How to negotiate a TERMITE DAMAGED large Period Flat

Hi There

One of my friends wants to sell a lovely period art deco flat that i am thinking of buying if it is the right price.

It's within 10km of Melbourne CBD in a highly desirable upscale Eastern suburb. A completely original flat sold for $565k about 6 months ago with no termite damage at all.

Another completely renovated & modernised one sold for about $625k in the same block.

Basically the kitchen, lounge and possibly hallway floorboards are eaten and there are holes in the floorboards. Even the kitchen door trim has been partially eaten away- leaving a cavity like shell.
I would say one quarter to one third of the floorboards are damaged by termites via holes, eaten away at some parts of the floor board. It currently has tenants and the floor boards have been covered with the original carpets, so it is liveable. The Flat was treated for termites and has all the certificates.

The flat is considered to be generous proportions at approx 80m2 with high ceilings, compared to new builds and is 2 bedrooms.

The flat is lovely and spacious and im wondering how do you determine a price to pay in light of past termite activity and in light of other flats recently sold within the last 5-6months?

I know i could add value to this.
But what price should I offer??

 

Any idea how much the repairs would cost?

Roughly, the buy price would be:

End value minus cost of repairs minus renovation costs minus profit margin.

 

this as well as, minus an allowance to cover the unforeseen that you will find when fixing.

 

Dont forget the time it would take to fix
Aka, lost income not being able to be rented

 

Not sure I would buy property from someone I know... is there any chance your friendship could be impacted negatively if your offer price is too low or if you can't come to an agreement on price?

 

In Melbourne an Art Deco property, in zone 1 eastern suburbs will be highly sought after.

Don't assume it will be much cheaper than something renovated that sold 6 months ago, though!.

Fair enough to deduct termite damage repair.

 

I'd much prefer to buy renovated but if at a good price and below market value it will be worth it. I'm guessing a $80k spend to renovate to a modern standard that is slightly better than average but not super high spec.
It can rent for $430 per week once renovated which will take about 3 months to renovate.

Just found out today another flat upstairs in the same block is being renovated to a very high spec and they spent $90k to do everything..

 

Ye

How do you factor the 'unknown '? What % of reno costs do you factor in as a margin? Who knows there may be more termite damage than first thought.

Im guessing I'd get a builder & building inspector to quote before an offer?
How would you approach this if this was your deal?

 

Obtain a building and pest inspection, and be guided by the report as to what rectification works are required. Then obtain several quotes from builders and deduct an average repairs cost figure from your purchase price offer.

 

If this was my deal I'd walk away and find an Art Deco apartment that was termite free. I've seen termite damage that has been treated and repaired only to see the termites reemerge in another part of the building.

 

Offer what price you feel comfortable with and put STB&P, then obtain a B&P and get quotes to resolve the issues and put a contingency in.

Ask for a refund at settlement for that amount and go from there.

I think this would give you a better result than doing all this work now and offering unco at a lower price as;

1. You are still in theory borrowing the money for the repair work (80k is a lot of spare cash to hold to do the repair which you could of leveraged).
2. You are giving your offer the best chance as an offer of 450k unco doesn't seem as good as an offer of 530k STB&P with an 80k refund.
3. Less risk as you don't need to pay all these upfront fees for an offer that doesn't get accepted.

Also what happens if the damage was only 50k instead of 80k and someone bought it for 460k?

 

Hey @Big Will I thought if you put 7 days STB&P in the offer, once the 7 days expired, there is no way that you can negotiate the price anymore, and the owner has no responsibility to refund $x amount at settlement. Correct me if i am wrong

 

7 days is plenty of time to get an inspection done, if you find a fault and it hasn't been negotiated within the 7 days you can always ask for an extension whilst you negotiate which I have never had it not approved.

My B&P I have is 14 days to avoid that issue and I tell the agent it is the same as my finance.

 

That would mean a complete strip-out back too the frame and floor joists then depending if they are hardwood may also have to come out,then the plumbing and rewire the complete area then new kitchen area ,i have rebuilt over the roof flood jobs 800 hours plus and something like this would be in that range in hours ..imho..