The current housing market is becoming increasingly difficult to break into for first home buyers. A lot of first home buyers are now looking to purchase land and build packages, generally from developer companies, some of which fall under the First Home Grant cap. This cap changes depending on the area of the country where the purchase occurs. For a new build costing under $600,000 in Nelson, for example, a couple who earn less than $150,000 combined (after tax), can apply for a grant up to $10,000 from the government as a contribution towards the purchase price.
These land and build packages have the distinct advantage of not only allowing a buyer into the housing market, but also being able to move into a new home upon completion of the build. Buyers can also take advantage of the lower deposit required for the purchase of a new build. There are many important aspects to a land and build package which people must be aware of when entering into these contracts. A few key areas are highlighted below:
Firstly, there are two separate agreements while being one ultimate end goal. There is a purchase agreement for the land where the purchaser is often buying off the plans, prior to title issuing for that property.
Secondly, there is a build contract which is with the builder for the build of house itself. The building contract outlines the structure of payments to be paid throughout the build, as well as all timeframes, responsibilities and conditions of the construction. In respect of payments, these are often made at certain stages of the build. For example, the first payment is likely to be made when the foundations and floor are completed; the second stage might be when the framing goes up; etc.
It is important to note that included in the building contract, are the specifications of construction. This outlines all materials, including all fixtures, fittings, taps etc, to be used during the course of construction. It is crucial that these specifications are assessed with a fine tooth comb by the buyer, as once the contract is signed, these are the products and specifications which the builder will use to complete the build. Any addition or change to the specifications, will likely result in an increase in cost to the buyer.
Ultimately, many first home buyers are under significant financial pressures and stringent budgets. Being thorough in the early stages of the purchase can allay issues further down the track of the build process. Communication between the building company, bank, lawyer and buyer is integral to ensure all requirements have been met.
The biggest issue we see with first home buyers is being under pressure upon the issue of title or upon entering an agreement to purchase an existing home.
1. Have finance pre-approved by the bank up to a maximum amount;
2. Obtain pre approval of Kiwisaver withdrawal eligibility;
3. Obtain pre approval of first home grant withdrawal eligibility (if applicable);
4. Complete necessary on boarding requirements with lawyers so there are no delays; and
5. Use your lawyer, it is a confusing process, ask questions to put your mind at ease!
The property market has showed no signs of slowing down, if you are looking to purchase a first home, investment property or a piece of land, please don’t hesitate to get in touch with Oliver Jones-Allen to discuss how Pitt & Moore Lawyers can assist you.
Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.