Termite issue and leaking found after b&p inspection

Hi all,
I've recently had the building and pest done for an IP in Brisbane. It's a split level post war house which was built approx in the 1950s with mainly double brick and some timber construction, and asbestos roof.

Unfortunately inspector found a bait station on the ground and later on after dealing with selling agent we found out that there was termite activity in Jun 2016. The damage was located at ensuite bathroom and agent said that it's been treated. However oddly owner didn't have any termite barrier put in place. Inspector states that the moisture level of ensuite bathroom wall is high which may suggest leaking or pest activity, however according to him there's no structural default. Also roof leaks which needs to be fixed.

Building and pest is due next Wednesday. Agent has sourced a plumber to be there on Tuesday morning to check out and report on leaking. What I'm concerned is that there may still be active termite in the house.

It is an LMR site with development potential. My plan is to buy and hold with NO intention to develop it in the next 5-8 years. Cashflow can be nearly neutral with 20% LVR. But for an LMR the price that I bought for may be above market price since agent told me there was no termite issue at my first inspection and therefore I didn't factor it into the price. Good news is it passed valuation and finance is already conditionally approved.

What do you think about this deal? What other information and documents do I need to obtain from the agent? Should I walk away or negotiate further? Any suggestions are highly appreciated. Thank you.

 

Rub your hands together and negotiate.

The trouble with termite is that it is often very hard to determine how much damage is done and even inspectors have a lot of different ways of getting out of paying up if they dont initially find it.

Make sure the structure of the building is very sound, then calculate how much it will cost you to treat the termite and add to that any potential of having to redo the wet areas, add an additional margin on top and send it to the vendor saying you have to spend that much and take the risk and therefore you would like them to renegotiate

 

If the site has a really good location close to shops, schools, transport or any planned infrastructure improvements think very seriously about retaining it. Have a look at council or govt plans for the area.

Have you done any investigation of how many dwellings you could fit on the site?

Take the downstream potential into account for your decision. Try and do some rough numbers on development scenarios. Develop & sell, develop & hold, plans & permits.

Try to establish the extent of any termite damage and keep money aside in an offset to cover the cost of repairs. Although you may only need that "insurance" for 5-8 years.

There are always other sites. Location is perhaps the key consideration as that will determine viability and potential for future development.

 

Hi Wylie,
Thanks a lot for reply.
I don't think the inspector used X-ray or heat meter. He used a moisture meter basically and concluded that an invasive inspection is the way to go if I need to find out if the pest is still living there. Visually he didn't find any live termite. It were subterranean termites that attached the house last year so I'm quite concerned.

Would you suggest to have another pest inspection done with better equipment?

 

If there are serious signs of termite conditions (high moisture measured with an infra red camera, moisture meter etc) that can't be seen, an invasive inspection is always needed for confirmation.

These types of tools are sophisticated, but can't actually see the termites if they are inside walls.

 

Thanks heaps for the advice!

The house is quite close to uni, good high school, gardencity, and buses, however there's no view and the site is sloping away from the street. There's no problem with 3*3 bedders and I'd like to try to get either 3*4 bedders or 4*3 bedders approved. The plan is to hold - develop - hold in the future coz for a LMR land alone it may only worse about 600k, and I paid 700k plus so won't make much if it happens too soon.

The location seems to be alright. I have to admit I rushed into this deal since it took me two months to get my last IP and after another month of endless house hunting my panic level started to rise.

This termite thing really scares me. Is there some way to determine the extent of damage without pulling the walls off? And what if there is a nest underground (is it likely)?

 

A heat meter will be able to detect the activity of live termites behind walls.
Marg

 

Hi Joynz,
Yes very high moisture levels present to the wall on the opposite side of the ensuite shower, where the termites attached last year. And the pest control company's inspection report issued last year shows that the moisture level was normal in Jun 2016 after their treatment.

Thank you for the advice. Guess now my choice is to ask agent to allow invasive inspection, otherwise try to find another deal?

 

If the site slopes down from the road that can significantly impact development cost and complexity. You may also have hassles with easements to be negotiated through neighbouring sites. It ultimately depends on the load that a development is likely to put on the existing stormwater/sewage system.

You could get advise from a hydraulics consultant. It's largely the roof area and the hard surface area such as driveways that determines the impact on stormwater.

It looks like infrastructure charges are high. Minimum $28k per dwelling for 3 and 4-bedders.

Brisbane Adopted Infrastructure Charges Resolution (No.5) 2015 (Word - 119kb)

Edit - looks like Townhouses in the area are on the market for $550k to $600k particularly if you can fit 4 dwellings. Those end-values will help with absorbing development cost but try and get an approximate figure for hydraulics that may be required.

There may be better sites that are less hassle, however there will be more competition.

 

Thank you Wylie and Marg. I'll give Rifle pest a call.

 

Yes Wombat, we struggled with the slope. And It's impact assessable for 4 dwellings which would be more time and cost. Thanks a lot for the advice on hydraulics!

 

I have never seen a house fall down from termites, that is all I can say, if your knocking it down anyway.

Work out roughly what your paying for the actual house, that may help.

 

Termites will help reduce cost of demolition.
+1

 

It also reduces the scrap value of the timber salvaged.

 

-1
=0

 

The nest will be underground and maybe not even on your block as once they treat your footprint area all the termites do is just go next door or back to the main nest ,as a house in this age range would be all hardwood framed and a very high % asbestos factor..
The plumbing could well be in the old gal rusted internal pipework as a lot are the value is only in the future of the land imho..

 

Termite treatment for an active infestation will generally focus on powdering the termites so they take the poison back to the nest. When the termites groom each other, the poison is spread - killing the nest.

It's why it's so important never to disturb termites when found.

However this method requires access to the termite tracks or workings for chemical 'dusting'. This may mean removing some wall plaster for access pif the termite tracks aren't visible under the house.

In addition, a number of other means will usually be employed - a termite chemical barrier and perhaps bait stations.

 

Yes you will kill the nest within the treated area,but unless they treat the main nest they just come back been happening to one we have for over 30 years now and they tract in through the hardwood..