When you’re buying a house, there are a lot of things to think about. One of the steps that is often a mystery for homebuyers is what happens with their lawyer. Mortgage Lab asked Krystle Gardner from Clendons North Shore to answer some of the common questions.
I strongly suggest that you make contact with your lawyer as soon as you make your decision to start looking to purchase a house (and also when you are selling your existing house).
Making contact with your lawyer this early will mean that you can move quickly should you find a house you like and want to put an offer on whilst also enabling your lawyer to work with you, and the Real Estate Agent, to make sure that you take all legal steps needed including the very important review and approval of the agreement for sale and purchase.
If you are buying your new house through a negotiation process (i.e. not at auction), then the real estate agent needs to prepare the draft agreement for sale and purchase and provide this to your lawyer to review. They need to include any conditions of the purchase and approve the agreement before it is provided to the Vendor as an offer. This process can take 24 to 48 hours depending on other demands that your real estate agent and solicitor may have to meet. Upon your offer being accepted by the Vendor, the condition process starts.
The condition process involves you working with your mortgage broker and your lawyer to sort out:
In addition (and at a minimum) you would also be working with a builder to get a building report done on the house, arranging for a meth inspection and, a registered valuer if the bank requires a registered valuation of the house.
If you are buying your new house at an auction, your lawyer will work with you to carry out the legal enquiries (legal due diligence) on the house (the same process described above) well ahead of you attending the auction. Your lawyer will also review the Agreement for Sale and Purchase prepared by the real estate agent for use at the auction. This will mean you can confidently bid at the auction and sign the agreement to purchase the house on the day.
The bank, after providing you or your mortgage broker with final approval of your home loan, will send your lawyer a letter of instructions that enclose all your home loan documents. For a basic home loan structure (i.e. not involving a Trust, Company or Guarantor) these home loan documents will usually include:
Your lawyer will review the above home loan documents, prepare any of the documents required by the Bank, or at Law, and also prepare the required Authority and Instruction for Electronic Registration of the Transfer and Mortgage Instruments with Landonline and the Tax Statement. Your solicitor will then meet with you to sign the home loan documents and these additional documents. At this meeting, your lawyer will provide you with advice on the general nature and effect of the documents, and obtain a copy of your photo identification.
After receiving a copy of your insurance certificate for the new house, your lawyer will then send the home loan documents, together with the completed solicitor’s certificate to the bank requesting that the money be drawn down to your lawyer’s trust account to complete the purchase.
In our experience, after receiving the bank loan instructions, your lawyer will require a minimum of 48 hours to review and prepare the documents. At this point, your lawyer will be in a position to meet with you to sign these and give you the advice referred to above. The home loan documents must, according to most bank requirements, be returned to the bank a minimum of 48 hours before the purchase date to ensure any issues can be addressed without it holding up the purchase of your new house.
There are some circumstances in which it will be appropriate for your house to be put in a Trust, and other circumstances in which it is not appropriate, for example, the individual(s) purchasing the house intend to use part of the house as a home office or a holiday home.
Clendons North Shore know through experience, that it is sometimes the more appropriate approach for clients to use relationship property law together with asset protection structures as the means to protect the house rather than the trust structure.
It is very important, therefore, that you seek legal advice early so the right ownership structure for your circumstances is decided and established before the home loan documents are prepared and you purchase your house.
Your lawyer will absolutely help you with your KiwiSaver withdrawal, and will also receive the money into their Trust account to use as part of the purchase price of your house.
Krystle is the owner of Clendons North Shore in the North Shore of Auckland. Her contact details are:
Phone: 022 395 9973
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