Okay, so you’ve found a property that you’re interested in purchasing, how do you check it out?
“Due diligence” is a fancy way of saying “check out everything that you need to know about the property” and is a term commonly used by experienced property purchasers.
Here are some things to consider during your due diligence:
- Check the Land Information Memorandum (LIM), or “Property Bag/File” available from the local Council. This is to find out what information the local Council has on the property. It is common for people to get a LIM through their solicitor once the property is under offer. What is not so commonly known is that you can get a lot of this information from the local Council by ordering the “Property Bag/File”. There is a small charge, but it’s much cheaper than a LIM and often these days the Council will either email it to you, or give it to you on a CD.
- Get a copy of the Certificate of Title (CT). It is common for a CT to be ordered by your solicitor’s office once you have the property under offer. The CT lists the current owner/s of the property as well as the type of ownership (eg freehold, leasehold, unit title etc.). Also on the Title are other interests (e.g. mortgages). Some Titles also contain covenants, easements, caveats etc. I will explain a CT more thoroughly in a future post, but for now, just request that your solicitor get you one and go over it with you.
- Search the Rating Information on the Council’s website. This will show you the land size and what the current annual rates are for the property. This can be used for comparing properties, but don’t place too much weight on the valuations because they are only done every 3 years, and the valuer doesn’t visit the property.
- Do (or get a professional to do) a very thorough building inspection of the property. This step is absolutely vital! Once you become very familiar with building construction and have purchased a few properties, you’ll get this one nailed (ha ha), but if you are starting out in your property search (particularly if you have fallen in love with an old villa!) it is worth paying a professional to give you an unbiased report on the condition of the property. This check can save you thousands!
- Check out the Market Rent (if the property is to be an investment). In New Zealand the Ministry of Business, Innovation, and Employment produce market rent statistics that are freely available here
- Compare recent sales (either ask for a list of recent sales from a local real estate agent, or pay $47.95 for a QV (Quotable Value) E-valuer).
- Check the school zoning of the property. This may or may not be of importance to you, but it is handy to know. Good school zones fetch higher prices, and it is easier to attract tenants if the property is zoned for good schools. New Zealand school zones can be found here
- Get a good feel for the neighbourhood. Perhaps drive past on a Saturday night to check for parties/noise.
- If you are considering any development or subdivision, check the City Plan and zoning rules with the Council. A lot of local councils have their district plans available online. It is worth familiarising yourself with the different zoning rules because if a property is subdivisible this is likely to make a big difference to the value.