The time we tried to buy a house

Last updated 12:02 28/08/2012

I'm going to be honest. I think I've been more cranky than usual the last few weeks, but not without reason. The Silver Fox and I, after months of playing nosey parker looky-lou at weekend open homes, finally found a house.

I thought when we first went to the open home that there'd be no chance that we could afford it. The rooms were too big. The stained glass in the bathroom too elegant. The street and neighbouring houses were too nice. And the rateable value of the property was over half a million. Dollars. You should have seen the poker face I had when the real estate agent landed that one on me. Nonchalant AS. Like there was ice water running through my veins. Honestly, James Bond couldn't have done any better.

The kitchen and bathroom needed updating and the guttering on one side of the house needed replacing but we weren't too worried about those. There were EQC repairs pending with piles needed repacking in one corner of the house, but, hey, we'd also get the whole place replastered and painted for free and it was perfectly habitable in the meantime, not to mention bigger and nicer than our current rental. 

In any event we decided to make an offer on the house. Probably it wouldn't be enough but it would be good practice for us to go through the process. We did all sorts of calculations with spreadsheets and came up with a number we could manage and signed all the necessary papers. Even if we didn't end up getting the house it was still kind of exciting. Look at us, being all grown up! The Silver Fox started looking at puppies for sale on TradeMe (I've vetoed us getting a dog until we live somewhere more dog-suitable).

But then the anxiety started. Neither of us could sleep properly. We'd both try not to think about the house and moving into the house and enjoying frosty beverages in the backyard of the house but we couldn't. And then we'd start to worry about not getting the house and...I haven't felt that stressed out since the last time I moved. And that was because of earthquakes. And I was moving in with my mum.

As it turned out ours was the best offer. The owner's counter offer was $10,000 higher so we added $5000 to our original offer and Bob's your mother's brother, we were buying a house. BUYING A HOUSE.

And then we tried to get a mortgage. You know that "wah-waaah" sound effect that they play on game shows when someone gives an incorrect answer thereby forfeiting their lead and missing out on the speed trivia round and the opportunity to win large cash prizes? Imagine that sound playing about now.

We had already spoken to our own bank about getting a mortgage beforehand. We'd sashayed our numbers past them coquettishly and they'd given us a lascivious wink in return.

It's no accident that I'm framing the exchange this way. When approaching a bank for a mortgage, essentially your main aim is to be as attractive to the bank as you possibly can be. You hoist up your "assets" and say "like those, do you? Plenty more where that came from, if you know what I mean." And they do. Better than you do, most likely.

But as I've hinted, there was trouble a-brewing.

The house we wanted to buy, live in, and barbecue outside at with impunity, is on TC3 land. For those of you not fully cognisant of the intricacies of land in the Christchurch area at the moment, green zone land (i.e. the stuff you're allowed to build on) is broken down into 3 Technical Categories. TC1 is unlikely to be affected much by liquefaction from a large earthquake, TC2 might have slight to moderate land damage, and TC3 is moderate to significant but requires specific testing to be done to be sure.

The property we wanted to buy had some liquefaction, which had resulted in a very slight lowering of the floor in the kitchen but to be honest it was less noticeable than the floor dipping I've experienced in every rental property I've ever lived in, and with a scope of works from EQC stating what work was needed, we just assumed that the work would be done, we'd eventually have a fixed house and a mortgage, and throw some more sausies on the barbie would you, dear, the neighbours look hungry!

Let's play that "incorrect answer on a game show" noise again, shall we?

What we didn't factor in was the insurance. Insurance companies have been carrying over policies for new owners and this is what we'd anticipated would happen with us. However, with all things and especially with all things insurance-related, there are caveats. Lantern, the company which currently insures the house, is underwritten by IAG. IAG will provide insurance to new owners of earthquake-damaged homes. Yay! But they won't cover you for the costs associated with moving out of your house for several weeks while the work is done. Boo! They also won't provide full replacement cover but only indemnity cover. 

But what does that have to do with our ability to get a mortgage? Well, as best as I can tell, a lot of it is to do with the relationship between EQC and insurance companies, as well as the difference between full replacement and indemnity insurance cover.

Where earthquake damage costs less than $100,000 to repair, EQC pays the cheque. It might take a while (or seemingly eternity) for the repairs to get done but under the $100,000 cap there's at least a commitment to do them. Once you're over $100,000 it's the insurance company's dollar. If they decide, based on their calculations, that it's not actually cost-effective to repair your house, then they'll just pay out whatever your policy covers you for. With TC3 properties a lot depends on the state of the land the house sits on and with regards to foundation repairs the potential is there for a simple, cheaper job to become more complicated and more expensive depending on what analysis of the land shows. "Knock it down" expensive.

So even though the bank thinks your deposit and future earning potential are fairly attractive *winkity wink*, they're not keen on lending you a large chunk of cash for a house that your insurance company might pull the plug on and pay you tens of thousands of dollars less for. Apparently that's a bad investment.

In the meantime you've got a lawyer (OH MY GOD. SO EXPENSIVE) and filled out more forms than you've ever signed in your life and ordered a LIM report and wrung your hands and lost sleep and by the end of it, well, I was actually relieved that the sale couldn't go through. Sad but relieved. And boy are we a whole lot wiser about the process now and the added complications of house-buying in Christchurch. This emotional rollercoaster prompted me to make the graph below as a visual of just how crazy the whole thing felt.

The emotional rollercoaster that is prospective house ownership

Now, I know I'm not the first person in the world to attempt buying a house so I've got to this emotional seesaw normal? And never mind buying a house on TC3 on earth does anyone ever sell any? 

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Davo   #1   12:18 pm Aug 28 2012

I remember buying my first house. I was constantly getting interrupted at work by bank, estate agents etc, and wondered how anyone ever had time to actually buy a house. Now in our 4th home, it seems to get easier each time. As in, we stress less about it. And now, having a large amount of equity, it seems to be a lot easier than ever the point of banks going out of their way to try and accomodate us. But yes, the first time is always hard. And sometimes it is better to settle for something nice, if not quite what you want, in the knowledge that you can sell it a few years later, make a profit, and then have more to spend on your ideal home the next time. Make sense?

AT   #2   12:30 pm Aug 28 2012

We bought a house earlier this year, but we agreed to buy it a little over a year earlier. Sounds complicated but it wasn't really, my other half was a newly formed sole trader and needed 2 years of trading history before we could get a mortgage, so the people selling the house (friends, through a private sale) agreed to a rent to own for 15 months before settlement. It was the nicest thing anyone has ever done for us and we will be forever grateful, but 15 months of stressing about something going wrong and eating up our deposit or the banks changing their mind after the early "wink and nudge" we'd gotten when we agreed to the process was the most stressful thing I have ever done. I definitely went through "Holy crap what did we just do?" and "Low level nausea" at more than one stage. I don't think I got to night terrors but definitely sleep deprivation whilst lying awake thinking about it. I am still eternally grateful though and definitely settlement date was a good feeling. And now it's ours! Well, mostly the bank's....

TC3 land sounds like the worst kind of nightmare, it sounds so impossible that it's almost red by default, but without the accompanying government offers.

Chrissy   #3   12:31 pm Aug 28 2012

Having been through the house buying process 5 times now, I can assure you that it gets less stressful each time. The first house can be an emotional buy - you fall in love with the house and MUST have it. After that you tend to get a bit more practical and look at things such as resale potential and how much money you will have to spend to make it perfect. My advice... there will always be another house if this one falls through, you will panic more once the sale goes through ie OMG how are we going to pay the mortgage, what if I lose my job etc etc. I bought my current house between the Sept & Feb quakes so only had to go through half the hurdles you are now facing. If the banks and insurance don't think it's a good investment then perhaps they are doing you are a favour by turning you down.

Cy   #4   12:34 pm Aug 28 2012

That graph appears to represent what i've been through pretty accurately. Apart from the rejections as i am in wellington and not in such a bad state for earthquakes as we're not having them.

Be thankful you have missed settlement day in there, it would require you re-working your graph to have something worse than night terrors. Especially as standard practice is 12% penalty for late settlement. In my case it wasn't much, in yours... lots.

Rose   #5   12:38 pm Aug 28 2012

We bought our first house at the end of last year. We found a house we liked that we thought we could afford, but the house had to go to auction. That concentrated all the nerves to massive proportions, but on the upside, by the end of the process we knew we had it, subject to the insurance going through. It was kind of like ripping off a bandaid - hurts more, but over quicker. We had to do all the groundwork first, and yes, lawyers are real expensive. Ours was nice enough to provide a discount, since the final bill was substatially higher than the initial estimate. We used kiwisaver, which along with the insurance, hiked up the bill a lot.

It is on TC2 land, so fortunately we didn't have to worry about that, and at that time the insurance company did give us full replacement cover. It has since been repaired, and we did get an accommodation allowance through the company we had contents cover with, as we were insured with them at the time of the earthquake, and continually since.

It's stressful enough buying a first house, but the whole Christchurch earthquake/insurance rigmarole you have to go through just makes it so much more fun. Buying a house somewhere else in New Zealand seems like it would be child's play in comparison.

Booboo   #6   12:51 pm Aug 28 2012

That sucks! Poor you

Asha   #7   12:52 pm Aug 28 2012

Totes normal! Blimmin stressful process isn't it, and a major learning curve. I think its actually a good thing to have a dummy run on something like this because next time you'll be much more up with the play. Anyone told you about the stress when you actually have bought, and spend a few months freaking out about being saddled with a mortgage and being an actual home owner/proper grown up? Thankfully that passes with time...

Niri Tacen   #8   12:54 pm Aug 28 2012

Ah, house buying, and playing mind-games with the sales agent. "I'm here to work for you!" No, no you're not. And stop trying to be my friend.

Honestly, when the beloved and I bought our house, by the end I was more than happy to let my experienced Dad take care of dealing with the agent, because I was at the "oh, for the love of Darwin, just give me the f***ing house!!" stage.

Also, excellent use of "coquettishly" and "lascivious" there Big M. If they had an award, you'd get it.

em   #9   12:54 pm Aug 28 2012

I'm with you on the anxiety levels! My partner and are possibly just about to buy our first house. BUT, it's not insulated, and it has mostly original wiring - big NO from the insurance company and it needs a tonne of other work becasue the current owners have just painted it, really badly, with colours that must be from the reject paint bin at Mitre10. So now I'm all like, do we put in an offer because it's a really nice place (despite it's foibles)and it's RV is really quite low. OR do we find somewhere else that might be dearer but needs less work!?!? AND then there's lawyers fees (holy crap!) AND then we have to buy our own whiteware, sounds stupid but it's freakin expensive!

gazza   #10   12:55 pm Aug 28 2012

just brought our first house about 2 months ago, and yeesh was it stressful.

negiotating price, then ndoing it again after a few minor things on the building inspection.

Spending all that money on inspections, LIM reports and Lawyers and wondering if something is going to jump out of the woodwork and sink the whole deal.

Luckily we don't have the earthquake damage issues to deal with.

In the end we ended up with a cheap three bedroom house that needs a few minor things fixed but the price was right, it has a decent sized section, it had a dishwasher (bonus) and heating, good insulation and was well positioned to catch all day sun. Not too bad for a first home.

oh, and we got a puppy. The puppy is probably ging to cost more than the lawyers despite getting her for free:

1) Vaccinations (done) 2) Registration (upcoming) 3) getting her fixed (upcoming)

thats not to mention all the things its chewed (including $300 glasses and a poisonous pot plant that required a late night vet call). Still shes incredible cute.

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