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  Reply # 477964 5-Jun-2011 11:55 Send private message

ChundaMars:
doublehell: Forgot to mention - have your lawyer do a due diligence check on the property (first thing they will do is get a LIM report). Make sure that there are no upcoming consents for the area that have already been approved (like a pre-school etc.)

Make sure you check in with your lawyer before signing anything. Otherwise, make sure that whatever you sign has an exit clause that stipulates that everything is subject to the review and approval of your lawyer.


This advice is often given, but is actually a waste of time and wouldn't stand up in court - get your lawyer to check the document BEFORE you sign it, if you are worried.

Clauses that allow for checking of specific things by the lawyer (LIM reports, title checks etc.) are ok, but a blanket "subject to lawyers approval" doesn't cut the mustard.

This was the advice given to our company by our solicitor when I was in real estate a couple of years ago - not sure if there's actually been cases that have gone before the courts but would you really want to be the first?


Actually I know someone who earlier this year had exactly that happen to them - they were selling their house and everything was signed up and then 2 days before possession date the whole thing fell over because the buyers lawyer stop the deal. No reason given except that their lawyer wouldn't let the deal go ahead!

In discussion with others at the time it had been heard of happening a couple of other times. So it does happen.

Personally I think it just a cop-out clause that should never be allow.



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  Reply # 477985 5-Jun-2011 13:48 Send private message

robbyp:
pih: Sounds like it's your first house purchase which probably means it's your first mortgage.


 

The other mistake people make is borrowing as much as a bank will lend them. Banks are again only requiring small deposits. This means that if house prices drop just a little, you will end up owning more to the bank than the house is actually worth. This is called negative equity. This is happening quite a bit  Oz at the momen as house prices drop over there.

Only borrow as much as you can afford and that you think the house is worth. 

Also don't trust valuations. Use the councils rateable value as a more true guide to the house value. Valuations can over inflate the price from my experience. Look at all those apartment valuations in Auckalnd before the credit crunch that were highly inflated.


sorry but that last point is dead wrong.

I've seen many houses go for a lot more, and a lot less, than RV.

for one thing they don't take acount of how nice the property is inside.  You could buy an old do-up, spend $100k on fixtures and fittings and as far as teh council is concerned the RV is exactly the same when clealry the market value will be considerably more.

What is more, they were lats done on 2008, and the market was very different back then.

contrary to people's assumptions in this thread,this isn't in fact my first house. We have in fact just sold our house for 30% over RV.

the reason for posting this thread was not that I had no idea about the overall process, finance, mortgage etc. I'm clear on all of that stuff.
Rather I wanted to know specific things I should look for in a 1920s house before bringing in the inspectors.
thanks to everyone else for the advice.

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  Reply # 478008 5-Jun-2011 15:41

ChundaMars:
robbyp: Also don't trust valuations. Use the councils rateable value as a more true guide to the house value. Valuations can over inflate the price from my experience. Look at all those apartment valuations in Auckalnd before the credit crunch that were highly inflated.


Are you serious? RVs are a complete and utter waste of time, at least here in Christchurch. Not to mention that they are only issued every 3 years, so basically for at least 2.5 years of that time they can be considered hideously out of date. And nobody actually visits the house when the RV is done, so if you buy a house, spend $50,000 on it putting in new kitchen, bathroom, heating etc. the RV doesn't change. Nope, never use the RV as anything but a rough (emphasis on rough) guide to value - maybe, give or take up to 50%!

I wouldn't trust a valuation provided to you from the seller, for obvious reasons, but if you commission your own valuer you should get a good indication of the market value... 


The earthquake in christchurch is obviously an exception and is a one off situation. In my area RVs chnage on an annual basis, and I have found they are relatively accurate. You do however have to use them as a 'guide'. RVs are based on what simialr properties have sold for around the area, and if the house is average, and has been maintained with no deferred maintenance the RV should be indicative of the property value within a margin of error. I am basing this on my exerience with buying and selling several properties. If a houseowner believes that their RV is wrong, such as it being an architecturally designed house that has had recent improvements that didn't require consent for, they do have to contact their council about it and object, and it will then be individually valued. I have had to do this in the past and the property's RV was increased 10%.
The RV can also often change after the house has sold, and the purchase price can change the RV for that property. From my experience the RV was adjusted to the purchase price paid in the previous year. The more houses in an area that sell, the more accurate the RVs should be.

When selling a property, buyers will often base their prices on the RV, and they will say things like, well it's only got a RV of ..., so my offer is a good one etc So the RV is very important when selling, as it is used as leverage.

ChundaMars:
I wouldn't trust a valuation provided to you from the seller, for obvious reasons, but if you commission your own valuer you should get a good indication of the market value... 


Isn't that contradictory. All professional registered valuations should be similar within a margin of error, so it shouldn't make any difference whether it was commissioned by the seller or buyer. Banks will require a valuation before they will lend , however it will often be their own valuer, who from my experience will  very conservative and they do use the rateable value as a guide. Banks obviously don't want to lend more than the house is worth.


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  Reply # 478011 5-Jun-2011 15:55

NonprayingMantis:
robbyp:
pih: Sounds like it's your first house purchase which probably means it's your first mortgage.


 

The other mistake people make is borrowing as much as a bank will lend them. Banks are again only requiring small deposits. This means that if house prices drop just a little, you will end up owning more to the bank than the house is actually worth. This is called negative equity. This is happening quite a bit  Oz at the momen as house prices drop over there.

Only borrow as much as you can afford and that you think the house is worth. 

Also don't trust valuations. Use the councils rateable value as a more true guide to the house value. Valuations can over inflate the price from my experience. Look at all those apartment valuations in Auckalnd before the credit crunch that were highly inflated.


sorry but that last point is dead wrong.

I've seen many houses go for a lot more, and a lot less, than RV.

for one thing they don't take acount of how nice the property is inside.  You could buy an old do-up, spend $100k on fixtures and fittings and as far as teh council is concerned the RV is exactly the same when clealry the market value will be considerably more.

What is more, they were lats done on 2008, and the market was very different back then.

contrary to people's assumptions in this thread,this isn't in fact my first house. We have in fact just sold our house for 30% over RV.

the reason for posting this thread was not that I had no idea about the overall process, finance, mortgage etc. I'm clear on all of that stuff.
Rather I wanted to know specific things I should look for in a 1920s house before bringing in the inspectors.
thanks to everyone else for the advice.


Yes houses will go for a lot less and a lot more than the RV. However the RV should be used only as a guide, using it as base, assuming that you are buying a standard average house. You then adjust the RV price depending on it's condition and quality. If it is very high spec, then you may get  30% over the RV. However I would question as to why your RV was so far out, did you not question it's RV when you received your updated one? If you had done it up inside, you should have got the RV redone to take into account improvements, as otherwise they wouldn't know that they had been carried out if they didn't require consent.  Getting 30% above the RV is a rare exception in todays market, so well done.
I have found the RV is more accurate when it comes to land value, rather than improvements. If a house hasn't had any consents issued for many years, the improvement value stays static or gradually goes down. I have looked at the RV of many properties and examined how the RV has changed over that time. The RV of a house that has sold in the last 3 years prior, will usually be more accurate, as it would have taken in consideration what the previous buyer paid for it.


I would be very wary of buying a house that is nearly 100 years old. You would need to see what work has been done to it, and check the councils property packet, which should contain consents of all work done. It may also have unconsented work, which could lead to insurance issues. eg. If it has an unconsented woodburner that ends up burning down the house, you could have problems. It could have a lot of rot and borer. It has probably many coats of paint hiding problems. It may require repiling, rewiring, replumbing. If it has been replumbed, check that it hasn't been done in the black plumbing of the 70's and 80's which may eventually leak. It will also have higher energy costs to keep it running, as it probably won't have the same standards of insulation /double glazing etc.

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  Reply # 478019 5-Jun-2011 16:16

xpd:
robbyp:
pih: Sounds like it's your first house purchase which probably means it's your first mortgage.


 

The other mistake people make is borrowing as much as a bank will lend them. Banks are again only requiring small deposits. This means that if house prices drop just a little, you will end up owning more to the bank than the house is actually worth. This is called negative equity. This is happening quite a bit  Oz at the momen as house prices drop over there.

Only borrow as much as you can afford and that you think the house is worth. 

Also don't trust valuations. Use the councils rateable value as a more true guide to the house value. Valuations can over inflate the price from my experience. Look at all those apartment valuations in Auckalnd before the credit crunch that were highly inflated.


I dont agree....  borrow all the money the bank will loan you if you want, just remember its got to be paid back tho with interest...... :)

As for valuations, banks dont accept GV/CV etc they want a registered valuers valuation - the valuers take the GV etc into consideration as well so theyre usually pretty bang on in my experience. Even the "caravan" of real estate agents that go through a house when its on the market usually work out what its worth between them knowing the market etc.


I don't disagree with what you have said. Although the 'value' on a house is largely what someone is prepared to pay for it. Valuers may put some huge figure on a property, but whether anyone would actually pay that figure is another matter. It could be more for insurance purposes that they are valued higher. Recently I visited a property that had a registered vlauation on it that had been commissioned by the seller, and even the agent said that it was way too high. The property ended up selling for 20% less than that valuation. It sold for 5% above the 2010 rateable value.

I do disagree about borrowing all  the money a bank will lend you.  I would try to minimise borrowing as much as possible, as you never know what is around the corner, and the bank is in business to lend and make as much money as they can from that lending. Certainly I would take out some good insurance cover, incase of loss of income, sickness etc, which banks often require anyway.

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  Reply # 478385 6-Jun-2011 22:53 Send private message

Building inspectors can be a waste of time. I had an inspection, but the house, and i've had to spend tens of thousands to fix things they didn't find. I'd take a good, working builder along, as well as having a building inspector do a proper inspection.

Piles are a HUGE thing. If you need to redo them it's a big thing. Sloping floors are a big sign. I have to pull my modern kitchen out (someone put it in before I got the place), level the floors, and put the kitchen back in.

If there's no insulation under the floor make sure there's space to get in and do it, wind coming up between floorboards makes for a cold house. I spent thousands getting dirt dug out so I could have my place insulated. I spent thousands more on ceiling and wall insulation, $20K i'd say all up on insulation including installing a heat pump. That doesn't include $6K on retrofit double glazing for half the windows in the house.

Roofs (rooves?) are expensive. My inspector said a couple of sheets of iron needed to be replaced. Actually the whole roof needed replacing. Plus the shed roof.

I've redone my driveway, $25K including preparation. I've spent $6k or so on drainage, including the guttering, sumps, and just getting rid of water. Fences, $5K.

One day i'll replace the bathroom. And paint the house.

So, all up, I think i'll spend $100 - $120K on the place to get it up to where I want it, after spending $440K to start with. It was fine when I bought it, but i've made it so much nicer.




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  Reply # 478390 6-Jun-2011 23:02 Send private message

And the sad thing is, after all those actual improvements you will see stuff all change in the value of the property, whereas if you had added an ugly featurewall and put in a cheap-ass benchtop that was the current colour of choise among designers and some new taps you would make a massive change to the house value.

IMO, never buy a house that has just been done up ;)




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  Reply # 478393 6-Jun-2011 23:18 Send private message

richms: And the sad thing is, after all those actual improvements you will see stuff all change in the value of the property, whereas if you had added an ugly featurewall and put in a cheap-ass benchtop that was the current colour of choise among designers and some new taps you would make a massive change to the house value.

IMO, never buy a house that has just been done up ;)


Rich, if you're talking to me, you're right. Some of what i've done will add value, some not. The landscaping and exterior work will definitely help, if just to get people in the door. Drainage, heating, insulation, etc, will add only a little value.

I'm improving the house for myself though, not for resale. I wish I knew then what I knew now, i'd have offered a lot less for the house.

Old houses are expensive to fix up and maintain. Anyone who disagrees is very lucky or kidding themselves!




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  Reply # 478492 7-Jun-2011 12:21 Send private message

My partner and I collectively earn not a great deal more than the single-person average wage. Do I even want to _consider_ buying a house given that the apparent costs involved would likely result in us living off baked beans for the next 30 years?

Given current market prices we'd have to get an already run-down house in a likely unpleasant area. Is the cost of fixing it up, rates, transport into the city, dealing with the bogans next door etc worth it given that a such a house isn't likely to change in value beyond the national averages regardless of what's done to it, or should we just keep renting indefinately and having a generally reasonable standard of living instead?

I guess it'd be worth looking at many of the same things in a new home as it would be flatting, does the shower work properly? Is there a car on blocks in the frontyard next door with a pitbull chained to it? Are there any obvious results of moisture (mold/mildew/rot/condensation etc) inside?




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  Reply # 478493 7-Jun-2011 12:23 Send private message

I think renting is definitely a great option for many people. There are always extra costs for houses... rates, water may come in one day, random maintenance, improvements, lawns, etc, etc. If you're not well off I think renting is a better option.




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  Reply # 478504 7-Jun-2011 12:41 Send private message

timmmay: I think renting is definitely a great option for many people. There are always extra costs for houses... rates, water may come in one day, random maintenance, improvements, lawns, etc, etc. If you're not well off I think renting is a better option.

I disagree with your rather simplistic conclusion.  There are certainly scenarios where it is better to rent than own, but it depends on far too many variables to make such a sweeping generalisation.  In NZ, we do seem to have an obsession with buying over renting though.

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  Reply # 478507 7-Jun-2011 12:44 Send private message

bazzer:
timmmay: I think renting is definitely a great option for many people. There are always extra costs for houses... rates, water may come in one day, random maintenance, improvements, lawns, etc, etc. If you're not well off I think renting is a better option.

I disagree with your rather simplistic conclusion.  There are certainly scenarios where it is better to rent than own, but it depends on far too many variables to make such a sweeping generalisation.  In NZ, we do seem to have an obsession with buying over renting though.


Based on the information provided I think my conclusion is correct, it wasn't meant to be a generalisation, it was for a specific person. If someone can't afford to eat properly after paying the mortgage, but is ok when renting, then renting is the obvious thing to do. You have to take into account maintenance, rates, and that interest rates will go up at some point.





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  Reply # 478527 7-Jun-2011 13:13 Send private message

stevenz: Do I even want to _consider_ buying a house given that the apparent costs involved would likely result in us living off baked beans for the next 30 years?


Housing is overpriced in NZ, especially Auckland and Wellington. I would not buy unless you were in a strong financial position or in an area that has a really good income to house price ratio (usually only small towns).
 

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  Reply # 478536 7-Jun-2011 13:37 Send private message

Buying on a single income as such is very possible, its just the deposit that stops most people from doing so.

As for roof replacement, looking at $8-12k for average sized house colursteel type product. (got quotes done for a place we looked at buying a few months back)

If you want to buy around Auckland without paying the "premium", look at places slightly out of the usual Auckland region, Rodney district for example. Its not that much of a hassle with the m/ways etc. Takes me 20mins to get to work - used to take me that long when I lived 5km away rather than the 25km I am now :)




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  Reply # 478604 7-Jun-2011 16:18 Send private message

timmmay:
bazzer:
timmmay: I think renting is definitely a great option for many people. There are always extra costs for houses... rates, water may come in one day, random maintenance, improvements, lawns, etc, etc. If you're not well off I think renting is a better option.

I disagree with your rather simplistic conclusion.  There are certainly scenarios where it is better to rent than own, but it depends on far too many variables to make such a sweeping generalisation.  In NZ, we do seem to have an obsession with buying over renting though.


Based on the information provided I think my conclusion is correct, it wasn't meant to be a generalisation, it was for a specific person. If someone can't afford to eat properly after paying the mortgage, but is ok when renting, then renting is the obvious thing to do. You have to take into account maintenance, rates, and that interest rates will go up at some point.

Fair enough, but we don't know what stevenz considers "not a great deal more than the single-person average wage".  We don't know if he has a deposit saved.  We don't know if he has the possibility of using the Kiwisaver first home deposit subsidy.  We don't know what he considers a "run-down house" in an "unpleasant area".

Just saying, that's a whole lot of "I don't knows" to make any kind of conclusion about his position.  Given that his financial position is, perhaps, likely to improve in future years, if he sees a house he can stand in a location that's not awful that he can afford, why not buy it?  In any case, baked beans are quite good for you, aren't they?!

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