Buying a property mid-extension, BMV deal or landmine?

Discussion in 'Renovation & Home Improvement' started by Ouchmyknees, 5th Dec, 2016.

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  1. Ouchmyknees

    Ouchmyknees Well-Known Member

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    We saw a property for private sale in the middle of an addition/extension, the extension is done but not the Reno so the house is not habitable yet. We thought this maybe an opportunity to buy below market value given the timing but our broker warned us that:

    1. There is a bigger risk of the bank's valuation on this type of transactions; and
    2. The completed property is subject to council's final approval of occupancy.

    Any suggestions regarding this situation? And how can we make a good offer?
     
    Perthguy likes this.
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    • Add 50% to the cost to complete the works & discount the purchase price accordingly
    • You're stuck with the current electrician and plumber who have commenced the works (under their trade licences)
    • Have a building inspector go right over the works including the specs, plans, inspection certificates, reports & approvals
    • Run cameras down any drainage installed - sewer and stormwater
    • Pressure test any plumbing
    • Review the building contract, has it been terminated or are you required to take on the builder to complete the works (what variationshave been committed)
    • Get an asbestos clearance for the works
    • Engage a QS to estimate the cost to complete
     
  3. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    If the house currently has no kitchen and/or bathroom then beware that it may be considered by a bank as uninhabitable and the valuation for this can be VERY cruel. There are ways to get around this - which may be a LVR80 or below mortgage with a bank that will do a Contract of Sale valuation and not go out there for a valuation and realise it's uninhabitable.

    @Scott No Mates has pointed out some very valid issues/points to consider.
     
  4. Ouchmyknees

    Ouchmyknees Well-Known Member

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    Thanks heaps @Scott No Mates and @Westminster , it feels we need to jump a few hoops for this, it's not going to be a quick deal either by the looks of it. Thanks again!
     
  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    They can be a very good buy - they are generally a distressed seller and as long as you don't send them bankrupt then a low ball offer that takes the risk into account can be an excellent idea.
    However I will preface that with - don't just buy it because you think it's a bargain - the end product needs to be good. No point buying someone renovation plans if they are really awfully designed, don't suit your portfolio, is in a terrible suburb, the house number is 44 and has a layout that makes you or potential buyers feel has bad feng shui.
     
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  6. RenegadeDom

    RenegadeDom Well-Known Member

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    My last purchase sounded something like this with a downstairs attached secondary dwelling being partially completed (slab down and frames up). The problem was that the owner had DA approval but begun construction without CC approval. The main house was fully renovated so there was no issue in renting that out straight away. I made the real estate obtain a building certificate for works to date so council couldn't impose the works be demolished and settlement went through no problems. I didn't negotiate as I found the asking price fair for the good suburb and location. A year on and having completed the secondary dwelling myself as owner builder it has recently been valued at $100k+ that I purchased for and both are being rented.