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Real Estate Agents and ‘the truth’

Some people regard real estate agents as a pack of liars and a proposal before parliament which would require real estate agents to tell the truth about properties they’re marketing might just formalise that thinking.

What’s more it would appear the REINZ are against the proposals saying changes to the status quo could open the floodgates to complaints. Now that’s a good look!

Personally I don’t see what the REINZ’s problem is. In my experience most real estate agents will substantiate any aspect of a property before telling you about it and if they don’t know the answer to any specific question, will go find out for you. Don’t believe me? Fair enough. I did say ‘most’ real estate agents not ‘every’ real estate agent!

The reality is this – as a prospective buyer the onus is on you to check out the property and make sure you’re happy with every aspect of it before committing 100% to the purchase. Remember what you learned in 5th form economics – caveat emptor. Don’t rely solely on what the real estate agent says. Even if they are a decent bloke their interests are not the same as yours and you need to make your own enquiries.

Things to check can include

  • Price – consider getting a registered valuation. Yes, it’s an expense but at least it’s an independent opinion. The bank may require one anyway.
  • Property title – Who else has an interest in the property? What kind of tenure is it?
  • The construction – what sort of shape are the buildings in?
  • Council records – is the building permitted, consented? Where do the drains go? Are there any specific restrictions imposed on the site?
  • Collateral – will the bank accept the property as collateral for your loan?

 

Doing these checks could save you from buying a lemon. For that reason we tend to favour sales which are conducted ‘by negotiation’ because they give you the opportunity to make an offer subject to checking the place out. Then if the checks don’t stack up you’ve got a legitimate exit.

 

Residential property market survey

Although bank reports are often as dry as a brick in the Sahara the latest residential property market survey done by the BNZ has some interesting information if you care to take a look. Truly. It’s on their website.

I noted a couple of things.

Firstly, that first home buyers are active in every region across the country. Which would seem to match very closely what we’re seeing too. After all, they’re the kind of client we most often assist.

Secondly, that prices are perceived to be rising. Whether or not that’s really happening is almost irrelevant – perception is reality. Having said that we’ve had several clients just recently really pushing the boat out to ensure they’re putting their best foot forward in order to buy a property so if prices are rising I’m not surprised. Especially in Auckland which always leads the way in terms of property price rises.

Thirdly, that the main reasons for sales failing to complete is because finance cannot be obtained or because building inspections reveal problems. No doubt the two are related but I still have a niggly feeling that some people are going into a buying situation without a pre-approval. God knows why you’d put yourself through the heartache but it still happens.

It seems some lessons are worth repeating:

The starting point for any home buyer is to get your pre-approval sorted. That’s true even if you have tons of equity built up over the years because lending criteria can and does change. What might have seemed all too easy 5 years ago may not be the walk in the park you remember. The GFC changed all that. Understand what you can and can’t do (financially) and you’ll be in a great position to be decisive and act quickly. Both great attributes when negotiating a house purchase whether it’s your first or fifth time.

The leaky building crisis still casts a pall over the property market and wise buyers will take the precaution of getting a building inspection done so as to avoid buying a lemon. Even if the house appears to be in perfect nick I’d still say you get one. Why? Mostly because they always reveal something that needs repair and you can use that to your advantage in terms of squeezing a lower price out of the vendor. If spending $500 on a report ends up saving you $10,000 it’s money well spent I say. If it reveals a house in perfect nick so much the better. The main thing is you didn’t end up buying a problem. Then it really is money well spent.

5 reasons why 2012 is a good time to buy a house

I have a funny feeling that this year we’ll be helping more people into their first home than ever before. Yes, I think 2012 is a good time to buy a house.

That’s despite the doom and gloom that keeps coming out of Europe. The ongoing quakes in the garden city. And the downbeat articles that grab headlines and sell newspapers. In October 2011 I followed the lead of my new mortgage clients and bought a house after sitting on the sidelines for a couple of years as a renter myself. The conditions seemed good enough then and I can’t see 2012 being much different.

Below are the main reasons I took the plunge recently – some of them are economic, some of them are entirely personal.

Reason 1 – sick of renting, deposit in hand

Although not a first home buyer I was in pretty much the same position. That is, I had a deposit and was sick and tired of handing over rent money every month. Don’t get me wrong – our landlord was awesome and the place we rented was modern and in a great neighbourhood. It’s just that rent money feels like dead money (unless you’re the one receiving it!!)

In addition there were other intangibles I wanted. I like a nice vege garden but there’s no way I’m investing in one only to leave it behind. I was never going to be a tenant forever so why bother? Plus it’s hard to get rid of wallpaper that drives you insane when you’re a tenant. You know what I mean?

And every tenant knows their stay is not guaranteed even if they’ve been there for years. When you buy a house it’s yours, you call the shots about everything. I like that the most.

Reason 2 – house prices have stabilised

If you had the balls, 2009 was probably ‘the’ year to buy a house in recent times because there were a number of pressure sales. Which we did – as a rental. But taking on another mortgage for our own place was a different kettle of fish. We wanted a bit more certainty in the market before getting back in, we wanted prices to stabilise.

Prices had fallen below their 2007 peak and had stopped falling which was good. Will prices go up in the next year or two? Some will, some won’t but nothing spectacular either way. For the moment, Auckland property prices are pretty much flat as a pancake and I think the same could be said in other regions too.

Reason 3 – Interest rates are good

I think they’ll remain this way for a while too. And with rates so low it gives me an opportunity to make larger mortgage repayments as well as put some money away in my holiday account.

Will rates go up in 2012? Probably. That’s because inflation will grow in NZ and Europe might yet fall apart completely. Even so the increases are sure to be well signalled and gradual. Nothing dramatic and no real surprises which means you can plan for them.

I opted to lock in my rental property mortgage for 3 years at 6.45% just recently. That’s a bit more expensive than current 3 year rates (ooops, I jumped  a bit too soon on that one) but at that rate my tenant covers the mortgage completely so no sleepless nights for me.

For my own house I opted to go for the floating rate as this gives me the ability to jump into a fixed rate whenever I want, to pay more than the minimum and make lump sum payments if I choose plus, at approx 5.50% it can’t get much cheaper.

Reason 4 – affordability is there

Everyone talks about how low interest rates make a mortgage more affordable. Which is true but income is what it’s really about. As a self-employed person my income can be a volatile – sometimes it rains, sometimes it’s a drought. Not the kind of thing that always fits nicely with regular boring mortgage repayments. But I’d worked hard in recent years to get more regularity into my income and in 2011 that work began to bear fruit. Ahhhh.

The point is if you’re going to buy a house you must have a job and a good degree of income security because without it paying a mortgage is hell.

Reason 5 – other considerations

In recent years there’s been talk of a housing shortage in NZ. If talk becomes reality then the price of existing property will tend to increase. The NZ economy is on the improve too, just. Certainly the rash of layoffs that happened in 2008-9 has all but stopped. Both bonus factors as far as capital gain goes.

People seem to moan that there are very few houses on the market and the good ones go almost as soon as they’re listed. True. And it’s always been like that. What I really noticed is that it became really easy to spot good ones amongst the duds. The good one’s really do stand out if you’re vigilant.

Some people are saying rent levels will increase in 2012 and I reckon our landlord was about to start typing the letter so we got a wriggle on.

 

Anyway, that was my thinking then and it remains so now. There are clearly economic considerations behind your decision to buy a house but there are also personal reasons that count for as much – maybe more – than just the pure numbers themselves. What do you think?

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