Due Diligence for NZ Homes

When Looking at Open Homes

For a house you like, check the property documents (linked in the listing). Do a preliminary DIY screen for any major issues by looking for red flags in the building report (if provided). If it’s a contender, start due diligence…

How long it takes for due diligence

• Legal: Our lawyer took 5-6 working days to review everything. Varies by lawyer. Faster with an urgency fee.

• Finance: Allow 2 weeks for full bank approval. Some busy periods are slower e.g. Christmas.

• Insurance: About 5-6 working days for approval after they review your docs. Add extra time if issues pop up (e.g., if they request an engineer’s report).

• Building Report: Varies. Our inspector checked it in a week, gave verbal feedback, and sent the formal report 3 working days later.

I think friends or family recommendations are best if you have them. Can also look online. Read reviews.

We would caution against using mortgage brokers, lawyers, or builders recommended by real estate agents. They might be linked, potentially prioritizing speed over thoroughness. Some broker agencies are affiliated with real estate firms.

Thoroughness and quality matters more than price and speed. We've seen lawyers advertised who can compete due diligence in 1 day for an auction, but our lawyer took 6 days to overhaul key parts of the S&P agreement - saving us lots of hassle and money down the line.

For a lawyer: Ask for a full breakdown of their fees, and if they have any planned holidays coming up.

For a mortgage broker: See next section.

You can either go straight to a bank/non-bank lender, or use a broker.

Broker Pros: They submit your details to multiple banks (saves time). If they're good, then they can be great to guide you through the whole process. Just bear in mind if you are going through a broker, the banks won’t deal with you directly and you will do everything through the broker.

DIY Pros: Simple, you can just go to the bank yourself. You’ll repeat your details for each bank, but you can communicate directly with each bank, which is a pro if you like to be in full control.

Broker Tips:

If you are given an disclosure agreement to sign by the mortgage broker, read this carefully. See whether there is a fee if you do not end up lending with them. Most brokers work on commission, with no charge if you don't end up signing with them. We also saw one contract with a clause allowing personal information to be ‘viewed by a range of professionals’ including real estate agents, which we felt was inappropriate.

Tell your broker in writing which banks you'd like them to apply to and insist on approaching multiple banks. Ours planned to only go to ANZ (which has a rumored high commission for brokers) until we pushed for more. In the end, ANZ failed to get finance in time for both auctions - cast a wide net! Your broker should want to get you the best deal and best chance of getting approved.

Real estate agents are held to be truthful, however there seems to be a gray area where if they don't know something, then they aren't liable - even if it's a leaky home or unconsented works. So just because the agent isn't aware of an issue existing, it doesn't mean there are no issues, and so it's your legal responsibility to pick up any issues through due diligence.

General advice

• Usually banks want a 20% deposit, and if it’s lower you’ll probably pay higher interest rates. See section 1b below for options.

• Remember you often have to pay a 10% deposit up front when you sign the contract to go unconditional on the house (this is spelled out in the S&P). You usually go unconditional on the day of auction or once conditions on a conditional offer are met. You then pay the remainder of the deposit on settlement date which is when you formally have the house passed over to you.

• If you're going to auction you need your lawyer to specifically apply in advance  and lead the process to use this 10% deposit out from your kiwisaver for the upfront deposit. 

When to get finance?

• Before looking - get preapproval for mortgage loan. Preapproval does not mean the bank will definitely lend for a particular house, it is approximate and conditional on the specific house.

• BEFORE you are going to auction or AFTER you make a conditional offer (only if you made it subject to finance!!!), you need to get unconditional finance from the bank to confirm how much they can lend to you, for a specific house. You give them the house details and they will do their final unconditional approval.

• Having finance requires insurance, so the bank will need to know you have insurance on the house.

I'll briefly review the options here - there are lots of great resources online about the options that I'll link to.

KiwiSaver First-Home Withdrawal

• You can withdraw your KiwiSaver (leaving $1000 behind in it) towards your deposit. 

Contact your kiwisaver provider and ask for a letter of preapproval. They'll check you are eligible to withdraw and give you a letter saying this. You need to have been contributing for at least three years and intend to live in the home. https://kaingaora.govt.nz/en_NZ/home-ownership/kiwisaver-first-home-withdrawal/

Lower than 20% deposit options:

• Kāinga Ora have a First Home Loan scheme which lowers the deposit required to as low as 5%, if you income does not go over their threshold (as well as other criteria): https://kaingaora.govt.nz/en_NZ/home-ownership/first-home-loan/

• Moneyhub has a great guide on Low Deposit Home Loans and a page about the First Home Loan scheme.

In some cases (select houses) you can purchase your current state home:

If you live in state housing you may be eligible to buy the house from Kāinga Ora. It sounds like they get a professional valuer around and may sell it at that determined price to you. You then are pretty much guaranteed to secure the house at market price! You don't have to deal with negotiations with agents etc. Along with the above First home loan scheme, this could be an affordable way to get on the ladder! 

https://kaingaora.govt.nz/en_NZ/home-ownership/tenant-home-ownership/

Kāinga Whenua Loan

• For Māori to build, purchase or relocate a house on multiply-owned Māori land.

• https://kaingaora.govt.nz/en_NZ/home-ownership/kainga-whenua/kainga-whenua-loans-for-individuals/ - see criteria.

Family/Whānau Help

https://www.bnz.co.nz/personal-banking/home-loans/first-home-buyers/getting-help-from-family-to-buy-your-first-home - in summary the options are:

• Family-Assisted Lending: Family secures part of your mortgage.

• Gifted Funds: Family gives money, no repayment needed.

• Borrowed Funds: You repay family over time.

• Guarantee: Family backs your loan, they are liable if you default (can't pay it).

Co-Ownership

• Buying together with a partner, family member or friend (Kiwibank Guide).

• Buying a house is a huge financial commitment, if you decide on this route make sure you are very comfortable with the person/people you are buying with.

• Make a solid legal agreement - see the "Contracting Out & Co-Ownership Agreement" section at the bottom of this page.

The Kāinga Ora First Home Buyers Grant you may have heard about before has unfortunately been discontinued.

What is Simplicity?

A great non-bank lender for first home buyers with on average better interest rates than the banks. Only offers a floating rate.

I would seriously consider choosing them if you meet their incredibly strict lending criteria and are quite financially stable. See their FAQ.

You can't ever switch to Simplicity from a bank so you only get one chance to sign up! But you can switch to a bank later if you want.

Brokers don't recommend them because they don't work with brokers and don't give commissions.

Pros and cons of Simplicity

Pros

• On average their floating rate has been about 1% less than the 1 year fixed rate of banks. For us, I calculated we’d save around 100k over the 30 years if we had a 1% less interest rate! No guarantee what their rates will be in the future (but they'll need to stay competitive).

• Floating rate, so your interest rate changes along with the market. This can be good or bad depending on if they’re going up or down.

• Unlimited overpayments without penalties - pay off faster.

• Non - profit with ethical investments.

Cons

• Strict criteria: repayments ≤35% of after-tax income, house must be freehold/crosslease with no insurance exclusions, and more.

• Need to pay for a formal valuation after you've bought the house, costs between $1,000-$1,750.

• Floating rate is less predictable - ups and downs.

• No bank perks: cashback, revolving credit etc. You will need to keep your own emergency fund.

Pros and cons of a bank

Pros

• Stability: Lock in fixed rates for long periods of time so you know exactly how much you'll be paying each month.

• Extra perks (complex to understand, but you don't need to fully get it until you've bought):

  • Cash Back: Bank gives you cash after signing (around 0.8 - 1% of purchase price). If you switch to another bank in the first few years however they may take some of this back.

  • Revolving Credit Facility: Flexible loan portion at higher interest which you can freely withdraw or deposit money into unlike the regular mortgage. Good if you're good with money, you can fill it up and have it act like an emergency fund. 

-A revolving credit is like an empty bucket that you can fill with money that you can then use at any time. But mind, the bucket charges you for being empty! 

• • Offset account: A bank account which acts to reduce your home loan interest cost. The money stays in your normal bank account and while the money is there, it acts like it's paid towards your mortgage, so you pay less interest.

  • Green Home Loan: loans for double glazing, electric cars etc at a temporarily discounted rate (usually a few years). After the discounted period expires - it turns back to a standard floating home loan though! 

Cons

• Overall higher interest rates over time than Simplicity (thus far).

• Limited extra payments - banks only let you pay a certain % more than your regular mortgage payment, or you get a penalty fee. This is because they expect a certain amount of profit gained by you paying interest, so if you repay too much they lose on that potential profit. You can however deposit extra funds just before you refix the mortgage (e.g. if you fix for 1 year at a time, you can add extra money in every year). you can add money after the bank loan turns to 'floating.'

Lawyer - Title and LIM

• Checks LIM for unconsented works*, it also specifies if the house has been flagged for specific natural hazards (is not a risk assessment itself - still do your own research into flooding/Christchurch TC zone etc)

• Checks the title and helps to unpack what it means

• Checks the S&P (Sales and Purchase agreement) which is the main legal document you sign to own the house

Understand what the ownership titles mean - freehold, leasehold, unit title and cross lease. 

Freehold (also known as fee simple) is the best - you control all the land. 

Crosslease: You and other people in complex own the land collectively and each have rights to portions of it - e.g your house. There could be complications if you want to expand your house etc. 

Leasehold means you own the house but not the land and pay 'rent' to the landowner, which changes after a period of time. Leasehold houses sell for very very cheap - don't overpay on these! You and everyone else may have trouble getting a mortgage - and may need to buy in cash. 

Get your lawyer to review the property type and advise you, we have given a brief summary above based on our understanding. See below guides.

References:

https://www.settled.govt.nz/buying-a-home/finding-a-property/understanding-types-of-ownership/ 

https://www.moneyhub.co.nz/best-type-of-property-to-invest-in.html 

LIM

• Information held by the council regarding consents and permits related to property. 

• You can read it yourself and cross-check consents - see "About consents". You're looking to see if anything is NOT there! 

• Get lawyer to review this.

A LIM doesn't include the building permit and consent plans or documents.

Request a Property File

• You can order this for any property at any time - go to the council website. Costed $40 for us. It will contain everything they have on record including the consent plans/documents. It DOES NOT replace the LIM, but is in addition to it. This is a slightly extra step, but we thought it was useful. 

  • Request a Property File - Christchurch

  • Request a Property File - Wellington

  • Request a Property File - Auckland

How to use it

• Look at what is on the file (sometimes they include original house plans if they have them) and what the property looks like now, to see if anything has been changed. E.g. you could see if there were walls taken out, extensions to the house etc.

• Compare them with what consents are on record - if the wall has been taken out (which requires consenting), but there is no consent in the documents - this needs to be addressed.

• If you discover unconsented works like this, you can ask for the vendor to apply for a COA or COC.

There are some renovations which need to be checked and signed off by your local council. In New Zealand, people sometimes DIY themselves and not get proper sign off as it costs money/time. If something is not consented, this opens a whole can of worms with insurance potentially not covering you e.g. a fire starting from unconsented electrical works.

Every council sets their own rules, so they will vary, It is always important get in contact with the council - they will give you a call and walk you through what they need. Below is a general guide: 

How can you sort out something that hasn't been consented?

The issue is solved by either a:

1. Applying for a COA or COC (certificate of acceptance or certificate of compliance) from the council for the unconsented item (essentially consent in retrospect). This process can take many weeks.

2. Simply removing the unconsented item e.g. a wet tile bathroom could be totally ripped out (naturally this would affect how much the house should be worth).

If getting a COA/COC, it should be the vendor’s responsibility to do this, not your’s. If something needs to be removed, this should also fall on the vendor.

You could put conditions on a conditional offer for a consenting issue to be sorted, or on an aside agreement (signed by vendor) before an auction.

If you have any questions about consents:

• You can ask the local council - the Christchurch City Council replied within a week to us for our queries.

• For the legal side - talk to your lawyer.

How to check if unconsented works are present?

Cross check what consents are on the LIM and what is in the house (e.g. if there is a sleepout on the property, but there’s no consent in the LIM it may be unconsented).

Some common unconsented works to look for are:

• A bathroom with a tiled shower (bad if unconsented as requires a waterproof membrane behind the tile to stop leaking). Bathrooms without tiled showers need consent if they are direct replacements to an existing one (in Christchurch)

• Wall removed (bad as house can be not structurally sound, could void insurance unless a structural engineer signs it off)

• Sleepouts (including garages converted into sleepouts)

• Log burner (consents expire very regularly e.g. every 3 years)

• Extension to the house / extra bedrooms

• Sunroom

You can look up a full list on your local council website - e.g. for Christchurch

References: 

https://www.fhlaw.co.nz/2024/07/22/unconsented-works-a-buyers-guide/

https://www.redlbp.co.nz/buying-a-home-with-unconsented-work-what-you-need-to-know/ 

https://www.oneroof.co.nz/news/is-a-30-price-discount-worth-it-the-risks-of-buying-an-unconsented-home-44027

https://ccc.govt.nz/consents-and-licences/building-consents/apply-for-a-building-consent

https://www.consumer.org.nz/articles/legal-requirements-of-building-consents 

Obtain insurance for the property before going unconditional - banks require insurance with no or minimal exclusions to lend.

Unconsented works can trigger exclusions (e.g., bank won't cover for fire damage originating from an unconsented sleepout), complicating bank approval. If the insurance comes with exclusions, you need to negotiate with the bank about whether the bank will lend to you.

Tips:

• Submit building report, EQC report, and LIM to the insurer—insist they review them especially if there is damage to the house. MAS did this for us. Some companies just ask you to tick a “no defects” box (flood/earthquake risks included) but don't ask for documents, then could void coverage later if issues emerge. Full disclosure upfront is safer.

• You need to have active and final insurance starting from the day you go unconditional (if it's an auction, then on auction day). Don't rely on a ‘letter of intent’ —our lawyer stressed this.

Note: Some buyers don't disclose unconsented works to insurance companies so that they can secure finance. Risky! If insurers uncover it later when you have an event, they could void your policy, leaving you uninsured after years of payments and a damaged house! Insurance agencies can and do investigate.

Insurance used to be more lax (thus why so many people didn’t bother to get consent in the past) but they have become stricter, at least in Christchurch after the earthquakes, and presumably will be strict in the future with more major weather events coming. Don't be caught not declaring things.

Reference:

https://www.opespartners.co.nz/property-markets/canterbury/christchurch-1/insurance 

https://www.nzpropertyinvestor.co.nz/unconsented-works-dilemma 

https://www.vero.co.nz/documents/personal-insurance/vero-residential-home-policy-0522.pdf

Get your own building report to spot maintenance, damage, or structural issues - don’t rely on the seller’s (it might be biased or lower-quality). Hiring your own ensures thoroughness.

Ask the inspector to check specific concerns you have, like EQC damage or anything you notice at the open home. Quality varies—choose someone recommended. A good report is detailed, clear, plenty of photos. They can be quite handy as a future reference (such as for your pre-purchase inspection to double check nothing has changed).

Specific things to check

• Get floor levels if relevant (ask your inspector) - this is related to earthquake damage

• Get moisture testing - this is related to leaking from shower/bath/any water ingress into house (moisture coming in through the outside wall)

Checking liquefaction risk:

If in Christchurch first search the technical category!  TC1 means very low risk - don't worry. TC2/TC3 means there is risk of some damage having occurred. TC3 sites near river (<150 m away) are particularly high risk! 

https://opendata.canterburymaps.govt.nz/datasets/mbie-technical-categories/about

Tools showing very approximate risk of liquefaction (or observed liquefaction in CHCH case!)

• Christchurch: Liquefaction Viewer (Earthquake maps (top banner) -> 'observed liquefaction and lateral spreading in urban areas' -> February 2011)

• Wellington: Liquefaction Potential 

• Auckland: Liquefaction Map Viewer (this one seems to take a while to load)

See "EQC for experts" at the bottom of the page to learn more about earthquake risk.

If in Christchurch: Checking if EQC repairs were done:

Mostly relevant for Canterbury or anywhere that has been affected by a major earthquake and had EQC involvement.

1. Ask the real estate agent if there’s an EQC claim - they’ll give you a report with their assessment of any earthquake damage. Almost every house in Christchurch will have a past claim.

2. The document lists the damage and how much it costs to repair - it stating this doesn’t mean the repairs have been done. Confirm if repairs have been done with the real estate agent.

• The repairs were done through EQC, or were done through EQC giving a cash pay out to the house owner who gets their own private contractor to fix the damage. 

3. You can cross check with the building report with the EQC file to see whether the damage has been repaired. (The building inspector can cross-compare if you give them a copy as well).

Check if a house is in a flood management zone (searchable by city):

• Christchurch: Floor Level Map 

• Wellington: GWRC Flood Map

• Auckland: Flood Viewer

If worried, use the tools to see elevation. You can get a rough idea in person how elevated the house is compared to the street.

A flood zone isn’t a deal breaker - but its good to be aware and take it into account.

With climate change, flooding risk will likely worsen—insurers may hike premiums for high-risk homes. 

Look around

• Visit at different times (day and night especially a Friday/Saturday night for noise) and walk around

• Talk to neighbours and get a feel for the community

• Try the commute out (especially if you think it may be too long)

Check online resources if you're concerned

Sometimes places get a bad reputation by word of mouth but statistics tell a different story, and the other way round. Looking at the real stats can help you to make an informed decision. Relatively New Zealand is a fairly safe country - it's up to your own comfort levels.

• Police Crime Stats: NZ Police Crime Snapshot. Only works on desktop. 

• Record of State Land: LINZ Map Viewer. Includes lots of state-owned social housing as well as parks, schools. Some social housing isn't on here as its not state owned but potentially council owned. 

• NZ Deprivation Index: EHINZ NZDep. Shows general socioeconomic status near your house. 5 is average.

• Kāinga Ora Developments: Kāinga Ora Social housing developments

If you're buying with a partner:

• Get a contracting out agreement to protect you both if funds are unequal. (Ideally before making an offer, in case there is dispute)

If you're buying with friends/family:

• Make sure to have a very robust agreement between parties about what to do in every possible future situation. Get separate legal representation and make a solid legal agreement.

• Cover scenarios like breakups, having kids, selling, financial struggles, or maintenance disputes. 

• Consider an end clause (e.g., sell after X years unless all agree to extend).

• Having these discussions can become heated - but is also a great way to see if you can discuss difficult topics amicably - being unable to resolve things may mean you'll have conflicts in the future too.

• Even with a great agreement, co-owning can strain relationships. Weigh the risks.

• See this article from Settled.