Ahelping hand with paperwork
You like the house. Now’s the time to get ready to make your offer, or to get auction-ready. It’s time to spend some serious cash.
First, the Land Information Memorandum (LIM) will cost you. Auckland Council charges $395 if you need it in three days or less (not including the courier).
A building inspection can set you back $400 to $500 more, if there’s invasive moisture testing needed. A valuation might also be required.
Oh, and these days meth-lab testing is frequent. That’s another $200 to $500 depending on the size of the place.
All of this expenditure can be for nothing, if you miss out at the auction, or your offer is rejected.
But would you dare skip any of these steps when faced with leaky homes, meth labs, huge levels of unconsented work?
William Cairns from mortgage financier Cairns Lockie sympathises.
‘‘It is becoming increasingly more complex to purchase a residential property,’’ he said.
‘‘Potential buyers need to consider whether they should obtain a weather-tightness report, particularly if the property was built post-1990.’’
That was when New Zealand, which had just deregulated the building market, forgot how to build weather-tight homes.
The 1990s was also when the country saw a major rise in the use of methamphetamine, and some home buyers were caught horribly, ending up with properties polluted from being used to manufacture the drug.
‘‘It is probably a good idea to test your proposed purchase for ‘P houses’ in all areas and price brackets have been found to have been contaminated with this dreadful substance,’’ Cairns says.
‘‘If you are buying in an earthquake-prone area, such as greater Christchurch or Wellington, some checking is required as to what your obligations may be for the strengthening of your property.’’
Going to court to sue anyone is costly, stressful and timeconsuming, and unlikely to be within reach of someone with a big mortgage, so not buying a lemon is important.
Cairns said: ‘‘Adequate due diligence is becoming a must, even when you are purchasing a residential home. Failure to do this can cost you thousands of dollars in a worst-case scenario.’’
The multi-report cost of deciding whether to buy a house got Christchurch IT expert Alan Christensen thinking when he was searching for a home in the city, and led to the creation of a company, one of several looking to use technology to bring down the cost of housebuying due diligence.
All around the world the ‘‘sharing economy’’ has been on the rise, involving teamwork to buy goods and services.
Christensen created Auctionready.co.nz to do the same with property reports, which could reduce the instances of cashstrapped buyers skimping on building inspections for fear of diminishing their barely-adequate deposits.
His thinking was that when people are getting ready for an auction, they are paying for the same reports – building, LIM, meth-testing, and valuations – as all the others preparing for the same auction.
If they could share the cost, everyone, including the real estate firms running the auctions, stood to gain. But, he says: ‘‘I realised there was nobody to co-ordinate that kind of thing.’’
Auction Ready allows a prospective buyer to effectively market to others the report they have bought, each share bringing down the initial cost.
Christensen is in early start-up mode, and hopes the likes of Trade Me, which has transformed the house-buying process, and real estate agents, will embrace the service as a way of getting more buyers ready for auctions.
Some buyers, he believes, are avoiding auctions altogether because of the risk of spending up on due diligence but missing out. Some vendors provide building inspections they have paid for.
Christensen urges caution. He says there is no legal redress should the information prove to be wrong. Part of his mission is to drive up the quality of inspections to protect people from buying homes without knowing whether they have big repair bills in their near future.
‘‘It’s a real New Zealand thing. We do have so many problems with our houses. There’s the meth issues, and in Christchurch we’ve got all the botched EQC repairs,’’ he said.
‘‘We would go to open homes and there would be big cracks in the plastering.’’
It made him extremely cautious about the flaws he could not see.
Technology solutions such as Auction Ready are beginning to have a reverse inflation effect on home-buying due diligence.
It’s hard to even recall the days before the internet when the process involved doing the rounds of real estate agents’ shop windows, and gathering fliers.
Drive-bys are still needed, but virtual drive-bys save a lot of petrol and time by excluding many before prospective buyers reach for the car keys.
But more and more data is becoming available for free online.
‘‘We are on a mission to free up New Zealand’s property data to help people make smarter decisions,’’ says Jeremy O’Hanlon from Homes.co.nz, which provides free sales histories, estimated valuations and brings together much of the information about properties that is on public record.
‘‘It is ridiculous how expensive our property data is.
‘‘It’s horrible, particularly for first-time buyers who have been trying to keep up with the market through their savings account, and struggling desperately.’’
There’s still a long way for technology to go in bringing down the cost of home due diligence.
In the United Kingdom, Brits are treated to a clearer view of what it costs to own a home.
Zoopla, for instance, gives you a pretty clear view of the ‘‘operating’’ costs of a place with a tool incorporating home energy use, water and rates.
Homes.co.nz doesn’t have that yet. It’s gone no further than estimated mortgage repayments.
But, O’Hanlon says, it is talking with the likes of councils and power companies to get the information it would need to provide something similar here.
He says the company is also looking at how it might make it easier, and cheaper, for buyers to get their hands on LIMs.