Increasingly, home buyers in the Rotorua area are experiencing similar difficulties reported by home buyers in Auckland and other areas where there is a physical shortage of homes to buy, inflated prices, and actually even being able to secure a contract in some instances. So what’s that all about?
Well, there’s good news and bad news. Firstly, whilst there does seem to be more out-of-town buyers who are relocating to the provinces or buying rentals because they are pushed out of the high-priced Auckland market, it’s probably not quite the hype made out in the media. But, secondly, what I am seeing is a physical shortage of under $350k and less housing for sale in the Rotorua region. This means the goal posts keep moving for first-home buyers who are finding themselves in the situation of simply having to buy SOMETHING, ANYTHING, in their price range in order to even get on the property ladder, and not be too picky about what they are buying.
Because there are actually less homes for sale, it means we are seeing more multi-offers and back-up offers on the same property. So the buyer has to put their best foot (offer) forward because the vendor gets to pick from more than one buyer in a multi-offer situation. In a back-up contract situation, if a buyer dilly-dallies around getting their finance and so on sorted, they risk contract cancellation in favour of another buyer waiting in the wings. If you were selling, wouldn’t you choose the offer with highest price or least conditions and restrictions? Of course you would.
But the down-side of a shortage of homes for sale means a buyer often needs to be in a position of waiving obtaining important due diligence reports such as building, LIM, valuation, Council property file etc, in order to make their offer as attractive as possible to a vendor. And this is serious stuff, because such reports can cost a buyer in excess of $1200.00 or more in total, but on the other hand can leave a buyer flying in the dark about what they are actually buying. And if you don’t get the property? Tough luck: that money is down the drain and you’ll have to start the same process with the next one you find.
I suggest that if you are trying to actually secure a property and have had trouble doing so, that you firstly make sure you have any KiwiSaver and HomeStart Grants pre-approved (if you qualify for this under the KiwiSaver scheme). Secondly, you approach your bank or mortgage broker for finance approval so you know how much you can spend. Thirdly, that you ask your solicitor to check the title before you sign. Fourthly, find out from the Agent if the vendor has previously obtained a LIM or Building Report for the property or a valuation, and/or any other reports relating to the property. These can be a useful guide, but I would still always recommend obtaining your own reports if you are able to. Fifthly, if you are a back-up offer, that the contract is drafted to ensure the conditions for finance, LIM etc (if you elect to obtain those) only become applicable once the first contract has fallen over. Otherwise you end up forking out money for reports etc for a contract which may never come to fruition if the first buyer goes ahead.
by Roslyn Morshead, of Rotorua’s Morshead Law