Q&As
- What are reasonable conditions for a home buyer to insist on?
- Government’s proposed tax changes on international shares.
QMy partner and myself have been on the rocky road to finding our first home. We have had a few issues to contend with.
Real estate agents don’t seem to want to be helpful in giving any advice if they can see we will go conditional.
This has happened four times when we have been shown properties and then said if we were to put in an offer we would have certain conditions. We then were given no service or follow up calls from the agents.
The only conditions we are looking for are as follows: Lim report; finance (we have pre-approval, but you never know); builder’s report (we have looked at some new properties less then five years old.)
We thought that these would be quite standard conditions. But it seems estate agents are looking for unconditional offers.
We are making a huge decision and think that it would unrealistic not to have these conditions in place for our first major investment.
Some of the new properties we were looking at we wanted to ensure that the company that built them was still in business. We never got a response back from the real estate agent, and after a company search we found they were no longer in business.
We looked at one property that was a good price and had everything we wanted, but it did say a little TLC was required. We are not scared of a little hard work but when we found out it had a major leaking problem on inspection we were disgusted that it was advertised as TLC.
Where can we go to get the best informed unbiased information for first home buyers? We have a checklist and all the things banks provide, but how do we deal with these real estate agents that waste our time and give us the run around?
Another thing: It seems if you email a real estate agent instead of ringing them they will never get back to you. It seems odd they even offer this service on their websites.
AYou don’t need more information. You’re being savvy and reasonable, for the most part. You might get further, though, if you try to see things from the agents’ and sellers’ points of view.
Real Estate Institute national president Howard Morley says the conditions you are asking for are “totally appropriate. They’re the sort of conditions I would tell my family to be watching for.
“A building report is a good idea, especially if you suspect leaky housing. And a lot of sale and purchase agreements are subject to a LIM report.”
He’s not so sure, though, that ensuring the builder is still in business is a real estate agent’s role.
An agent might do a search and find a company does exist, “but that might not mean much” if it’s in financial trouble.
“That’s not normal for people to request of an agent. If you’re worried about leaks and may have to take legal action against somebody, a lawyer would be best to check on the company. If you have an ongoing problem with the builder, that’s mostly a legal issue.”
On the house that needed more than TLC, whether you can blame the agent depends on what the agent knew, says Morley.
“If an owner tells an agent they’ve had trouble with a house, that it leaked and has been fixed, that information definitely has to be passed on to anybody who asks.” Only to those who ask? “No, the agent should declare it.”
“But if the owner says the house is OK, we can only go with that. Agents are not engineers.”
The same goes for valuers. “I’m a property valuer. We put in reports that we’ve inspected the property but we can’t guarantee what’s behind the walls.”
That’s why getting a builder’s report makes sense.
In all your dealings with agents, keep in mind that they act for the sellers who pay them, rather than for buyers.
“If you were the owner of a property and you had an agent working for you, you would want unconditional offers. If there are three offers at the same price and one is unconditional, that’s the one that will be accepted.”
However, the market is moving more in your favour, with fewer unconditional offers than a couple of years ago, says Morley. Still, to compete with other buyers, you might try:
- Asking if the agent already has copies of a LIM report. Sellers are increasingly providing copies to would-be buyers.
If there’s not a copy available, the quickest and cheapest way is to get one yourself from the local Council, preferably paying the premium to get it done faster.
- Telling the agent you have pre-approval for a mortgage. “You can still say your offer is subject to finance. But if you can show the agent your letter from the bank, the agent can tell the vendor, ‘These people are 99 per cent sure of getting finance.’.”
“There’s nothing wrong with due diligence,” Morley adds. “I strongly recommend they continue to do that, but they need to take as little time as they can.”
On your email comment, he says, “That’s not acceptable. What I suggest is that they ring the real estate office concerned and ask for the office manager or the licensee of the business and talk to him or her about that.”
QJust a question on the government’s proposal to tax capital gains on shares in countries currently on the Grey List (ie Australia, Canada, Germany, Japan, Norway, UK and US).
If you purchase an international share that subsequently declines in price, would you be able to use this capital loss to offset any taxable income on capital gains from other shares?
AYes. But that doesn’t make the proposal okay.
I put off answering your question until after the election, as John Key had said that National would not go ahead with the proposed changes, so I thought the whole thing might go away.
But now that a Labour coalition will probably be running the country — and the deadline to make comments on the proposal is next Friday, September 30 — it’s time for me to vent my spleen!
Currently, if you invest in international shares in the Grey List countries — which have rules and taxes roughly similar to New Zealand’s — you are taxed in much the same way as if you were investing in local shares.
For example, if you invest in Winz or another New Zealand-based international index fund, you are not taxed on capital gains. For most people, this is the easiest and best way to spread your share investment overseas.
Under the government’s proposal, however, from April 2007 you will be taxed not only on capital gains you make when you sell units in the fund, but on gains in the fund value even when you don’t sell.
Each year you will look at the difference in the value of your investment at the start of the year, in New Zealand dollars, and at the end, again in New Zealand dollars, including dividends received.
If the value has risen, you will be taxed on the gain; if it has fallen, you can deduct the loss from your other income.
There will be a 6 per cent cap on a taxable gain or deductible loss in any year, but any excess will be carried over to later years.
Direct investments into shares in countries with tax agreements with New Zealand will be exempt, as long as they totalled less than $50,000 when you put the money in. But if your investments total more than that, you will be taxed on the whole lot.
In any case, it’s not easy for smaller investors to directly buy and own international shares.
While there are other aspects of the government’s proposed tax changes on investments that might be good, this is certainly not one of them.
Michael Cullen, himself, has said, “We think it is important over time the we become a nation of share owners as well as, but not instead of, a nation of home owners.”
Making the taxation of shares more complicated and distorted hardly encourages that.
If you want to protest, send an email by next Friday to [email protected], and put “Taxation of Investment Income” in the subject line.
It could be just a sentence or two. Lots of brief submissions from “ordinary” people sometimes make more impression than great long complicated ones from the gurus. Go for it!
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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.