Common situation - what's the best approach?

Hi all,

I've been on the house hunting scene for a little while now, and this situation is starting to arise more and more. I'm after what you would do or how you would approach the problem!

The picture is, you inspect a house which needs work but which is suited on a good enough location to warrant further deliberations. The property in general is quite good but the house needs work. New paint won't solve the problems, and you're not sure to what extent the problems are.

The fact that work needs to be done seems to have been priced in a little as you can see that doing the place up will add value, but you feel that they've overlooked what really needs to be done.

Various scenarios play out in my head but being inexperienced and a little gun shy I'm not sure what would be best. Make an offer, get a building inspection, and subsequently reducing the offer seems feasible.
 
Tristo,

We had this issue and made a reasonable offer based on what we believed required fixing. The offer was accepted and we then undertook the building and pest during the cooling off period.

The building inspection found an issue with plumbing and was given a preliminary quotation by a plumber at $10k. We contacted the REA and reduced the offer accordingly. The revised offer was accepted.

After settlement we had a plumber carry out the works at substantially less than the preliminary estimate. :)

Regards

Andrew
 
........and you're not sure to what extent the problems are.
You need to get sure - so that you know what you're up against. Really the only thing you are lacking is experience. In the early stages it is worthwhile paying for someone else's experience and then when you've seen how it goes a couple of times, you'll be in a better position.

The fact that work needs to be done seems to have been priced in a little as you can see that doing the place up will add value, but you feel that they've overlooked what really needs to be done.
ALL vendors I've met have an overly optimistic opinion of what their property is worth. Asking prices are just that.

Various scenarios play out in my head but being inexperienced and a little gun shy I'm not sure what would be best.
Get with someone whose done lots of renos before and can do some back of the envelope calcs for you. Then add 20% for the unexpected. Then add your own labour + a profit margin = final selling price (to work out what it is worth to you).
 
Hi Tristo

That is a really good question - and one lots of property investors find themselves facing! I agree with BargainHunter's tip re. making a reasonable offer and then using the cooling off period to renegotiate if an issue is found. This can be difficult though if the cooling off period has to be waived. Wherever possible, make sure you get your building and strata inspection before you exchange contracts.

We've had a similar experience whereby a strata inspection report identified the apartment we were buying had caused major water leaks in the apartment below. We only discovered after the price had been agreed, so had to re-neg and reduce our offer, which the vendor luckily accepted.

Good luck with your property search.

Regards
PropertyBuyingGuide
 
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Thanks for the replies, I really appreciate them. Should things go to plan I'll be going down the path of offer and "meet half way" following a building inspection.
 
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