On a number of occasions over the years, clients have had issues with dates that have been put onto their contracts either when selling or buying property. This can be related to not knowing what happens at each stage of the purchase process or what steps need to be taken to meet certain deadlines. With this in mind, this week’s article goes through different aspects of the contract and what to be mindful of when you are putting that contract together.
Date of contract This is the first date that you see on the contract and is entered once both seller and purchaser have agreed on the terms of the agreement. It is a very important date as many of the following conditions relate to timings that start from the date of signing.
Finance date is the important date that you need to have arranged mortgage finance (If required) to purchase the property. Before the finance condition can be satisfied, a loan offer with no outstanding requirements needs to be in place. Your mortgage adviser will be able to guide you as to how long will be required between receipt of the contract and receiving a loan offer. In fact on many occasions if you have a loan pre-approval in place, you can strengthen your purchase offer by having a very short finance date set up.
It is important to remember though that the finance date is different to the date when your lawyer will declare the contract unconditional. There could be a number of other requirements which need to be addressed, such as building inspections, LIM reports and more frequently these days, meth testing of the property. Another issue that some lenders will require ahead of issuing approval, and is also important to check before the lawyer can go ahead with declaring your purchase unconditional, is confirmation of Kiwisaver and Home start eligibility. Starting your enquiries as a first home buyer earlier in the piece will save any last minute panics as target dates draw near.
So, once the contract is unconditional, the next date to be aware of is Settlement date. This is the date when you take possession of the keys and the house officially becomes yours. This is obviously a massive day in the purchase process but not necessarily the final one to think about. In some situations even though ownership may have changed hands, an agreement may have been made with the existing owner to delay their having to vacate the property. On one occasion, we had a situation where the vendors were selling in order to fund the build of a new house. They would have been stuck for somewhere to live, but the purchasers agreed to let them remain in the property (renting from the new owner) until such time that their house was ready to move into. The other thing to remember when choosing a settlement date is whether you need to line up dates to tie in with anything specific such as the sale of another property or access to funds which may be tied up in a term deposit. We have had clients who came to us with two contracts which had a difference of four days between the sale of one property and the purchase of another. If they had aligned their dates they would have saved a significant amount in legal costs and break fees and could have even transferred existing loans to their new property.
These dates are important for so many reasons and there are a couple of things to be mindful of when choosing suitable dates on your contract. Bear in mind the difference between “15 days” and “15 working days”. The first is exactly 15 days from the date on the top of the contract, whereas the second excludes weekends and any public holidays and could in theory be an additional five days later when calculating dates to work towards. There are a number of other reasons why it is important to make sure you choose your dates carefully and your home loan adviser should be able to work with your agent and lawyer to make sure that everything is done when it should be.
