Pictured: 7 Godwit Street, Southshore. Sold at auction for $315,000, April 2016.
Surprising as it may seem, the sale and purchase of these properties has become more commonplace and an acceptable and viable option since 2012. Frowned upon originally, now with a much broader cross-section of purchasers pursuing these properties, the process has gained both credibility and acceptance across the board. Understandably most are seeing them as affordable opportunities to secure property well below current market values, and for a large percentage, their structural integrity is largely intact.
These brief tips and info will hopefully answer the commonly asked questions:
The bottom line is that they are affordable and make very attractive buying, whether it be a cheaper home for the kids, a cash positive investment property, or simply a cheap home to live in while the family home is being repaired the numbers stack up.
In a nutshell, once a homeowner has cash-settled with their insurer for either a repair or a rebuild of the dwelling, the insurance policy is cancelled due to the insurer having met their obligations under the policy. It makes sense really, once a homeowner has been paid out, the home will remain uninsured until such time the home is remediated fully and meets the criteria as stipulated by the insurer. When selling ‘as is’ the owner retains the funds and sells the property without remediation.
Generally only a cash buyer or someone who has the ability to secure a mortgage against other property can fund an ‘as is’ property. Some banks will lend on a percentage of the land value, however some banks, like my own (ASB), take the stance that they will not secure a mortgage on anything with an uninsured dwelling on it.
The homeowner has already taken one bite at the cherry with their payments from EQC and the insurer, often leaving them reasonably flush, hence only needing to sell at modest levels to be better off than selling their home if it was not damaged.
Unless you have the required skills, if you are not provided with some form of comprehensive report (preferably an engineer’s report with scribed floor levels) – be very wary. How can you be sure you know what you are buying? On the flipside, if a salesperson can’t provide such info, how do they know what they are selling? An engineer’s report will comment directly on the structural integrity of the property and in my opinion this is vital information!
Most ‘as is where is’ sale and
purchase agreements and auction contracts have a number of clauses deleted from
the body of the contract, so it is very important to take legal advice so that
you fully understand just what you are getting yourself into. The Risk and Insurance
clause (clause 6 in auction contracts and clause 4 in private treaty
agreements) is a common one that some owners’ solicitors delete in full. The effect of
which, regardless of whether the property has sustained further damage or has
been destroyed between the date of purchase and settlement date, you must
settle in full. In my opinion this leaves you far too vulnerable. We recommend that the majority of these clauses remain to protect you against liability for property that you have not
yet taken possession of. The Griff
Team have now sold in excess of 120 of these properties so we are constantly refining
the contractual clauses to better protect both the purchaser and vendor.
We encourage our sellers to have any such repairs well documented with photographs so that it is very clear to a buyer what has been done to a property. You don’t want to purchase a property that has had a quick tart-up but may still be structurally compromised. The engineer’s report should have been carried out prior to these repairs.
Ultimately any home can be repaired but it is not always economic to do so. However, we are becoming aware of some techniques that are more cost effective and with new technology and knowledge coming to the fore, various repair strategies are becoming more viable.
A well skilled salesperson can provide you with a number of bidding techniques and ultimately assist you with securing the property. Here at Team Griff it is not uncommon for us to have “pre-purchase auction meetings” with buyers where we help them strategise a plan prior to the auction. These meetings often take the surprise out of the process, and besides from making you feel more comfortable, can often provide you with the necessary skills to win the day.
Team Griff provide an efficient email notification system – simply subscribe to our ‘as is’ database at Griff.net.nz and you will receive regular updates of all of our new ‘as is’ listings with client exclusive open homes to view the property prior to the general public. The team are constantly connecting buyers with sellers, so we are your one stop shop for ‘as is’ transactions.
Lloyds of London have been the most consistent insurer of these properties, however we are beginning to get some traction via brokers with New Zealand insurers once the appropriate remediation and paperwork is in place, so watch this space.
At the end of the day, I believe it is about having credible information and making well informed decisions, however they are not for the faint of heart – if the risk of owning an uninsured property is going to keep you awake at night, they’re probably not for you…