Moving Forward With Your Home - Harcourts gold by Harcourts Gold Group RE

MOVING FORWARD WITH YOUR HOME HARCOURTS GOLD

WHEN OTHER COMPANIES SAY ‘SELLING IS COMPLICATED’ WE SAY ‘WE’VE MADE IT SIMPLE’!

471 Papanui Road PO Box 5400, Papanui, Christchurch 8542 Telephone (03) 352 6166 Facsimile (03) 352 1322 Email: enquiries.papanui@harcourtsgold.co.nz

REDWOOD BRANCH

280 Main North Road, Redwood PO Box 5400, Papanui, Christchurch 8542 Telephone (03) 352 0352 Facsimile (03) 352 8400 Email: enquiries.redwood@harcourtsgold.co.nz

PARKLANDS BRANCH

Parklands Mall, Queenspark Drive PO Box 18515, New Brighton, Christchurch 8641 Telephone (03) 383 0406 Facsimile (03) 383 0525 Email: enquiries.parklands@harcourtsgold.co.nz

NEW BRIGHTON BRANCH

95 Seaview Road, New Brighton Mall PO Box 18515, New Brighton, Christchurch 8641 Telephone (03) 382 0043 Facsimile (03) 388 0116 Email: enquiries.newbrighton@harcourtsgold.co.nz

info@harcourtsgold.co.nz www.homes4sale.co.nz

CONTENTS PAGE 4

SELLING YOUR HOME IN TODAY’S MARKET

PAGE 6

SELLING YOUR EARTHQUAKE DAMAGED HOME

PAGE 10

BUYING AN EARTHQUAKE DAMAGED HOME

PAGE 14

ADDITIONAL PROPERTY INFORMATION

SELLING YOUR HOME IN TODAY’S MARKET...

As realtors selling your home today, we have more requirements to meet than ever before. Not only under our own regulatory body and legislation (the Real Estate Agents Authority and the Real Estate Agents Act 2008) but also under the Fair Trading Act and Consumer Rights Act. Then there are insurance companies and banks that all need their own prerequisites satisfied before they will approve a property for insurance cover or a mortgage. It may seem like a lot, but it’s important to remember that it’s all for your protection as a vendor, and for prospective purchasers. This rigorous process does mean though that there are some new obligations when taking your property to market. The realtor acting on your behalf needs to be able to check documentation and have full disclosure and knowledge of the property to ensure that they comply with the current real estate law. Here is an example of some of the documents that may be required. Not all will apply, so always check with your agent for further clarification or assistance with acquiring the information:

EQC ❏ Scope of works or repair strategy reports for unrepaired properties ❏ Cash settlements received ❏ Sign off of completed work for repaired properties and/or receipted proof of work being done

“AS IS” REMEDIATED ❏ Pre-remediation reports (EQC/insurance scopes, structural reports, geotech reports etc) – if you purchased the property ‘as is, where is’, you will need the consent of the previous owners to distribute these reports when marketing the property for resale. ❏ Clear documentation of the works/repairs that have been carried out – photographs, invoices etc ❏ Appropriate sign-offs by an engineer where structural work has been carried out (http://www.ipenz.org.nz/ipenz/Engineering_ Practice/Producer_Statements.cfm) ❏ Post-remediation reports should be carried out by a registered building surveyor – a ‘report’ carried out by your builder mate is unlikely to be enough to provide prospective purchasers with confidence!

TITLE

INSURANCE

❏ Easements ❏ Covenants / Encumbrances / Instruments ❏ Cross lease / Unit Title ❏ Trustee’s / Legal names of owners for signature authority

❏ Full disclosure of payouts and work done for driveways and paths etc. ❏ Claims not yet settled ❏ Repairs not completed ❏ Additional cash settlements received

LIM FROM THE LOCAL COUNCIL ❏ Checking for consents and code of compliance for log burner or building work, renovations and additions, granny flats, pools and spas ❏ Consents within a 100 metre radius of the property ❏ Special notes, flood risk or liquefaction risk ❏ Protected trees

HOMES BUILT PRIOR TO 1935 (Insurance requirements)

❏ Electrical certificate ❏ Plumbing certificate ❏ Re-roofed

MONOLITHIC CLADDING

ASBESTOS

(Water tightness, Insurance & Bank Requirements)

❏ Stippled ceilings (1970’s homes) are known to have asbestos and the removal of or repair has to be done by a specialist because of the potential health risk ❏ Some roofing has asbestos that may require a test to be done to ascertain if asbestos is present ❏ Backing boards on some artificial stonework

❏ Build 1990 – 2004 ❏ No air cavity ❏ No eaves and / or flashings ❏ Plaster over monolithic cladding ❏ Thermal testing and building report done to prove water tightness may be required ❏ Invasive testing recommended

FLOOD ZONE Locate your property on the flood zone map:

Visit http://www.ccc.govt.nz/homeliving/ goaheadbuildingplanningS00/ buildingandplanningprojects-s02/property-s 02s0305/floorlevels-s02s0305-08.aspx

EXAMPLES OF NON-COMPLIANT OR NON-CONSENTED WORK ❏ Log burner: consent for use has expired Visit http://tools.ecan.govt.nz/WoodburnerAge/ Christchurch.aspx?centre=Christchurch ❏ Building consent / permit issued but no Code of compliance ❏ No building permit ❏ Pools and Spa: need to comply with the Fencing of Swimming Pools Act 1987

CERA LAND INFORMATION Visit: www.cera.govt.nz/my-property ❏ ❏

TC 1, TC 2, TC 3 Geotech Report

CROSSLEASE PROPERTIES ❏ Additions not on the flat plan i.e garage or conservatory added ❏ Old historic title which may show unclear division of the cross lease

CONTAMINATED LAND LLUR (Listed Land Use Register)

❏ Rules within the cross lease document with regards to pets, tenants or insurance

❏ A copy of received notification from the Council Visit www.llur.ecan.govt.nz to find out if your land is potentially contaminated

IT’S IMPORTANT TO REMEMBER THAT IT’S ALL FOR YOUR PROTECTION AS A VENDOR, AND FOR PROSPECTIVE PURCHASERS.

The Canterbury marketplace is currently seeing a proliferation of uninsured earthquake-damaged properties being listed and sold. Such properties are generally sold on an â&#x20AC;&#x153;as is, uninsuredâ&#x20AC;? basis where the owners have taken a cash settlement from their insurer and have negotiated to keep their damaged property on site. We are frequently being asked to sell these homes and regularly people are making contact for advice on the best way to go about the process.

SELLING YOUR EARTHQUAKE DAMAGED HOME...

KNOW YOUR OPTIONS

TAKE LEGAL ADVICE

When looking to settle with your insurance company or progress your claim, make sure that your insurer provides you with all the options.

Have your solicitor examine your insurance settlement prior to signing anything.

These may include: • Repairing or rebuilding your home.

A few incorrect words can have dire consequences and significantly jeopardise your future plans if left unchecked.

• Building a home on another section. • Buying an existing home. • Receiving a cash settlement for your existing home with your home being demolished. • Accepting a cash settlement and retaining your home, leaving you free to sell “as is.” Some insurance companies require your home to meet a certain standard if you wish to occupy or sell it “as is.”

WHAT EXACTLY IS SELLING ‘AS IS, WHERE IS’? Essentially, selling “as is” and uninsured equates to cash settling both your EQC and private insurance claims, retaining these funds and then selling your home on the open market without carrying out any significant repairs.

GET IT IN WRITING Whichever option you choose, make sure that your insurer provides it to you in writing. This is important for your own records and because proof of settlement (excluding settlement figures) may be needed when selling.

WHEN DOES MY HOME BECOME UNINSURED? Once you accept a cash settlement from your insurer, then the insurance is usually cancelled.

WHY THE DEMAND? Due to retaining both EQC and insurance settlements, you offer your home to the open market at an attractive price due to the property being uninsured. This is normally well below current market value for an equivalent undamaged and fully insured home. The buying public generally perceive this to be an excellent opportunity to secure affordable property.

WHO WOULD BUY AN ‘AS IS’ HOME? You may be surprised. Purchasers range from investors and speculators to mums and dads helping their kids into their first home, red zone and earthquake refugees, and even families seeking an affordable family home option in a competitive market. WHAT ARE THE RISKS? That’s a valid question, but you can be rest assured that the Harcourts Gold Parklands and New Brighton team has the experience, expertise and skills to guide you through the sale process and ensure that all the appropriate clauses are entered into the sale and purchase agreement. We also have your solicitor approve the contract prior to a sale, and we are continually getting updates and feedback from solicitors on valid clauses.

SELLING YOUR EARTHQUAKE DAMAGED HOME...

YEAR

TOTAL

AUCTIONS

NON-AUCTION

2012

2013

2014

2015 YTD

252

186

TOTALS SINCE 2012

Harcourts Gold Eastside results YTD. An example of the volume of ‘As is, Where is’ properties we are so practised at selling.

IS AN ENGINEERS REPORT IMPORTANT? An engineer’s report is essential because it addresses the key question in the mind of the buyer: Is this house safe? Secondly, it forms the absolute baseline of representation. The reports we recommend are comprehensive and include scribed floor levels.

SHOULD I MAKE IMPROVEMENTS It is important that your home is presented to the open market with transparency, and that an engineer’s report is completed prior to any improvements. We have found, however, that the buying public generally respond more favourably to a home following cosmetic repairs due to the aesthetic appeal.

CHOOSE THE HARCOURTS GOLD TEAM FOR ‘AS IS’ SALES With over 240 sales already under our belt and plenty more in play, we have the experience to get the job done. We have a smoothly-honed marketing template and sellers also benefit from our online contacts’ database.

TWO YEAR BRIGHTLINE TEST...

TWO YEAR BRIGHTLINE TEST The first of these new rules is the two-year ”brightline” test. This applies in addition to the existing rules which tax property that was acquired with the intention of resale. The new rule is that, subject to certain exclusions, if any residential property is sold within 2 years of the date of acquisition, any gain on sale will be subject to income tax. The rule applies to residential land only, which is any land that has a dwelling or which by its nature is capable of having a dwelling erected on it. It does not include any land that is used mainly as business premises or for farming. No work needs to be carried out on the property for the taxing provisions to apply.

The land will not be taxed if the property is: • The owner’s “main home”; or • Is being sold as part of a relationship property settlement; or • Is inherited property that is being sold.

HOW CAN WE HELP YOU? We are more than happy to meet with you for a friendly chat and to empower you with the right information to assist you with your decision making. We’ll help you choose the right marketing methods and make sure that you receive the right advice applicable to your home and situation.

Under the Bill, to be the main home, a property must have been used predominantly, for most of the time the person owns the land, for a dwelling that was the main home of the person or a beneficiary of a trust that owns the land. The purchase date is the date that the vendor becomes the registered owner of the property. The disposal date is taken as the date on which the vendor and purchaser enter into an agreement for the sale of the property. While these dates are inconsistent with each other, they do provide easier dates for Inland Revenue to police and allow for less manipulation to circumvent the intention of these rules. Deductions would be permitted against the proceeds on disposal, in accordance with the usual tax rules. There are further rules that will apply the brightline test in situations where a landrich company or trust has held land for less than two years, and there is a change in shareholding or the trust deed changes so that the economic effect is the same as the sale of land. If there is a loss on the property that is subject to the new rules then the loss is “ring-fenced” and can only be used against any future gains on property.

NEW DISCLOSURE & IRD NUMBER RULES...

NEW DISCLOSURE AND IRD NUMBER RULES There are also additional information disclosure requirements being introduced, also with effect from 1 October 2015. Under these requirements, buyers and sellers of property will be required to provide their IRD numbers at the time property is transferred. Those who are tax resident in another country will also have to provide their home country tax identification number. There will be no requirement to provide these details when the property is being purchased by a New Zealand resident individual who will use the property as their “main home” or, for the vendor, where the vendor used the property as their “main home”. New Zealand residents will therefore have to provide their IRD number if the home is not their “main home”. This also means “overseas residents” will be required to obtain an IRD number to purchase a property. They will also be required to open a New Zealand bank account to obtain this IRD number. This means those people will have to go through

the identity verification procedures that banks have to comply with under the anti-money laundering rules. New Zealanders who have been outside New Zealand for three or more years will also be labelled as “overseas people”, as will holders of residence class visa who have not been in New Zealand within the previous 12 months. Vendors and purchasers will need to provide specific details at the time of sale otherwise the change in title will not be registered. This information will only be available to the government departments involved, and not the general public. The penalty for knowingly providing false information is proposed to be a fine of up to $25,000 for the first offence, and up to $50,000 for any other offences. FOR MORE INFORMATION: http://www.ird.govt.nz/m/campaigns/ property-changes.html

Surprising as it may seem, the sale and purchase of earthquake-damaged homes has become more commonplace and a viable option over the past 24 months.

10.

BUYING AN EARTHQUAKE DAMAGED HOME...

Now a much broader cross-section of purchasers are pursuing these properties, and the process has gained credibility and acceptance across the board. Most purchasers see these homes as an affordable opportunity to secure property well below current market values when their structural integrity is largely intact. Here are some answers to commonly asked questions about buying an earthquake-damaged property:

WHY ARE EARTHQUAKE DAMAGED HOMES IN DEMAND? Simply put, they are affordable and make very attractive buying, whether purchasers just want a cheaper home for the kids, a cash-positive investment property, or a cheap home to live in while the family home is being repaired.

WHAT MAKES A HOME ‘AS IS’? Once a homeowner has cash-settled with their insurer for either a repair or a rebuild of the dwelling, the insurance policy is cancelled due to the insurer having met their obligations under the policy. When a homeowner has been paid out, the home will remain uninsured until such time as it is remediated fully and meets the criteria as stipulated by an insurer. When selling “as is,” the owner retains the funds and sells the property without remediation. A home may also be “as is” because the homeowner allowed their insurance policy to lapse or they had no insurance on the property to start with.

WHO CAN BUY ‘AS IS’ PROPERTY? Generally only a cash buyer or someone who has the ability to secure a mortgage against another property can fund an “as is” property. Some banks will lend on a percentage of the land value, however most banks will not secure a mortgage on any land with an uninsured dwelling on it. Some buyers purchase an “as is” property, secure insurance on the property and then approach the bank to secure lending.

BUYING AN EARTHQUAKE DAMAGED HOME...

WHY SO CHEAP? The homeowner has already taken payments from EQC and their insurer, so they are able to sell at a modest level in order to move on.

HOW CAN YOU BE SURE THEY ARE SAFE? It’s important to have all of the right information in order to make a wise decision. Unless you have the professional skills, it’s recommended that you seek professional advice. Your agent should be able to provide you with appropriate information or help you to secure it. Some examples include: • Land Information Report and Title

We are constantly refining these clauses to better protect both the purchaser and vendor, and as always, our recommendation is to seek legal advice. CAN THEY BE FIXED? Ultimately, any home can be repaired, but it is not always economic to do so. However, we are becoming aware of some techniques that are more cost effective. With new technology and knowledge coming to the fore, various repair strategies are becoming more viable and some of these properties have been repaired, reinsured and sold again.

• Engineer’s/builder’s report • Scope of Works from EQC/ private insurer

WHAT ABOUT THE CONTRACT? Most “as is” sale and purchase agreements and auction contracts have a number of clauses deleted from the body of the contract, so it is very important to take legal advice so that you fully understand what you are signing. The Risk and Insurance clause (clause 6 in auction contracts and clause 4 in private treaty agreements) is a common one that some owners’ solicitors delete. This means that even if the property sustains further damage or has been destroyed between the date of purchase and settlement date, you must settle in full. This does leave you vulnerable, so it is important to understand these clauses completely. We recommend that the majority of these clauses remain to protect you against liability for property that you have not yet taken possession of.

12.

WHAT ABOUT INSURANCE? It is possible to get some forms of insurance on these properties, usually it is from off shore insurance companies such as Lloyds and comes in many different form, such as fire and general without disaster cover ie. Earthquake and generally it is more expensive than normal. But this can allow some clients to obtain finance from some banking lenders. We are also seeing some New Zealand insurers and brokers also offering insurance.

REINSURING YOUR DAMAGED HOME 5 ESSENTIAL STEPS

01 INSURANCE 05

The first step is getting ‘Construction Works Insurance’ (CWI). This covers you against fire, theft, defective design or workmanship or materials while you embark on this process.

BANK

Now that you’ve got your insurance cover, your property is favourable to banks for mortgage purposes.

ENGINEER’S ASSESSMENT An engineer assesses the building to see what parts of the structure need to be repaired. Following this, a design and plans for the repairs are produced by the engineer. These are called the PS1 forms.

INSURANCE APPLICATION

As part of the insurance applicati on, the insurers will want tosee the engineers design (PS1), engineers sign off form (PS4),the scope of works and the builders sign off form (PS3) plus the photographic evidence. Once these documents have been reviewed by the insurer, the CWI will convert to Full House Cover.

REPAIRS Repairs are then carried out by the builder, as per the engineers design(PS1). The builder will apply for any necessary council consent, as may be required. It is important to document and photograph repairs throughout the process. Once the repairs are complete, the builder will produce a PS3 form, which states that all repairs have been carried out as per building code using correct procedures. The engineer will then sign off the structural repair works and produce a PS4 – stating that the repairs have been completed as per the design (PS1).

INFORMATION PROVIDED BY BUILD QUAL WWW.BUILDQUAL.CO.NZ

WEBSITES FOR CHECKING

WEBSITES FOR CHECKING ADDITIONAL PROPERTY INFORMATION... ADDITIONAL PROPERTY INFORMATION

WEBSITES FOR CHECKING ADDITIONAL PROPERTY INFORMATION Listed land use register:

Listed Land Use Register http://www.llur.ecan.govt.nz/

Listed Land Use Register http://www.llur.ecan.govt.nz/ http://www.llur.ecan.govt.nz/

Woodburner Age:

Woodburner Age http://tools.ecan.govt.nz/WoodburnerAge/Christchurch.aspx?centre=Christchurch http://tools.ecan.govt.nz/WoodburnerAge/Christchurch.aspx?centre=Christchurch

Woodburner Age http://tools.ecan.govt.nz/WoodburnerAge/Christchurch.aspx?centre=Christchurch

WEBSITES FOR CHECKING ADDITIONAL PROPERTY INFORMATION City Plan

City Plan:

http://www.cityplan.ccc.govt.nz/NXT/gateway.dll?f=templates&fn=default.htm

CERA TC Zoning

14.http://cera.govt.nz/my-property

WEBSITES FOR CHECKING ADDITIONAL PROPERTY INFORMATION City Flood Plan

Zones:

http://www.cityplan.ccc.govt.nz/NXT/gateway.dll?f=templates&fn=default.htm

http://maps.cera.govt.nz/advanced-viewer/?Viewer=Ccc-Floor-Levels

TC CERACERA TC Zoning

Zoning:

http://cera.govt.nz/my-property