Posted by: BrentSelwyn | on December 9, 2018
If you are thinking of buying at auction then there are a few basic things which you need to be aware of.
For starters, if you are a first homebuyer looking to avail yourself of funding from either or both of the Home Start grant or your KiwiSaver first home withdrawal then buying at auction is not ideal for you. Why not? Well for starters, you cannot begin the process of formally having your withdrawal approved until you have a contract in place. There is always going to be some risk involved in that as a purchase at auction must generally be unconditional. In other words, there are no conditions inserted for your benefit as there generally are when you buy land through a process other than auction. The sort of conditions we refer to are those relating to you arranging suitable finance, approval of a Land Information Memorandum, insurance, building inspection and so on. Non satisfaction of any of those conditions for genuine reasons will give you an ‘out’ and a way to cancel the purchase that you do not generally have when buying at auction.
Secondly, a purchase at auction generally requires a 10% deposit at the fall of the hammer or in other words, as soon as you are confirmed as the successful buyer. Now you can
For reasons stated above, you cannot use your KiwiSaver money for immediate payment of a deposit at auction because you cannot even commence the process of withdrawing your savings until you have a contract in place.
A further issue with KiwiSaver funds is that the provider (the fund manager you have your KiwiSaver with) require your lawyer to obtain an undertaking that KiwiSaver funds be paid, not to the agent, but to the trust account of the solicitor for the vendor and, that we obtain an undertaking from the vendor’s solicitor to hold those funds until settlement and, should settlement not proceed due to the default of the vendor, that they will refund your KiwiSaver funds to us in full so that we, as your lawyers, can pay it back to your provider. This is not necessarily ideal as for starters, the agent usually collects the deposit and once a statutory time frame has been observed, is entitled to deduct their commission from it. The balance of the deposit after
So, whilst it isn’t impossible by any means to buy your first homeat auction there are a few hurdles to get out of the way if some or all of yourdeposit is coming from KiwiSaver or Home Start funding. For that reason, it is really important that you engage the services of a specialist conveyancing lawyer to assist you with your purchase.
If you miss out on buying at auction you need also be aware that you are likely going to get a bill for anywhere between $300-500 plus GST for the solicitor’s time in appraising and advising you on the auction pack. That