Selling house, terrible building report, what to do?

[turbora28]

Hi all, we are in the process of selling our house to fund a 1 year trip around Australia.
A bit of background.. we purchased an old house (mix of 1920s/1970s), great block in Saratoga 3.5yrs ago for $350,000.
The building report was not great, but my old man was a builder and we weren't scared off and had great plans of renovating, etc.
We had a kid, my old man got cancer, things changed and renovating was no longer on the cards.
We did tip around $30k into the place which consisted of a single lockup garage, fencing, new carpet, paint, general freshen up. We didn't think this was over-capitalising due to the sort after location.

Due to everything going on we really want to sell up and do a trip. We need a year out to clear our heads and be a family.

Anyway.. So we put the house on the market for $399k, so if you do the sums very little profit for a 3.5yr house ownership. But this would pay back all our debts, fund our holiday and leave enough for a deposit on a house when we return.

We had plenty of offers, 2x which we have accepted ($390k and $388k) but both fell through due to bad building report.

The real estate agent is saying it is at the point where we need to sell for land value - $350k.

This is very upsetting to us as we have lost such a large amount of money for a young family.

The builder report didn't think it was worth the money/time to fix the problems as they are structural things.

So i'm trying to think outside of the box here and need some ideas..

We live in a street where most old houses are getting knocked down and new homes built.

Is there such a thing as an investor who would put a new house on our block of land, then we sell up and they recoup their costs with profit and we get the $390 we are chasing?
Just thinking outloud, a new house of say $160k, sell the whole property for $600k.. We get $390, investor gets $210k.. Quick $50k profit for them?

Or is this stupid idea and not the done thing?

We are very scared to do repairs and put more money in, as we just spent our last $10k on renovations to prepare the place for sale and if we now sell for land value that was a total waste of money.

Advice? Positive thoughts? We are feeling pretty bad right about now.
I know others have lost more than us.. But we sold our cars and everything to do the last lot of renovations.. It looks like we will walk away with nothing the way we are going and have to start again.

Thanks
Joel

 

[Propertunity]

A bit of background.. we purchased an old house (mix of 1920s/1970s), great block in Saratoga 3.5yrs ago for $350,000.

OK. But bear in mind real estate is a long term play - minimum 5 - 7 years. If you sell in a shorter period than this, you stand to make a loss.

The Saratoga market peaked in late 2004 (about 12 months behind Sydney - pretty typical). It is heading back up but still has not quite reached the prices of 2004. See attached chart.

We did tip around $30k into the place which consisted of a single lockup garage, fencing, new carpet, paint, general freshen up. We didn't think this was over-capitalising due to the sort after location.

Spending less than 10% of the purchase price is not overcapitalising BUT you may have been better advised to spend the money on repairs identified in your original building report - which is now coming back to bite you.

Anyway.. So we put the house on the market for $399k, so if you do the sums very little profit for a 3.5yr house ownership.

As mentioned, you stand little chance of making a profit in a short time frame - and you have stamp duty to pay buying and REA coms to pay selling.

We had plenty of offers, 2x which we have accepted ($390k and $388k) but both fell through due to bad building report.

Is there any chance you can get a copy of those building reports? If you have one - you are welcome to email it to me and I can perhaps advise a possible course of action.

The real estate agent is saying it is at the point where we need to sell for land value - $350k.

OK he is just getting tied of sales falling over (understandably). Also, he now has to disclose (by law) that he is aware of a bad building report to any new potential buyers. It is a Material Fact.

We live in a street where most old houses are getting knocked down and new homes built.

OK - good

Is there such a thing as an investor who would put a new house on our block of land, then we sell up and they recoup their costs with profit and we get the $390 we are chasing?
Just thinking outloud, a new house of say $160k, sell the whole property for $600k.. We get $390, investor gets $210k.. Quick $50k profit for them?

This is not going to happen. Don't waste your time thinking about it. Sorry.

We are very scared to do repairs and put more money in, as we just spent our last $10k on renovations to prepare the place for sale and if we now sell for land value that was a total waste of money.

Actually if the house is a bull-dozer job, it's value is really land value minus $10K for demolition & removal.

Let's not go there just yet. I think you should attempt to fix major issues identified in the building report - but at reasonable cost.

The good news is that you are well under the suburb median price of $436K - which is probably why you are getting offers. There is plenty of buyers for the Central Coast at the moment.

 

[Perp]

I'm feeling awful for you, it's all-round not a great situation, but it's not all over, either. No consolation to you, but you've again proven the wisdom of addressing structural issues first.

1) How much would it cost to fix the structural issues?

2) How much would you get for the house if you do these works? ie Were the $390K-ish offers with knowledge of some structural issues bringing down the price, but which just turned out to be more severe than anticipated, or is $390K market price if there are no significant issues?

3) A year's vacation is a big luxury, especially for a young family, and especially when you can't seem to afford it. Do you need to get out of the house and area, or would another change serve the purpose, eg working part-time for a year to spend more quality time together, or even just having a month away?

 

[turbora28]

Thanks for that information. I'm trying to get the building report so I can see what we are up against.

The phone call with the real estate agent mentioned briefly that the span of the floor joists are too far apart, the sandstone stumps are well worn and not enough bearers in the roof for the tin to bolt to.

Yeah I really didn't know the structual issues were so bad. The house 'feels' nice and solid. My old man is confident it will be there in another 20 years as it has been for the last how ever many. But who knows..

Basically it was valued at $399 without the structural issues.. No one has offered to re-negotiate after seeing the report. We would happily come down in price if the purchaser made a resonable offer to allow they to have some repairs carried out.

The vacation, yeah is a big luxury in financial terms.. But for the 'soul' we really need to do it.. We are in a bad rut that needs some big changes to fix and remain a family. So that is the most important thing to us at the moment.

My old man was building a Coaster bus to do the trip around Australia, but now due to his health he can't do it.. We have since inherited the bus to do the trip in. There is a lot of other stuff at play here, which don't really need to get into.. But it is clear to us that we need to sell, spend a year out and hopefully come back with some clarity to continue on as a family.

Cheers
Joel

 

[Perp]

The phone call with the real estate agent mentioned briefly that the span of the floor joists are too far apart, the sandstone stumps are well worn and not enough bearers in the roof for the tin to bolt to.

They don't sound that drastic/expensive... but I'm no builder! What does your Dad say?

 

[Paul Do]

We get $390, investor gets $210k.. Quick $50k profit for them?

Joel, sorry to hear about your situation, but take a step back and evaluate the $350k land value vs the $390k you're after.

Believe it or not, they are nearly the same thing. The $390k going down the investor partnership route is not $390k now but $390k in a year's time (cost to find investor, get building approval, build and then sell). You could almost get that by selling the property for $350k land value now and investing the proceeds in a term deposit for a year.

Yeah, but $390k is more you say. But there's no guarantee you'll get this, and it involves a lot of work to find such an investor and draw up contracts etc. I'm also not clear about the tax arrangments.

Try advertising the property with the structural problems and include a copy of the structural report and see what offers you get.

 

[skater]

It seems to me, that even after selling the house (even if you DO get a decent amount for it) and paying down the loans & R/E Commissions that you are not really going to have much left over to fund a year long trip around Australia.

If the house is not falling down around you, and looks in a good condition, is it possible to put tenants in it while you are away and do some kind of work during your trip. I'm not up on what is possible in this arena, the only thing that comes to mind is fruit picking, but I am sure there is some kind of work that you could do to make ends meet.

Of course, in saying that, I don't know how much is owing on the home or what kind of rent it would attract, let alone any other intricies of your financial situation. It could be that my suggestion is no good, but sometimes thinking outside the box can be what is needed too.

Best of luck.

 

[NBS]

I. Do you have available funds to get some of these issues fixed.
2. The sandstone supports can be fixed no biggie there. How high off the ground to the joist is the house?
3. The roof bearers you refer to I assume you mean battens the roof sheeting is screwed to. How far apart are they?

The building report you got when you purchased what did it say about the roof battens and joist span issues? If it never mentioned anything about these why not contact them and ask why it was not mentioned maybe this person doing the current report is wrong or the person that did yours was did a poor job. I would be more concerned about the roof battens than the other stuff.

Also are you able to do any of the works if need be. What about getting quotes to fix the issues and then use these when selling the place.

I did this with my daughter in Darwin the place she wanted needed a roof replacement the seller had quotes to have fixed and we got that taken off the price and a few $$$ and the owner was happy as they did not want to go through the hussle of doing the roof.

Brian

 

[turbora28]

We've exhausted all of our money on making the place presentable for the sale so nothing left for major work. We may be able to borrow a few $$ from family but nothing extensive.

I was hoping one of the buyers may have made a new offer which would have some compensation for the work they needed to carry out.

Here is the building report from when I purchased it back in 2007..
We have fixed a few of the things on the list such as new toilet, external window trims replaced and carport knocked down and single garage build.

https://docs.google.com/viewer?a=v&...k3MTMtNDdmMDk2N2ExN2I3&hl=en&authkey=CKCCoM0K

 

[Perp]

We've exhausted all of our money on making the place presentable for the sale so nothing left for major work. We may be able to borrow a few $$ from family but nothing extensive.

How much do you owe on the house? 80% of $390K (demonstrable value) is $312K, so if you owe less than $312K, you may be able to borrow more by redrawing on your mortgage.

Even if that option's not viable, the same lender (or another) may give you $10K unsecured if it's to fix up the house for sale. Shoot, if it's only $10K you need, they may even do it via a credit card or two (probably cheapest/easiest way to do it for such a small sum and a small time).

 

[turbora28]

We owe $291000 on the house.. so maybe an option.

 

[Propertunity]

This report is typical of a house of this age. There is nothing in there that indicates (to me at least) that it should be sold at land value.

It needs piering work and some more timbers in the flooring and the roof (along with some more screws) and lots of maintenance issue fixed up. But it is never going to be perfect.

If land value is $350K and you are selling with a house for $400K, what kind of house are people expecting for $50K?

I'd suspect you are dealing with FHB's who get a bit flighty when they read this kind of report for the first time.

 

[turbora28]

Yeah I didn't think it was too bad given that we accepted $390k, and land at 350 - 360.. So between $30 and $40 for the house/garage.

I am thinking I should get a quote to have the subfloor all fixed up? Or should I be sitting on it and hoping a buyer comes along who isn't scared off by it?

What concerned myself and the real estate agent was the last offer was from an 'experienced investor' who suposedly if gets scared off is a bad thing. This is what the real estate has stated.

 

[wylie]

What concerned myself and the real estate agent was the last offer was from an 'experienced investor' who suposedly if gets scared off is a bad thing. This is what the real estate has stated.

More likely an experienced investor can smell your need to sell and is lowballing.

I have never seen a "good" house inspection report and have experience being in the position of giving some money off the price for first home buyers because they thought the house had "scary" issues.

Unfortunately, it often comes down to the wording. I try to have the buyers be there at the end of the inspection as, in my experience, building inspectors will cover their ar$es on paper, but are happy to say "this is a good house and I would buy it" to the buyers.

 

[Perp]

We had plenty of offers, 2x which we have accepted ($390k and $388k) but both fell through due to bad building report.

The real estate agent is saying it is at the point where we need to sell for land value - $350k.

What concerned myself and the real estate agent was the last offer was from an 'experienced investor' who suposedly if gets scared off is a bad thing. This is what the real estate has stated.

Hmmm... the more I hear, the more I'm suspecting you're being conditioned by your agent. Yes, the house has some problems, but none of them seem anything like a huge drama. I know houses that have needed under-pinning which have been discounted much less than $40K!

I wouldn't put too much store in an "experienced investor" being scared off. Amongst the experienced investors here, you'll find heaps who wouldn't touch a place with these issues, and plenty others who'd sniff opportunity and be delighted to spend $5K fixing problems when they've negotiated $10K off the price agreed prior to inspection.

I think it's far more likely that you just hit two panicky buyers, and your agent doesn't get much less commission on a $350K sale than he gets on a $390K sale, and he's sick of sales falling over on your property, so he wants you to take a very low offer and be done with it.

I'd be considering a new real estate agent, and going back to the market either with the issues addressed, or with a copy of the building report presented to prospective buyers accompanied by a quote for repairs, and I'd still be hoping to get close to the $390K. If you can fix the issues for < $10K, your best bet, in my opinion, is to fix them and go back on the market at the appraised value of $399K.

As you mentioned, you have equity, and I'd think you should be able to arrange a redraw or loan extension fairly readily (provided your mortgage conduct is good).

Good luck, try not to let this feel like the kick in the guts you just didn't need. I don't think it's going to pan out as badly as it first sounded.

 

[Perp]

More likely an experienced investor can smell your need to sell and is lowballing.

I have never seen a "good" house inspection report and have experience being in the position of giving some money off the price for first home buyers because they thought the house had "scary" issues.

Agree with all that, too.

 

[craigb]

the market seems to be following the rest, like here in canberra! so it might be some time on the market, and if all the other agents are finding it difficult to sell their stock too! expect some conditioning from your agent, Y,know the i'll get 400k easy sighn here and gee! the markets changed i suggest you drop the price ??? it happens ,

But its all about you and the family , selling this home might be seen as a quick fix removing stress and all, but it will be just as stresfull when your holiday ends , when you sell you lose the stamp duty and the agents fee, these could be 25K all told ,
Think about the holiday , and budjet for $25k do it cheap, and rent the house out while your gone , if you get enough to cover the mortgage, your set, sort the familly out, and come back home , with a new plan.

 

[weg]

What a lot of other posters said.

On a more positive note, you don't have to sell, or at least you don't have to sell at the price that doesn't make your plan viable.

As another option, have you thought of saving a bit and going on a 2 to 6 month trip? You still get a break, and overall experience less drama and inconvenience.

 

[beach01]

Could you rent the house out instead to fund your trip around Australia?

 

[evand]

You have to ask yourself did the $350k you paid for the house 3 and a half years ago take into account the bad building report from that time. Did you and/or the agent think you got a 'good buy' because of the dodgy building report?

If the answer is 'yes' and it is the case, you have to blame the slow growth of the market and not the house itself.

As the price you will be selling it for now is relative to that. (excluding any money you spent on it, which i don't know added real value in buyers eyes)

The central coast market is generally slow, pretty much all the time. And Saratoga is a sleepy part of the coast.

Either way, the market will have a bit to do with it and not just the building report itself.

If you have to sell, the market will tell you what you can get for it. Its thats simple. Real estate is really a very simple game.

I read once that the market doesn't care what we need the money for - which drives unrealistic listing prices - and i think its a good line to remember. Jenman i think.

maybe your best bet is to rent for now.

Also, try McGrath up there if you havnt already. Ive had pretty good results with them.

Anyway, good luck with it.

ps: Prop, that chart is a bit old, i think that particular market is trending down now.