Renovating house before settlement

[johnm]

I am considering doing minor renovations ($1500) on IP before settlement date,so that tenant can move in immediately on settlement date.
what are the legal implications if the vendor decides he doesnt want to sell before settlement date arrives??? Do i lose any money i have used for renovating??
Also would appreciate thoughts on what current management / leasing fees are,when using a RE Agent?
any help would be appreciated

 

[sbe]

Hi John.

I've done this one before, so may be able to shine some light....

1) Only do it when contracts are unconditional.
2) Have paperwork that authorises you to do so.
3) Insure the house / contents during this period (it's your stuff!)
4) Helps if the place is empty.....

Legal implications are the same as always - breach of contract. Ultimately though, depends on if you canm afford to fight in court. It's a calculated risk. For me - worked perfectly. It would probably depend on the vendor to a large degree.

Current leasing fees vary, depending on quantity and location.

Factor around 6-7% Fees, 1-2 weeks letting fee, plus misc outgoings (statement fee, taxes etc)

Good luck.

 

[Sunstone]

Dear John,

Agents fees can vary enormously depending on which state and region your IP is located, the levels of agent competition, and how well you can negotiate (what leverage do you have etc).

Would help others if you can put your location in your profile.

Cheers,

Sunstone.

 

[Luke]

I ditto and endorse sbe's comments, with one clarification/amendment.
I have done this twice, and my suggestion is to actually make it a condition of the contract that access is allowed. Put it in your offer, and ask your solicitor for the wording.

In one case we only did minor repairs, but in the case of our first home, we had full access for one month, and stripped wallpaper, painted, cleaned the entire place... all in the weeks before we got married.

(/me shakes head and remembers what sick puppies we were back then)

Good luck with it!

Luke

 

[Aceyducey]

Originally posted by Luke
I have done this twice, and my suggestion is to actually make it a condition of the contract that access is allowed. Put it in your offer, and ask your solicitor for the wording.

We also include an access clause on all our renos for the same reason.

They may also wish to add clauses about reversing improvements if things fall through etc.....we also add a clause to cover if the vendor renegs for any reason to cover us for the work we've done

cheers,

Aceyducey

 

[RightValue]

If you are getting finance on the property, get it valued before you begin renovations. The other day I had to value a property that was purchased in Sept with a Dec settlement. The purchaser had moved in to do renos. At inspection there were no windows, no linings on the walls and flooring missing in the kitchen. I had to value it as inspected and I had to make the comment that the property, as inspected was uninhabitable.

Althought I only pulled the val back $25k (lesss than 10%) from the purchse price, due to high land content, the mortgage insurers would not tough the property and it was only a 50% lend on purchase price!

cheers,
RightValue

 

[geoffw]

Very good point RV. One which I would not have thought of.

Thanks.

 

[sbe]

I should have clarified - unconditional to me means you have any inspections done to YOUR satisfaction, and the finance arranged and unconditional - meaning valuations have been done.

You will need a clause in the contract for Access etc.

My offer had that in it in writing.

Acey - Good point. Never covered off if things went south. Hmm..... whoopsie !.

All the best.

 

[RPI]

Some agents I know won't touch these sort of clauses. However solicitors can normally work something out.

Good luck

Darryl

 

[asy]

Wow,

Great insight RV...

Thanks for that!

I bet the new owner went off mutterring 'bloody valuer', too

What could you do? The val is a snapshot of that day, you can't predict how good it will be when he finishes, or even if some disaster befalls him and the bank is left with it in that state.

Gosh.

Darryl, why do you put it on the agent as not liking certain clauses? In any case, if your contract is going to be anything out of the ordinary you SHOULD have a solicitor look it over (AND write the clauses) before you sign.

asy

 

[RPI]

aSY

The agent didn't like it and was telling me they wouldn't take it to the seller with that clause in it. I didn't budge and they took it the solicitor, but Had I not insisted she wouldn't of included the clause.

Darryl

 

[RightValue]

An update on the Valuation mentioned,

Despite ringing the contact at the lenders office in Perth and warning them, I got the inevitable phone call; "What do you mean by no windows" .. I kid you not, when there is anything out of the ordinary I get these stoopid questions... I emailed the photo directly.

Well the poor bugger had to work nearly 24 hrs a day over the past week. He spent 4 hours on the phone to find a joiner that would do the windows fast and pay cash up front. Luckily his plasterers etc came when expected. I had to go back today and reinspect, I was a few hours early, but I let it slide (the hassle would have been too much otherwise). I dictated the letter from the car saying the requsite things. I still got a dumb phone call to make sure it was all ok.

The guy was under so much stress that he had abused our receptionist. I didn't know this until he asked me to apoligise for him. By rights we should have refused to go out there as a result...he would have been in recision then and he would have been under even moore stress as the only other firm on this lenders panel takes a week at the moment to look at anything (we are still 24 hrs).

All this for a subistution loan that is currently drawn down only to a small amount.

As an aside, I often go to value places that have just been stripped for renovation. People are aghast when I tell them that unless otherwise instructed I have to value to place as I see it at inspection. Here's a hint, make sure the place is habitable befor the valuatiion and get your finance in place before you pick up your wrecking bar...

By the way valuations are only good for 3 months, so if it will be 3 months and one day between valuation and advance of finance the lender will send the valuer out a few days before settlement of the loan to do an update.

I hope this has been of help,
cheers,
RightValue

 

[jahn]

Hi all
The last IP we bought, we tried the access clause, through our solicitor, and we were advised that they (their solicitor) were NOT interested in any way with entry in order to improve the property.
Sort of take it or leave it, and we thought it was good enough value, so we took it without clauses.

RV Good info. We had a quantity survey done the day we took posession, but now 2.5 months down the track, and a lot of work, is it of any value other than our curiousity, to pay for a valuation now, or wait to the end of 1 year, and then when we refinance, have it done then.
jahn

 

[RightValue]

Jahn,

is it of any value other than our curiousity, to pay for a valuation now, or wait to the end of 1 year, and then when we refinance, have it done then.

unless you intend to refinance now, you have reallly answered your own question. Its a waste of money unless you want to feel good about the amount of equity you have. Remember, if the market is a falling market and you get it valued now, come refinance time it may well be lworth less then.

Basically, unless you want to pay $300+ to satisfy your curosity (and remember some valuers can be wildly inaccurate....even guys from the firm I work for..(the last one that undervalued my property got sacked), don't waste your money.

However if you think that the maket is going down, then now may well be a good time to revalue and lock in a line of credit as I am doing myself now.

So long as 3 months have passed and you have done work to the place most lenders will accept that there could be a material change in value between purchase and refinance over a 3 month period.

I hope this answers your question,
cheers,
RightValue

 

[jahn]

RV
Yes. Thanks.
I like the point about possible value gong down, so get in fast.
Don't think it is the case here though.
But this info of yours could be very helpful, thanks.

"So long as 3 months have passed and you have done work to the place most lenders will accept that there could be a material change in value between purchase and refinance over a 3 month period."
The problem with my question is, I am just a very curious person. Not to the tune of 300 dollars though.
jahn

 

[Nicholas H]

Originally posted by jahn

The problem with my question is, I am just a very curious person. Not to the tune of 300 dollars though.
jahn

You could always tell an agent your thinking of selling it now you have improved it, and just want to find out how much it is worth .. not as good as a real valuation .. but you will get some idea for free

 

[geoffw]

Many agents are happy to give a free, obligation free, written appraisal- but be fair with them. Don't be doing it frequently.

I like to be upfront with them. They know that I'm revaluing for the purpose of borrowing more money, not because I want to sell that property.

But do be careful all the same- some agents will deliberately inflate a price to get a listing.

The agent I usually deal with locally is very good in this way.

 

[jahn]

Hi
I did ask the agent we bought it from, for his estimate, when we asked them to find a tennant for us, but I think it was a very quick look and stabb that probably came close to our estimate.
I think it is better in the long term to tell it as it is. It is a fact though, that after renoing, it is tempting to sell and get a break from it but that would go against the "buy and hold for the long term" plan.
jahn