Home buyers presentation at the National Bank 10th October 2012
About my Background
After completing an apprenticeship in Building and gaining Trade certificate, I soon became self employed and have carried out mainly residential work in the Gore area for around 30 years. About 12 years ago, I saw a gap in the market for doing a professional job of house inspection. I listed Property Advice as a company and have now completed over 700 reports. I had also worked part time as an insurance assessor for about two years. I still keep my hand in with the odd smaller building project, but keep this to minimum so as not to be seen to be looking for work generated by inspections.
We do have some consumer guarantees and warrantees in law, but realistically there is a reasonable expectation for people to lookout for themselves. Pursuing any injustices can often cost more in legal fees and stress than remedying the problem.
In the house purchase process,
Real Estate agents work primarily for the seller.
Building inspectors and Lawyers work primarily for the buyer
Often, pressure is applied on purchasers to sign contracts as soon as possible in fear of missing out.
When you engage a Building inspector or a lawyer, you are getting people that are entirely on your team and so obliged to look after your best interests
The simple precaution of getting legal advice, before signing any documents, is fundamental to ensuring a smooth stress free process. The transaction will generally involve using a lawyer anyway and it is unlikely that you will be charged any more for getting involved with them early in the proceedings.
Recent changes to the Sale and Purchase agreement now include the optional condition of requiring a Building report.
I have found that expectations vary considerably on what is required from or meant by a builder’s report. Initially, most people want to keep cost to a minimum and think a quick look by a builder will suffice.
Traditionally, a local builder or friend in the industry has been asked to view the property and check for structural defects. Normally this is done over a 10 to 15 minute walk through and the guy is rewarded with a box of beer or the promise of future work. This type of report is usually done verbally.
When considered, the thoroughness and dependability you require on the purchase of your most important asset may not always be met from this type of inspection and will now not meet your obligations to the vendor should you wish to cancel the contract.
Having signed a contract, subject to your satisfaction of the building report, and you have identified some problems, you will need to cancel or amend it. New rules now oblige you to provide a written copy of the report to the vendor. The vendor then may challenge the credentials of the inspector who needs to be a “suitably qualified person” There are no hard and fast rules regarding minimum qualifications, simply that the inspector must have qualifications, experience and expertise to provide a report on that particular type of building and is familiar with accepted principles and methods of inspection.
Recognising the need for consistency in the industry, New Zealand has developed at standard for the inspection of residential property.NZS4306
This standard lists all of the appropriate inclusions that a purchaser should be aware of in regard to the quality of the house and the present and future expenditure required to bring it up to a good standard.
My company’s reports follow these guidelines and include usually between 50 and 75 captioned images along with supporting summary pages including a top to toe survey of all components of the property. Where relevant, cost estimations can be given and council building compliances are checked.
When choosing your inspector, check out his reputation. Ask your lawyer for a recommendation.
Armed with a good building report, you will be able to make an informed decision on whether to proceed with the purchase. Clearly identified issues can be priced out and the report becomes a valuable negotiating tool ensuring you are paying the true worth of the property.
Cost associated with inspections
In most cases, the person commissioning a report pays for it.
In Queenstown, Wanaka and larger cities you could expect to be charged between $600 and $800 for a full written report. Locally fees are generally around $400 for average sized properties.
A small price when compared to the price of the house, but a significant amount if you add this to valuation and LIM costs.
It is therefore important to be quite sure that this is the house for you.
If significant unforeseen expenditure is required, such as a new roof, or even a water cylinder at $2000, the report cost may seem small indeed. The report will give you documented proof for re-negotiating the price if necessary.
If looking at a number of houses and you are not quite sure which to choose, you may be able to engage your inspector to just do a verbal commentary in your presence prior to submitting an offer.
Increasingly, banks and insurance companies require building report information.
When borrowing money, it is important to know just how much is involved, so any maintenance or remedial work required on a house needs to be provided for. Your inspector should be reasonably current with building costs and able to provide some ball park cost estimates for such work.
While banks have some interest in builder’s reports, especially when lending a high percentage of the cost, they are likely to be even more interested in a registered valuation report to substantiate the value of the property and so protect their investment. This cost is also usually worn by the purchaser.
These are a document produced by District Councils to provide the purchaser with all the relevant information that they have on file regarding a property. One of the main reasons for getting a LIM is to ensure that Building Code compliance has been met at the property and matters can be resolved before they become the problem of the new owner. Other matters can be unearthed such as mine shafts under the property, planned development in the area, contamination and flood proneness etc. These matters may or may not be common knowledge and so people are often advised by lawyers to obtain such a report.
Information on compliances from the LIM must be interpreted and so a good pre purchase report should in most cases identify structural changes and work that has required consent or permitting.
With the recent hits the insurance companies have taken in CHCH many have tightened insurability criteria. Full insurance is likely to be a bank requirement if borrowing is high so insurability may need to be one of the first matters considered. Houses pre 1945 have a number of boxes to be ticked which include wiring, concrete piles, no scrim linings and good roofing.
These matters will normally be covered in your pre-purchase report.
A builders report is not a guarantee that all defects have been identified. Many defects can lurk behind the scenes where invasive inspection is generally not an option. A person experienced in house inspection is your best chance at discovering any existing problems before they become your problems. Talking with the neighbours is also a good source of information on any history the house may have had.
I will post a copy of this speech on my website for your future reference. My cards are available in the room.
I would also like to point out that although based in Gore, I travel to Invercargill for work without additional travel charge. All of Southland can be covered.