Kiwisaver Problems: keep your eye on your provider.
Filed under: Avalon's Money Thread, Cost of living, Future Finances, General Budgeting, Investing in general, Kiwisaver
I always thought putting the Inland Revenue in charge of Kiwisaver was a daft idea. Seems I may have had a point. The IRD passes on your information to one of the default providers, and then thats the end of what they care about. It seems that a lot of the default Kiwisaver providers (these are the ones you are automatically enrolled with if you don’t make your own choice), have got the wrong information, and cant get in contact with the people whose funds they are running.
It worries me that there appears to be an awful lot of people who are completely unaware that they have a Kiwisaver fund. There are 200,000 people who cannot be contacted by their fund managers.
The problem means people may not receive the letter telling them who their KiwiSaver provider is or the annual statement on their Kiwisaver balance and annual report explaining the returns of their fund.
McAllister [from ASB Group Investments - the larges Default provider] said some people could be in KiwiSaver for more than a year and still not know because it was new and they did not know what to expect from their provider or Inland Revenue.
“It appears it’s an IRD problem. It raises questions about how accurate IRD’s information is.
You need to be aware about Kiwisaver. You are automatically enrolled into a fund, whether you like it or not, and have to opt out if like us you think Kiwisaver is crap.
Make sure you understand what is at stake here – as immigrants you will face this the minute you start a job,a dn you have 2 weeks to make up your mind about staying in Kiwisaver forever or opting out. Do your homework.
More information on Kiwisaver can be found in Avalon’s Guide: 13 things you need to know, and 17 things you really need to know!
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Bank Guarantees on loans
When you take out a mortgage to buy your home, the mortgage is “secured” against the house. Most people get that, and understand it – it’s the bit that says “You can lose your home if you do not keep up the repayments on your loan” sort of thing.
But on top of that – you also get what is called a Personal Guarantee. Which says that even if we take your home, and you find some nifty way to try and get round paying us what you owe us, you personally guarantee that you will pay us what we want – even if its 20 times what your house was worth. Or something to that effect. Strangely enough its a nightmare of small-print and legal waffle.
And it’s the bit we seem to have no end of problems with in our dealings with ASB. I dread trying to organise mortgages with them now, because I can almost “guarantee” that there is gonna be a problem with the Guarantees.
We have yet another problem with them right because Ive actually paid off one of my mortgages.
Which is obviously a bit of a big thing for me. (Blog will be here as soon as I have the statement to copy and prove it!) It seems the ASB loan department have finally looked through the file, and worked out that one of the trustees in our Family Trust changed about 3 years ago. They were told, but it looks like everyone ignored it. Now they want us to sign another guarantee to replace that one.
For a loan that we have paid off.
Bloodsuckers!
So, as I am already a bit disgruntled with the loans people for screwing us around a few weeks ago, Ive said I wouldn’t do it unless they covered the legal costs – as Lawyers are needed (they are the trustees that changed). ASB have agreed to pay $250.00, so I’m instructing the solicitors that if it takes more than that, they need to stop working on it and tell me. I’m not paying for another bank stuff-up. They wont reduce my bank fees, so I’m not in the mood to indulge them right now.
I’ve also said that I need it in writing that the old guarantee is canceled, and that they are only wanting us to guarantee the amount of the outstanding loan – a rather large $210,000.00 less than the original guarantee.
Banks will try and sneak in a silly amount, but you can tell them to make the guarantee for the size of the loan only – it will have a clause in there that they can come after you for any associated costs and interest anyway.
I wait with baited breath to see what they will do.
One of the things to note about this situation, is that you may be advised to set up a family trust when you come to New Zealand. Usually on the premise that it protects your assets such as your home. But then the bank makes you sign these guarantees, and they bypass the whole family trust anyway. SO don’t be fooled. We are happy to have a family trust, because we have a business and investments, and it will to some extent protect the home my parents and brother live in if we stuff up. But every business loan we have has one attached, so if you go belly-up, the banks can come after us – there no hiding.
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Tax Changes in New Zealand: What’s Going Down.
Filed under: Cost of living, Economics, General Budgeting, Jobs & Work
I thought I would start this with the (possibly) good news.
In fact this bit is really good – if the new Zealand government were do it, it could make life very cosy indeed for Skilled Migrants who can earn relatively high salaries. (Right up until New Zealand companies screw you over by saying that you don’t need to earn as much now anyway).
Top Income tax Rate could go to down to 30%.
At the moment if you earn over $70,000 (by no means what should be considered a high salary) you pay 38% tax on every dollar over that level. Now this is being touted as saving someone about $20 a week – which really isn’t a whole lot.
But what happens if you earn $100k a year?
I’ve worked out that if just the top tax bracket comes down from the current 38% to 30% then you end up paying $406 a month less in tax. So instead of your take home pay being about $5,831 it would now be $6,237.
That’s an extra 116 coffees a month!
(Rough calculations only – this does not include ACC or Kiwisaver deductions.)
Also, trust and company tax rates may be going down – but it’s a bit unclear. The Tax Working group says it wants to make personal, trust and company tax rates all the same to avoid people being able to siphon off income into lower tax bands. So dropping the personal tax rate to 30% and then dropping the company tax rate below its current 30% doesn’t actually make that happen.
Why is this happening?
Because looking at this graph below shows that until you earn over $240,000 a year in New Zealand, you are better off from an Income Tax point of view moving to Australia because their income tax rates are cheaper. This of course completely ignores whether the cost of living is higher in Australia – but its something that is causing a lot of Kiwi’s to move.
In fact – this whole tax report seems to start with the theory that personal income tax rates must come down. That takes up roughly 5 pages of the report. The other 74 pages are all about the taxes that need to go up in order to pay for it.
There’s a surprise.
We will apparently know exactly what the income tax rates will be in May this year – at the budget. When we will also get the bad news about who amongst us has to pay for it all.
I don’t think that’s going to be a good day for me.
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Avalon’s Money Thread: Working out our net worth.
Filed under: Avalon's Money Thread, Banks, Economics, General Budgeting, Investing in general, Mortgages in New Zealand, Property Investing
We’ve done the budget, we’ve made some decisions, our personal Fixed Rate mortgage comes up for renewal in January, and we have decided to rejig the way we pay our mortgages.
All that was left to do was to track what our Net Worth was – which given the economy was a highly daunting task to be honest.
Your Net Worth is basically the value of what you own (assets) minus the value of you owe (debts). Unlike a Budget, which tells you what you are going to do over a month or year – your Net Worth tells you how much you have right now. Today.
It’s not difficult (especially if you have your accounts in order and your paperwork filed)– just a bit depressing at the moment. Because I like spreadsheets, and I’m lazy, I just copy the same spreadsheet from last year and fill in the numbers – its quite straightforward. In fact the only difficult bit to be honest is grabbing the bits of paper that contain the info you need.
On one side I have a list of all the assets: property, banks accounts, savings accounts, shares, pensions, car, and household goods (Insurance value is the best way to determine that).
On the other side are the mortgages, credit cards and any loans.
Take one from the other, and what is left is how much you are worth today.
In our case – about $250,000 less that we were 2 years ago.
I kid you not.
So why am I not crying into my coffee right now?
Well, Net Worth is a really good indicator of how you are doing financially. But it has to be taken in context. Most of that “wealth” is paper money. It doesn’t really exist. I don’t have $250,000 less dollar coins than I had – it’s just that my properties have gone down in value. In time – the value will go up again, and so will my “wealth”.
It becomes an issue if you want to borrow money and maximise how much money the banks will lend you – as they want to know the value of your assets. When I spoke to the valuer to get ours revalued – he said that he’s never been busier with banks insisting on clients getting up to date values on all their properties. While this can be annoying – I have to say I think I’m actually with the banks on this one.
I spoke to ANZ the other day about the possibility of refinancing a rental (the funds to be used to reduce personal mortgage – so no extra lending overall). They won’t lend more than 70% of the value of a rental, and my mortgage was for 75% already. The thing is, while doing this is defiantly for the banks good – it also prevents us as buyers from over extending. I think we personally got lucky that the recession hit so fast just after we bought our 3 rentals and couldn’t buy any more. It prevented us going mad, getting caught up in a storm and going belly-up which has happened to an awful lot of people.
We have “protected” as much as we can of our net worth by paying down as much debt as we can as fast as we can. So while our assets are worth much less, so are our debts. There is actually a lot you can learn from a recession, and if you can get through this and come out the other side – then just think what you will be like when the economic climate improves.
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Watch those Direct Debits in New Zealand.
I need to cancel a Direct Debit. No problem you would think? Hmmm, not so fast – this is the New Zealand Banking system, and so of course it just ain’t that simple.
In Avalon’s Guide, one of things I stress is:
And something which is vitally important: once you have closed down all your utilities in the UK, like gas, electricity, internet, and you have told them not to take any more money from you via Direct Debits – also tell your bank! You should always cancel your Direct Debits with the bank, and then if any company “forgets” that they shouldn’t be charging you anymore, they can’t get your money.
So I figured (I think rather sensibly) that I would do the same thing here. Cancel the Direct Debit at the bank just in case the company I’m dealing with (which so far has shown itself to be run by a bunch of bone idle morons) “forget” and try and take another premium.
But the bank wont do it.
Apparently, the only way to cancel the DD at the bank is to cancel my Credit Card and get a new one.
What???? 
Are these people for real?
This is despite a clause on the DD form that says:
2. The Customer may:
(a) At any time, terminate this Authority as to future payments
by giving written notice of termination to the Bank and to
the Initiator.
(b) Stop payment of any Direct Debit to be initiated under this
Authority by the Initiator by giving written notice to the
Bank prior to the Direct Debit being paid by the Bank.
Apparently, I cant.
So I contacted Direct Debit New Zealand, who were also as effective as a wet paper bag. Although they have said:
At directdebit.co.nz we are looking to increase the visibility of these
processes to ensure the “customer” controls the direct debit process more.
Which is nice.
So be warned. Here in New Zealand the Direct Debit system, which is supposed to offer us all sorts of protection, doesn’t.
The banks are ignoring their duty under the agreements we signed.
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Avalon’s Money Thread: Tree Hugging and the concept of money.
There is a theory that when you start to respect money and look after it, it kind of decides its likes your company and you get more of it. I now its sounds a bit odd but it really seems to work. Once I got the ball rolling and stopped overspending, the amount of money we had just kept going up. I know that may sound obvious but if it’s really that simple, why are so many people broke before payday?
It’s actually the compounding of interest that makes this work (and conversely makes debt spiral out of control so easily).
So you have $100. That earns $1 interest the first month. But if you don’t spend any of it, the next month you earn $1.01! You just got a pay rise! Your money is multiplying because you looked after it.
I’ve been reading a book lately that had something to say about this which kind of had the effect of walloping me round the head and made me look at it a very different way. I hope it helps.
Basically you can have security OR you can have freedom. Seldom do they go together. To see this in action you have only to look at what is happening in the States, the UK and Australia. The book was actually talking about financial security. You can have a good job and the security that comes with a steady paycheck, but it won’t often give you financial FREEDOM. For that you often need to step outside the box. It can mean changing a lot of preconceived ideas about money and that is scary
Mind you, so is emigrating. As soon as you actually decide to do this, you are stepping out of the box. You are daring to actually do something which most people only dream of. But most people live life in an “it’s alright for you” kind of daze, if only they had your money / family / background they could do the same. You are not doing that, you are going for it. If you can do that, why not make a change in your financial “box” as well.
Also, for many of us we really need to change the way we think about money. It’s not an evil thing and having it wont turn you from a nice loving, giving person, into a greedy megalomaniac who would sell their own family for a fast buck. Conversely, being poor as church mice, won’t necessarily make you a decent human being either.
Either you are a good person on your own merits or you are not.
Your bank balance doesn’t alter that.
But the tree hugging principle says that if you think only evil greedy people have money, you won’t be able to keep it, because it’s going to make you feel bad. If this applies to you, then please just think about it. Most of the people I’ve met on this journey some of whom are seriously good at this all started in the same boat as we did, flat broke and depressed about it. The only thing that made a difference is that they felt they were worth the effort and did something about it. Their wealth has not made them different people – it’s just made them wealthier people. They have been incredibly generous with their time and in sharing their knowledge.
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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Avalon’s Money Thread: Am I a Big Spender?
Filed under: Avalon's Money Thread, Cost of living, General Budgeting
So in reality, do you just take out a certain amount of cash and try to make do with it? I try to do that, but almost always something unexpected comes up, such as filling a gas tank or topping up my bus card… Something that you can’t really delay. So can you tell me how do you control yourself?
Firstly you CAN work on a cash only budget and this works well for over spenders. But that is really talking about people who literally spend spend spend. A cash only budget is where you take out a set amount of money each week and that’s IT, is said to help by making people AWARE that they are spending their money. When you use Credit cards, you never see the real money so for many people it helps when they have to count out $20 bills to buy that $400 coat! This can be really helpful in getting over any “consumerism” habits you may have. Moving to New Zealand of itself won’t necessarily turn you into a non-consumer. Learning to spend less money isnt something you get by osmosis from Kiwis – who overspend as much as anyone else.
When you look at what you are spending the money on, ask yourself:
“Do I NEED this or do I WANT this”?
If you WANT it, it needs to wait till you have the spare money or it comes out of sanity allowance. If it’s a NEED, then budget for it. Then when looking at items you are going to buy, look at the PRICE but also look at the VALUE. Ask yourself:
- “Is this thing WORTH what they are asking for it?”
- “Can I buy it cheaper elsewhere” and
- “Would I rather spend that money on something else”.
You would not believe how much money I HAVEN’T spent by asking those questions. Except on coffee which in any universe is worth any amount of money charged as far as I’m concerned especially when a friend and a natter is involved.
How do I control myself???
Well, when we were in debt I woke up and realised just how much the banks were making out of me. And how ill I was getting because I was so worried about how I we were going to pay the bills. Now I don’t remember the last time I couldn’t sleep because I was worried about how to pay a bill. THAT is what keeps me going, and stops me buying stuff I really don’t need, gets the library books back on time and makes me do crazy things like “budget days”. After a while I even got to enjoy it!
Just had another thought about this. I got my Moneysaving expert email today and it’s talking about debt. I know I’ve just mentioned credit cards on here but I just need to say that if you are struggling to cope with money, DONT get a credit card. I use one ONLY because it saves me money to do so, I get cashback rewards and it costs me nothing to do so. I ALWAYS pay off the full balance every month, so I pay NO INTEREST. (This makes my Mortgage cheaper because I have a revolving credit mortgage)
If you cannot do that, using a credit card can be VERY bad for your finances. Interest charges are too high and if you can’t pay the full balance, your debt spirals out of control way too easily.
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Avalon’s Money Thread: How do I start budgeting?
Filed under: Avalon's Money Thread, Banks, Cost of living, General Budgeting
If you need to do this (or want to) then pretty much the first step is to look at what you already do. There are lots of ways of doing this. I always keep accounts anyway and this is by far the best method. I use Quicken, but there’s also MS Money, you could use Excel Spreadsheets, or even old-fashioned paper and pen ( if you still remember how to use them). If you don’t keep accounts now, then consider it because if you are in a tight money spot, it’s worth its weight in dollars. But in any case in order to know what you are spending, you need to list all your outgoings for the last year, or as far back as you can go.
Sit down, grab a cup of coffee and some Tim Tams, probably a calculator and a sharp pencil too, and get to it. You can get the information you need from bank statements, any receipts you have, your past 12 months bills, and pay slips (because you also need to check how much you have coming in). If you keep accounts, all the info is there (or print it off if you use Quicken)
There is actually a good spreadsheet you can put it all in at moneysaving expert:
If you don’t want to use that, list everything under as many headings as you need: things like Mortgage /Rent, Food, Petrol, Cinema, clothes, whatever headings you need. One important thing to be aware of – you need to be ruthlessly honest about how you categorise your spending. If you only have six headings – its not enough. We currently have 60 heading that we use in our budget.
The next step would probably be to “analyse” all the stuff you write down and then look at where and why you spent that money. It’s probably time for a top up on the coffee and some more Tim Tams (I think trying to budget is hard enough without worrying about calories as well). Look for things that are costing you money that don’t need to. Easy ones to start with off the top of my head are: Bank fees (have a friend who was paying $15 a month to take $20 out each time from another bank’s ATM rather than walk an extra 5 minutes to the banks’ own ATM), papers and magazines (I know they are fun but you read ‘em in 10 minutes and that’s it), library fines (again costing a fortune in some cases as opposed to getting books back on time). Doing this can be a bit depressing – the Tim Tams should help with that- but you may just spot a few things.
Look at your bills, and see if you can cut them. Are you on the cheapest electricity supply? Can you get your phone bill cheaper? (I’m just changing to Ihug, which should save me nearly $100 a month!) Are you on the best mobile plan (and if you both have mobiles, are the both Vodaphone or both Telecom because it’s expensive to call from one to the other)? If you are in the UK, use moneysaving expert to check for cheaper suppliers.
Now you have the bones of a budget. Use the headings you have from the first bit of this exercise and look at how much you are overspending. That is, are you spending more than you earn? If you have managed to work out cheaper suppliers for most of your big bills, then what’s left covers your other spending. If you need to cut spending more, then decide on what is important to you and what you can fairly easily not have without as much pain and suffering. I could probably manage going out to eat less, but if someone took my coffee budget away there would be hell to pay. By this point, you should now be getting an actual “budget” or spending plan (in the way that saying a diet is an “eating plan” is supposed to make it easier to eat a lettuce leaf and a carrot instead of chocolate cake). This is the goal to stick to, what you should aim to be spending on average on all your requirements. Changing habits is not easy but apparently it actually only takes 28 days for something to become a habit. .
And for bills: work out your average monthly bills and put that much aside into a savings account each month, so you always have money to cover them (or do this fortnightly if that’s when you get paid as you may do in New Zealand). Make sure there are no fees for your savings account. When a bill comes in, pay it, and move the money from your savings account to your cheque account to cover it.
Next I have to say that I really think the sanity allowance is a must. This is a “Bellism” which gives both of you an allowance each payday. Small but something you can spend on whatever you like, without justifying it to the other person. You want to spend it all on chocolate that’s fine . You each have to have the same amount, one of you cannot get more than the other and until you find your feet, this is where all your treats come from. We can budget for meals out and things like that, but if you can’t, use the sanity allowance for coffees, or cinema. It really up to you to decide what has to come out of that allowance and what you can afford to “Budget” for.
And something about budgets: don’t always think of it terms of “what I can’t afford because I don’t have the budget for it”. Use a budget TO BE ABLE to afford what you want. If you want to be able to go out for a meal once a month then think about what you can do to wangle the money from somewhere. For example: if you are paying bank fees, just think what that could pay for if you worked out how to stop it!
Don’t see the need for a budget as a bad thing because it really isn’t.
I found the first week was the worst, when you start to look at exactly how much money you spend and what on. It’s incredibly daunting at first but please believe me once you start, you may even find it utterly liberating. Its one thing to buy yourself a jumper and then panic because you don’t really know where the money is coming from to pay the credit card bill, but imagine what its like going out to buy a jumper because you KNOW you have the money set aside for it. You may not buy as many jumpers, but the ones you do buy; you are not going to be in a cold sweat over!
Reading through that makes it sound like I think it’s easy but I do know its not. But it’s possible. We have “Budget days” probably every 4 months where we sit down and look at ways to improve what we do (but then I’m a bit daft in the head when it comes to this ) the last day we shaved about $150 off our spending plan
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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Avalon’s Money Thread: Can I Invest In new Zealand?
Filed under: Avalon's Money Thread, Future Finances, Investing in general, Property Investing
This is an area that I’ve personally experienced a big difference in from being in the UK. I’ve honestly been bowled over by the sheer opportunity available here to invest in our future. This is usually outside what I guess would be considered normal in the UK. Many more people “do their own thing” rather than relying on a “pension scheme”.
The main principle of investing for a future is:
PAY YOURSELF FIRST
or
SAVE FIRST – SPEND SECOND.
The aim is to set aside 10% of your income for your future. (Add that to your budget!)
Investing and wealth creation are huge industries here. And something I found amazing was the number of free seminars available. I think you should always be careful about seminars if anyone is pushy and asking you to sign up for an expensive course, walk out. Not that it’s always a bad course but you should “never sign anything” without sleeping on it first! Some seminars you need to pay for but still be wary. If you are the sort of person who easily gets signed up for stuff, don’t go. Or at least don’t take your credit card or you may end up with that much-hated timeshare in Lanzarote! (Which let’s face it – is not going to be a whole lot of help to you once you are in New Zealand.)
Company pensions are available but most companies will not pay contributions into them because they have to pay Fringe Benefit Tax to the government in order to do so. Also, any contributions you make are done after you have paid income tax on the money earned. So you do not even get that tax benefit. Kiwisaver is a new(ish) Superannoutaion scheme which you join automatically when starting a new job, and have to opt out of if you do not wish to be a member.
About the only benefit is that when you finally do take the pension out you aren’t taxed on the income.
A lot of Kiwis seem to go it alone with investment planning and do it with residential property. Property is big; shares not so much as people got badly burned in 1987 and won’t look again. Besides there are nice tax advantages (at the moment) to buying property and holding on to while renting it out. If you want to buy property and “do it up” a la Property Ladder you will get taxed on the profit but if you “buy and hold” you don’t get Capital Gains tax! (Yet)
If you want to get into investing in property, the best place to go is a forum called Property Talk because there’s just too much info and they are active investors.
Do be aware that most people “negative gear” property, which means they make a loss week to week. (We are in this position). This is because the Government pays you some of that money back if you are a taxpayer. But you do need to have spare cash to “prop up” a property if you are going to do this, and it does limit how many properties you can buy.
I will be looking at property for this year but I also invest in shares now. I do this by buying Direct Shares rather than what most people do which is to pay money each month into a Managed Fund. The difference is that I save up $5000 at a time and then decide on a company to invest in, and buy shares in that company. Whereas with a managed fund, I would put say $500 a month into a fund, and then the fund manager takes all the other $500 that everyone else paid in that month, and he picks a load of shares to buy with all that money (having taken some of the money out for fees). I read somewhere recently that if you throw darts at a list of shares you would probably pick just as well as the fund managers do!
Is it risky?
Well yeah, to a point. But I work with a company that advises me on which shares to buy and they use a method called Value Investing. This means ignoring the share price. Most people buy shares because they are “popular” and this means the price is higher. Value Investing means looking at the company and deciding what the company is worth. Then buying shares in that company when the share price is lower than it should be. Basically it’s buying shares at a sale price. It does require education, but then to be honest I’m now a firm believer in the fact that if you want a good financial future, you have to get educated about money. I find it odd that we are not allowed to drive a car without some education but we are allowed credit cards and allowed to invest without it!
We work with a company called Wise Planning But I strongly suggest that if you want to look at this, go to an evening seminar first. The program we did was expensive and you really need to work hard at it and I wouldn’t recommend it for everyone. Be assured that the one thing Wise Planning wont do is any Hard Sell which strangely is exactly why I joined them, so you can be sure your credit card is safe and you won’t end up with said timeshare in Lanzerote!
(Update: Wise Planning hiked thier fees up by a ridiculaous amount, and I now wouldnt recommend them, as the owner of the company was actually quite snotty and rude to us when we objected to a 100% fee hike with no warning. but if the Introductory seminar is still free – then it’s worth going to.)
The main thing that makes investing risky is ignorance. If you don’t understand what you are doing and the exact risks involved, you shouldn’t do it. There has to be an amount of personal responsibility taken for your future so if this is all gobbledygook, then read some and understand it.
Update: We headed firmly aware from share investing and into property, which for me was much more fun, much more interesting, and easier to understand. Ive made a lot of friends along the way, and learned huge amounts, not just about investing. Its worth joining a local Property Investors Association if you want to go to into this – they hold monthly meetings were you can network and learn.
Whatever you do, if you want to invest – make sure you get some advice. A lot of people have lost an awful lot of money in the last few years, and while no amount of knowledge or advice could have stopped all the problems, many people have lost everything because they just “invested” in something without understanding what they were doing or what they were signing.
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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Avalon’s Money Thread: What’s all this BBO & BEO nonsence on house adverts?
Do agents always list that the price as BBO or BEO in the ads next to the price (if it applies) or do you only find this out when you make enquiries. From reading this thread and the suggested links it seems that most houses have the BBO or BEO and yet we are not seeing it in the net ads, are we looking in the wrong place?
Many properties don’t have any prices on them. In that case all you really have to go on is the GV/RV (Government or rating values). That’s the value on which the rates are worked out.
The Prices are set as:
Auction
A public sale of property in which prospective purchasers bid until the highest price is reached (or not as often happens).
BBO / BEO
Buyer Budget Over or Buyer Enquiry Over (sort of a guide but as with a lot of this – often nothing like what the seller actually wants). You are supposed to make an offer above this – but theres no law that says you have to.
MWP
Marketed Without Price. Utterly pointless, and I have little respect for agents that use this term.
PBN
Price by Negotiation. Often in my experience the seller then refuses to negotiate.
POA
Price on Application (always says to me “overpriced” but that’s just me!)
Tender
Make a formal written offer for a property by a set date. You often get a “Tender Document” to fill in, but you dont have to use that. This is like a “Dutch Auction” in the UK.
GV / RV
well yeah, but how does that help? It may have been from 2-3 years ago, and still doesn’t tell you how much people want for the place.
A Set Price
My preferred option. It tells you just what you need to know and I’ve noticed you often get this with lower priced properties.
If the ad says tender or auction your only way of getting a guide price of what the seller wants is to phone the agent and try and get a number out of them. I found that this was in no way helpful, even if they did tell you a number. Often they are trying to just get your interest with a silly low number which the seller would never accept and is often nothing like what the agent told the seller the house was worth.
That’s why we got a valuation before we made an offer. This place was advertised with a price (I stopped going to see houses without prices). They wanted $650K, but the valuation came in at $606. So we knew ahead of time that if we could get it at that price, we would not be overpaying.
Also, something that has come up recently regarding investors bringing potential tenants round when you SELL a house here. It’s actually quite common and often investors will put a clause in their offer to the effect that they can bring round potential clients during the settlement period. If you are in this position, bear in mind that if it is in the S+P agreement you need to abide by that, but if it isn’t, you don’t. This is another of those things where I think the advice of a solicitor is worth every cent. They should guide you through every item in the S+P agreement whether you are buying or selling.
Avalon’s Money Thread is a series of posts which were originally written in 2007 for an Immigration Forum. They came about by answering questions that forum members asked, about how to cope with the often difficult financial situation they face in New Zealand. They formed the basis of what was eventually to become the book Avalon’s Guide: after another year or so of drinking way too much coffee and finding out way more about taxes, money and investing that any sane person should.
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