied within specified timeframes.
Make sure you understand what needs to happen and how much time you have to complete the necessary checks.
For example, you may need time for your bank to confirm finance, obtain a building report, review council information or investigate something identified on the title.
An unrealistically short timeframe can create unnecessary pressure.
5. Consider the LIM
A Land Information Memorandum contains information held by the local council about the property.
Depending on your circumstances, reviewing a LIM may help identify matters requiring further investigation.
If your agreement includes a LIM condition, understand how long you have to review the information and what the agreement allows you to do if a concern arises.
6. Consider a Building Inspection
A conveyancer looks at the legal aspects of your purchase. They do not replace a suitably qualified building inspector.
A building inspection can provide information about the physical condition of the property.
If you want the purchase to depend on an acceptable building report, make sure the Sale and Purchase Agreement contains an appropriate condition before you sign.
7. Check the Title for Easements and Covenants
An easement can give someone particular rights over part of a property or allow a property owner rights over neighbouring land.
Covenants can place restrictions or obligations on how land is used.
These matters are not necessarily problems, but you should understand them.
For example, a restriction could potentially affect plans you have for the property.
Your conveyancer can review the title and explain matters requiring your attention.
8. Think About How You Will Own the Property
If you are buying with another person, think about how ownership will be structured.
This is particularly important when purchasing with friends, relatives or business partners, or when people are contributing different amounts towards the purchase.
Questions may include:
How much is each person contributing?
What share will each person own?
Who will make the mortgage repayments?
How will property expenses be divided?
What happens if someone wants to sell?
What happens if circumstances change?
A co-ownership agreement may be appropriate.
These conversations are usually much easier to have before the property is purchased than after a disagreement arises.
9. Consider Your KiwiSaver Timing
If you are an eligible first-home buyer intending to use KiwiSaver towards the purchase, tell your conveyancer early.
Your KiwiSaver provider will need documents and sufficient time to process the withdrawal.
Do not assume the money can simply be accessed immediately when settlement arrives.
10. Make Sure You Understand the Settlement Date
The settlement date is when the transaction is completed and ownership transfers.
Before agreeing to the date, consider whether it works with your finance, moving arrangements and any other property transaction.
This becomes particularly important if you are selling another property and relying on those funds to complete your purchase.
What if I Am Buying at Auction?
Buying at auction requires particular care because you should not assume you will be able to complete your investigations after successfully bidding.
If you are considering an auction property, talk to your conveyancer early and make sure you understand the agreement and complete the appropriate checks before auction day.
Should a Conveyancer Review the Agreement Before I Sign?
Ideally, yes.
It is much better to identify a concern while you still have the opportunity to consider it than after you have entered into a binding agreement.
Your conveyancer can review the document, explain its legal effect and identify issues requiring further investigation.
At Conveyancing Plus, we also want to understand what you are trying to achieve with the property. Knowing your plans can help us recognise issues that may be particularly relevant to you.
Already Signed the Agreement?
Contact your conveyancer as soon as possible.
If your agreement is conditional, there may still be important checks to complete and deadlines to meet.
Do not wait until a condition is about to expire before asking for advice.
Before You Sign, Know What You're Agreeing To
Buying property is a major financial decision.
Taking some time to understand the agreement, investigate the property and get appropriate advice can help you make that decision with much greater confidence.
Conveyancing Plus helps buyers across Waiuku, Pukekohe, Franklin, South Auckland and beyond understand their Sale and Purchase Agreements and identify potential fish hooks before they become bigger problems.
Learn more about Buying a Property →
Have an agreement you are considering signing? Talk to Conveyancing Plus before you commit.
