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Desperate home-buyers warned against neglecting property checks

Wellington's property market has become so hot that desperate buyers are dispensing with vital checks such as builders' reports, valuations and legal advice.

With multiple buyers chasing sought-after homes, many are taking the risk of making unconditional offers without getting the full battery of reports and advice.

"I would say three-quarters of deals are cash unconditional," Tommy's Wellington agent Nicki Cruickshank said.

"When the market is slower, people can make offers subject to LIM, builders' reports and valuations, but when the market is hot people have to have no conditions on their offer to have a possible chance of buying."

Sellers were now often providing their own builders' and LIM reports, while buyers were either getting a builder's report done before making an offer or "just not bothering to get one done at all – just taking their chances", she said.

"There's virtually no valuations done because there's virtually no point – the market's moving so fast. People are probably doing less due diligence now because the market's so hot."

Real Estate Institute of New Zealand Wellington regional director Euon Murrell confirmed unconditional offers were cranking up the pressure on buyers, and there was the risk some would panic and neglect their due diligence, especially those who had missed out before.

Agents encouraged buyers to make checks, but with reports costing an average of $1500 to $2000 a time, it was a cost that many could not afford to keep repeating as bids fell through.

"To be honest, there's not much you can do about it. That's the reality," Murrell said.

Another "evolving process" was the number of state homes having to be decontaminated for methamphetamine, or P.

"It can't just be restricted to the public sector," he said.

Buyers were increasingly asking for proof that houses were not contaminated with methamphetamine, especially former rental properties.

Homes tainted by methamphetamine pose a serious health risk to tenants, and absorbent materials such as carpets and curtains can retain a potent level of the drug.

Initial tests take about 15 to 20 minutes and cost about $150, with an independent lab taking between four and 14 days to return a result.

If the result is positive, forensic testing costs about $3000 – significantly cheaper than decontamination, which can cost between $15,000 and $50,000, according to Housing NZ estimates.

Craig Lowe, of Wellington agents Lowe & Co, said transparency between buyers and sellers had improved markedly since the industry became regulated in 2008. Before that, much of the sector was based on the principle of caveat emptor, or buyer beware.

"It's in the sellers' interests to get building reports and LIM reports prior to sale, because it means they can either deal with any issues that arise before going to market, or just disclose the issues to buyers early, which will give buyers a lot of trust in the process."

Agents are obliged by law to pass on any real or suspected problems with a property to buyers.

"Ask agents what they know about the property, including the negative," Lowe said. "The good agents will divulge that."

He said the best piece of advice he could offer to buyers was to have everything checked by a lawyer.

Real Estate Investar Editor
Real Estate Investar Editor
Real Estate Investar provides intelligent software, tools and data to help you save time and make money in the residential property investment market.

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