There are a few questions we receive time and time again once our clients make an unconditional offer. The most common are: “What happens once my unconditional offer is accepted?”, “what do I need to do now that the offer is unconditional?”. We’re going to provide a little ‘behind the scenes’ explanation about the unconditional offer process, and what our clients can expect to do prior to settlement day to ensure that things will run smoothly.
What is an unconditional offer?
When a purchaser wishes to make an offer on a property, they will present one of two options:
- A conditional offer; or
- An unconditional offer.
A conditional offer is one where conditions have been inserted into an agreement that must be satisfied. If the conditions are not satisfied, the agreement can be cancelled. Generally, conditions are inserted for the purchaser’s benefit. They provide the purchaser with an opportunity to ensure that they are happy with the property they are purchasing and that they will be able to complete the purchase. The purchaser can include clauses such as finance, insurance, builder’s or LIM reports, among many other options. Subject to the particular condition, if the purchaser is not satisfied with certain aspects of the property, or will not be able to secure the funding they had anticipated, they will be able to bring the agreement to an end. Conditions will be subject to time-frames set out in the agreement. If the purchaser is unable to satisfy their conditions within the set time-frame, the vendor may cancel the agreement.
An unconditional offer is one where there are no conditions attached. When an unconditional offer is accepted, the purchaser is bound to complete the purchase and cannot cancel the agreement for any reason. When presenting an unconditional offer, a purchaser should complete a thorough due diligence investigation into the property and their ability to finance the purchase first. This is so they are confident they will be able to complete the purchase and have not agreed to buy a property that is later found to be unsuitable or undesirable.
How long is an unconditional offer valid
Once an unconditional offer is presented to a vendor, it can be revoked verbally or in writing at any stage until the vendor has signed the document. Once the vendor has signed the offer, it becomes a binding agreement. It would be wise to communicate verbally that you wish to revoke your offer and follow up with confirmation of this in writing. Once the offer becomes a binding agreement, the purchaser must complete the purchase and cannot cancel.
Once you’ve made an unconditional offer make sure you:
Pay your deposit
Assuming that the vendor accepts your unconditional offer, now is the time to pay your initial deposit. This will generally be paid to the agent or to your solicitor for either party. Your offer is typically held by the agent or solicitor for ten working days before release to the vendor’s solicitor. If settlement is set to occur within those ten working days, the agent will send us an early release request so all the money will be there in time for settlement. Paying your deposit isn’t optional, and it isn’t paid at settlement so please ensure you have the funds ready to handover when your agreement goes unconditional.
KiwiSaver
Now that your offer is unconditional, your application will be sent off. If you are hoping to withdraw from KiwiSaver you need to let us know as early as possible. You should contact your provider as soon as you start your house hunt and ask for an application form and a letter advising the amount you have available to withdraw. It is useful to have all this information ready to go to avoid delays.
Upon going unconditional you will need to see your solicitor. KiwiSaver applications require you to make a statutory declaration. This means you should only sign your application in the presence of your solicitor, or another qualified person. Along with your application will be the requirement of a solicitor’s certificate which one of our partners will sign. When we have your completed application, we send if off to your provider for processing.
It takes up to ten working days for providers to process the application and deposit the money into our account. This is why it is crucial you alert us to your intention to withdraw right from the start. If your offer goes unconditional on Monday and settle on Friday it is unlikely your provider can have your application processed in time.
If you need to withdraw KiwiSaver for your first home deposit, please make this one of the first things you tell us. Though it is possible, depending on the provider, it can be difficult to make this happen.
Housing New Zealand Subsidy –the HomeStart Grant
Much like KiwiSaver, these applications take a long time to process so you need to make us aware of your intention to apply as soon as possible. The initial application can take 10-15 working days to process and then a further five working days is required between receipt of the agreement by Housing New Zealand and the date of settlement.
You can apply for the grant when you first make your offer. This requires you to fill in the application and to attach certified copies of your ID and several other documents. Your solicitor will be happy to certify these documents for you as it forms part of our set fee. Other than certifying documents, you will not need our assistance with the application at this stage.
Once your application has been processed your solicitor will be sent an agreement. You will then arrange a meeting with your solicitor to sign this agreement. Like KiwiSaver, we sign an undertaking and send the agreement back to Housing New Zealand for you once you have signed. The agreement must be signed and returned five working days prior to settlement.
Loan Documents
You will need to contact your lender upon going unconditional and request that they send us your loan documents.
When we have them they will be reviewed and you will be contacted to arrange a meeting. At this meeting we will go through the documents, check everything is as anticipated and you will sign the documents. We will sign (another) certificate which provides our undertakings to the bank (essentially we promise the bank we will hold the funds in our account and return them if settlement does not happen), and then we send the documents back to the bank for processing.
Insurance
Before we can return the loan documents, we need your insurance information. You will need to arrange insurance on the property commencing the day of settlement. Your insurer will provide a Certificate of Currency (a document that states the sum insured, the address, the date insurance begins and names the bank as an interested party).
When you receive this you will need to send it through to us. We attach this to the loan documents and return them to the bank. Your bank will probably tell you that they need to see proof of insurance prior to lending, the bottom line is that without this certificate, you won’t get any money and without money you won’t be able to purchase that dream home.
Cash Contribution or Cash buying?
It is important that you get us the money in cleared funds for settlement. When your agreement is unconditional we will provide you with information as to how you can get us your funds. If you are cash buying, you will either need to transfer the money to us well in advance (4+ working days) or have the bank prepare a bank cheque which you bring to our firm for us to deposit.
If you are topping up your loan with a cash contribution and the money is with the same provider as your loan it is fairly simply to get us the funds. For example, if you have an account containing $40,000.00 with ANZ, and you will be borrowing $260,000.00 from ANZ as well, you can have ANZ transfer the $40,000.00 along with the $260,000.00 loan. You need to speak with your contact at the bank and give them your authority to make the transfer.
If you are borrowing money from one bank and providing your own funds from another, you will either need to transfer the money to us in advance (at least 4+ working days prior to settlement), or bring us a bank cheque for the amount required.
Please speak with your solicitor or legal executive before you make any transfers.
Pre-Settlement Inspection
Prior to settlement, you are entitled to enter the property for review. It is important you check all the chattels are still working, the windows and doors still open and close and that nothing has been damaged or removed that should not have been. If you wish to make any claims for compensation or requests to remedy, they need to be made by 5pm on the last working day prior to settlement. So if settlement is a Monday, you need to inspect the property and make any claims by 5pm Friday the week before. Please allow time for your lawyer to communicate the claim, if you call us at 4.58pm it is unlikely we can make a claim by 5pm.
The inspection is arranged through the agent, or where the sale is private, between the parties or their lawyers. It is worth noting here that claims can only be made where something has changed following entering into a contract. If the window was already painted shut when you signed that dotted line there is very little you can do about it!
If you’re happy with the property, flick us an email or give us a call and let us know. It’s one more thing that can be ticked off the list for a smooth settlement.
Settlement day
All going well, by settlement day we should have all your funds in our account or on their way from your lender.
For the last few weeks, our legal executives have been liaising with a number of different entities. Among many other things, they are finalising rates adjustments, preparing settlement statements, checking sales notices and setting up dealings.
As soon as we have the funds and know there are no last minute issues to be dealt with, we contact the vendors solicitor and let them know we are ready to settle.
Hopefully, the vendors are also ready to settle and we will be able to proceed.
We are often asked what time settlement will happen. Our honest answer is: we don’t know.
This is dependent on a lot of factors and even with the most straight forward transaction there can be last minute hold ups that no one anticipated. Most settlements occur between 11am and 2pm, but we cannot make any promises that yours will be one of them. If you are arranging movers or trades-people, make sure they are flexible and don’t book them for first thing in the morning.
As with any transaction, we will be doing all we can to ensure things run smoothly. Keeping you informed is part of that process and if you are ever unsure of anything, get in touch with your solicitor.
If you’re thinking about making an unconditional offer or need legal advice to sell your home, get in touch with us today and see how we can help.
