If you are buying a house for the first time, or if you haven’t accepted an unconditional offer before, have you ever thought about any of the following situations that might happen?

You are planning to attend an auction close to the deadline, which may result in not enough time to do due diligence for your dream house.

Or, you have loan pre-approval in place, but you haven't asked the bank to confirm if the property could be accepted for security.

Or, you feel it's ok to purchase a house without getting a loan pre-approval in advance.

Or, you just want to make the offer look clean, which means there are no conditions or  minimal conditions in the offer before you complete due diligence.

......

I know the whole question of unconditional offers can make your head dizzy. 

This article shows you a real story which happened to one of our clients who signed an unconditional offer without pre-approval, but failed to settle and lost $200,000 deposit in the end. The article also explains what buyers need to be aware of when entering into an unconditional offer to purchase a house in NZ.

What do buyers need to be aware of when making an unconditional offers on a house in NZ?

Video Timeline

1. Case Study: Client Mr A signed an unconditional offer but was unwilling to settle and lost $200,000 deposit in the end -- 00:10

2. What do buyers need to be aware of when making  unconditional offers when buying a house in NZ? -- 03:19

1. Case Study: Client Mr A signed an unconditional offer but was unwilling to settle and lost $200,000 deposit in the end

Client Mr A was looking to purchase a property, but he was too busy to get loan pre-approval. One day, he suddenly found a dream house and told us he would like to attend the auction - just the next day. It’s impossible to obtain pre-approval in such a short time.

However, in this circumstance, we quickly completed the initial assessment for this client to let him know his borrowing capacity and warned him of some potential risks.

Firstly, there was the possibility that the bank may not accept the property for security.

Secondly, the borrowing capacity we calculated with our self-developed loan calculator might be slightly different from the bank’s approved outcome.

What's more, the client had not done his due diligence on the house.

Can you guess the ending?

Client Mr A won the auction for $2 million dollars, which was even less than his budget. But he fell into trouble when he got the house inspection report after the auction. There were some major construction issues. Finally, Client Mr A was not happy about the house and tried to negotiate with the vendor but was unsuccessful. Client Mr A couldn’t get his $200,000 deposit back and had to sue the vendor.

2. What buyers need to be aware of when making unconditional offers when buying a house in NZ ?

If you are planning to purchase a house in NZ, I would highly recommend you ask a mortgage broker to help you get pre-approval, which will boost your confidence, as you then are clear about your borrowing capacity and approval conditions.

If you find your dream house that you intend to buy, always remember to get written consent to confirm the property is acceptable for security.

Complete due diligence before making an unconditional offer, or add this to your conditions. 

Be cautious when signing an unconditional offer which means you can't pull out if the owner signs your offer. The ideal way is completing due diligence before going unconditional (such as bidding at an auction). However, if you have any concerns about the purchase, including a finance condition or a building condition, I highly recommend you add it to the conditions in the offer.

If you have any questions and need help from a professional mortgage broker, give us a call on 09 930 8999 today!

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.

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