Understanding LIM reports

Posted: 23rd June 2010 by admin in Real Estate Terms
1

So you’ve purchased a house conditionally and are now completing the due diligence on your prospective new home. Now you have to get something called a LIM report?!? … and you’re thinking to yourself, “what is a LIM report and why the heck do I need one?”

Let’s take a closer look at LIM and why it is prudent to consider getting one.

A LIM (Land Information Memorandum) report is a summary of the property information and is compiled and supplied to you by your local council authority. It is really important to note the council does not at any stage conduct a site visit while they prepare a LIM report for you. The LIM report is a summary of the property information the local authority holds on file.

So why would you want a LIM report?

LIM reports are useful because they disclose important information to you, the purchaser. Here’s a list of information that you will typically find in a LIM report

1) Zoning details of the property

This is important to know as if you are planning to complete a subdivision on the property you are purchasing, you want to know if the zoning restrictions will allowing you to complete this.

2) Building consents and permits

The LIM will highlight any building works and certificates issued for that property by the local council. This is important because if the property has, for example, a log burner which isn’t mentioned in the LIM report as having a building consent or code compliance certificate issued, then this means the local council did not give permission to build it and has not approved it.

3) Any certificates of work by certified tradespeople

These are related to works carried out for alterations/improvements on a property. These workers require the tradesperson to create and supply a producer statement to council for the workmanship carried out as part of the consent conditions required by council.

Here’s some other items that you’ll often find in a LIM report:

> Any proposed major road works in the near future that is close to the property. This would include new roads, subdivisions etc.
> Any land features such as fills contaminants etc.
> Resource consents within 25 metres of the boundaries of the property
> Building Certificate of Fitness.
> Swimming Pool Fencing compliance (if applicable to the property)
> Planning details for sewer/storm water or water systems on the property
> Whether the property lies in a flood-plane
> It should give a general overview on the possibility of erosion, slippage or subsidence of the land
> It should tell you if there are any hazardous contaminants that the Council is aware of on the property
> It should advise if there is a water meter installed
> The report will also give you details pertaining to the Rates on the property. This section will cover the Land and Capital value, the annual Rates and the water charges. It also covers payments that have been made on the rates for the current year and what the current instalment is
> Any other information that the Council sees as relevant to the property and to the report.

    What you won’t often find in a LIM report

1) Building plans

Building plans are often excluded because it is too costly and time-consuming and bulky to include plans and drawing.

2) Accurate boundaries

Even with an aerial photo of the site with the boundaries marked out, their accuracies may only be accurate within two and three metres. If the boundaries are important, check the certificate of title survey pegs, and as a last resort engage a surveyor to check the site for you.

3) Easements

You will find easements on the property Certificate of Title at Land Information New Zealand, and a copy of the title should be made available to you by the Real Estate Agent you are dealing with.

4) Local proposed developments

If your immediate neighbour has put in a resource consent to build a structure/or make an addition to their home, this is unlikely to be found on your LIM, as they are not required by laws to do. It is very much a case of Caveat Emptor in this circumstance.

5) Development restrictions

A LIM doesn’t give comprehensive details of the building restrictions. If you are buying with a specific development in mind, consult with the local authority’s planning team.

It is really important to note (and I can’t stress this enough) that a LIM report does not contain all the information on the property. It is simply summary document of the property which includes what the local authority perceives to be the most useful information to you.

If you have any doubts, I would strongly recommend viewing the property file at council and ensuring you involve your solicitor in checking over the LIM report, so that he/she can give you further guidance.

If you live in Auckland City, then the Auckland City Council provides some really comprehensive information on LIM reports (click the link to access)
That’s it for today – Share with us what you know about LIM reports or if you have any questions don’t be afraid to ask :-)

Andrew Simich

Congratulating the Winners

Posted: 16th June 2010 by admin in Real Estate Marketing
0

We had our industry awards on the 29th of May and this is a hat-tip to the guys and girls of Clear Realty who have worked really hard over the year and who in many cases have led the way for LJ Hooker.

The big news for the company is that for the 3rd year in a row, Royal Oak is the top Auction office in New Zealand for LJ Hooker. Clear Realty is also the top office group for Auckland for the 11th year in a row.

This is a great achievement by the team, and a testament to the strong auctioneering skills of our auctioneer Keith Niederer and the team focus to provide a top level auction program as a marketing option for our clients. Here’s the rundown on our auction success for the last year (May 1 ’09 to April 30 ’10). We listed 236 auction properties and sold 232 of them (either prior to, at, or post auction), which is a 98% success rate… a phenomenal result!

Here’s some more information on how Clear Realty (LJ Hooker Royal Oak, Remuera, Onehunga & Ellerslie) fared in the year from 1 May ‘09 – April 30 ‘10:

We had 4 agents in the top 20 for gross commission for the year and 6 in the top 30. That’s 20% of the top performers for New Zealand coming from our team which is fantastic. Big congratulations go out to:

Steve Hood (Remuera) – 3rd overall
Lindy Lawton (Royal Oak) – 10th overall
Sally Dawson (Remuera) – 11th overall
Cheryl Crane (Royal Oak) – 12th overall
Dianne Nichol (Remuera) – 19th overall
Glenn Baker (Royal Oak) – 28th overall

The Royal Oak and Remuera also had a very strong showing in the top 10 offices competition with Royal Oak coming in 3rd and Remuera coming in 7th. It’s a credit to both offices that we had such a good showing in the top twenty and the fact we sell a residential portfolio (compared to other companies who have a large commercial/industrial portfolio) is a testament to the hard work put in by both offices.

Clear Realty was also the inaugural winner of the newly created “No1 Marketing Office” award which recognised our efforts in providing high-visibility marketing programmes for our clients and also instituting marketing internal initiatives for the Clear Realty franchise and L J Hooker brand, all of which, were of benefit to our clients i.e. our Weekly Property Update Magazine which started out as print magazine distributed through our open home network, and which has now evolved into a e-media tool, which is distributed to over 1000 buyers weekly via email and is available online (link above).

It was also great to meet our new business owner L Janusz Hooker at our awards night (grandson of founder – L J Hooker). L J got a first hand taste of our auction marketing system a fortnight ago when he came to observe our auctions. One property we were offering in Massey Avenue, Greenlane (marketed by Glenn Baker) sold under the hammer for $595,000. The client, who had purchased the property from Glenn several years ago, was in an advanced state of pregnancy. L J thought she was so happy with the outcome that she was going to enter into premature labour!

Looking ahead to 2011 it certainly seems Clear Realty LJ Hooker is moving in the right direction in terms of the company culture (which is second to none), and the way our clients trust how we represent them when dealing with their buyers.

It’s also really pleasing to have strong and forward-thinking leadership from the top with the likes of our Franchise owners – Glenn Baker & Keiron McDonnell, Kieth Niederer (not only our highly effective auctioneer but General Manager for LJ Hooker NZ) and LJ Hooker himself.

Here’s to further success to the team in 2011 (and for the Rugby World Cup!)

Andrew Simich

May recap and what’s ahead for winter

Posted: 14th June 2010 by admin in Uncategorized
0

I thought it would be a good time to do a check-in on what happened in the market in May and just what lies ahead over the winter months for buyers and vendors who are active and/or become active in the market.

It was interesting to note the comments in the May market which realestate.co.nz issued at the beginning of June.

The main premise of the report was:

  • Listings remain strong
  • Inventory of unsold houses fell
  • Sellers adjusted price expectations to meet the market
  • The Asking Price slipped out to below 5% of peak.

 To read the pdf summary of the may market from realestate.co.nz  click here

Certainly what I’ve noticed over the month of May, that the number of listings we market has decreased because

1)      We have sold a high percentage of those listings

2)      We haven’t been able to replace the sold listings due to a seasonal drop-off.

I have also observed some uncertainty from the buyers in May due to a shift in the market as opposed to awaiting announcement of the budget . I spoke to an accountant this morning about the budget and changes to depreciation, and his comment was that “its business as usual for many investors and clients are pretty happy that they are getting some tax relief from the government.” It seems that many people are now moving beyond the budget and looking to the winter market.

My advice to buyers is to make sure you conduct your due diligence and keep an eye on the market indicators such as auction sales percentages and days on market averages. This type of data can really help with understanding what’s happening in your local area. I really want to emphasise that point as whilst national statistics are important to help you understand trends in the market, you can’t beat having local data (as mentioned above) at hand.

It was interesting to note in yesterday’s herald about the auction results for one of the Auckland real estate companies.

Here’s our data for our auction sales in May 2010:

Over the month we had a total of 22 listings which we took to Auction. Of these we sold 14 under the hammer, which was 64% of our auctions sold. All of these properties were on the market for less than 30 days.

Of the remaining 8; 3 have had fair market value offers which have been turned down. At face value this is down on our April results for Auction but still a positive result for 2 out of 3 vendors we are dealing with.

I did say I was going to talk about the winter market. Between now and the end of August you’ll see a drop off in the availability of listings, and we are already observing this. Some of our Vendor’s do consciously choose to sell in Winter despite less buyers being around because there is less availability of properties to choose from. You only need to pick up a central property press to notice this (hint – it’s a lot thinner than 3 weeks ago.)  

To those buyers who are frustrated by missing out on a few properties in the 1st quarter, don’t give up and keep up the hard work. Many other buyers take a break and quit the market for winter. You’ll be rewarded for your persistence as is always the case with life! :-)

Thanks for reading and look out for our “winners” blog post on Wednesday.

Andrew Simich

The differences between a freehold (fee simple) and cross lease title

Posted: 3rd June 2010 by admin in Real Estate Terms
6

I thought this would be a good topic to focus on today, simply because I (and some of my colleagues) have had a number of queries about titles on different properties. The most common question we get asked is what’s the difference between a freehold title and a cross-lease title. Not only that, but often when we are marketing properties with a cross-lease title we are often asked “is this leasehold?” My intention today is to guide you through the difference between a fee simple and cross-lease title and show you what you need to look for so to both identify and understand the implications of each title.

Estate in Fee Simple

Drake, Lay, Varnham & Thomas, 2000 state “The law relating to the holding of most land in New Zealand is based on English law. As a result the inherited doctrine that the Crown is the ultimate owner of all land remains…ownership of an estate in fee simple is not limited by time and continues indefinitely. Such ownership carries with it a bundle of rights representative of absolute ownership of any property. These are the right to dispose of it by will, by gift, or by sale and generally do with it whatever the owner wishes. However there are statutory limitations (e.g., use of land is controlled by the Resource Management Act, 1991 and the sale of land to overseas persons by the Overseas Investment Act 1973.”

Click here to see an example of a Freehold Title

In practical terms, a freehold title enables the property owner to (within reason) do what ever they like with their land except where the appropriate permission is required from the local authority/local council. The most common type of permission is consents which are sought by freehold owners from their local council for additions/alterations to a property.

Cross Lease Title

What is cross lease? The consumerbuild website (cited below) defines it as “A cross lease is where a number of people share in the ownership of a piece of land (as tenants in common which means they can sell, or pass on their share in their will). The homes that they build on the land are actually leased from the other land-owners. The houses are usually flats or townhouses. For example, if you purchase a flat in a three flat development that is a cross lease, you will become the registered proprietor of:
• An undivided one third share in the land and buildings (as tenant in common in equal shares) with the other owners of the other two flats, and
• A long term lease, from all three of the tenants in common (including you), for your particular flat.”

To really understand a cross lease title you need to understand why they came about. Drake, Lay, Varnham & Thomas, 2000 state that “the rationale behind a cross lease system of land development was that the creation of cross-leases was not considered to be a subdivision under Municipal Corporations Act 1956 or the Local Government Act 1974) and was therefore immune from the onerous local body (council) requirements for subdivisions. The cross lease system was therefore particularly useful for small developments. The advantage was removed by the passing of the Resource Management Act 1991. The act includes “cross lease” within its definition of subdivision (s 218), bringing cross lease developments within the requirements of other subdivisions. This, together with the moves made by many territorial authorities to discourage cross leasing by imposing other more stringent criteria, means that the number of new cross lease developments is reduced.”

It is really important to note that cross lease does not mean freehold! This is certainly one of the most common misconceptions of a cross lease title. It’s very easy to see why people get confused when you look at a cross lease title.

click here to see an example of a cross lease title

As you can see above the word “leasehold” tends to throw a lot of people. The reason leasehold is mentioned on the title, is that it relates to the delineation and/or apportionment of the land for a lease period of (usually) 999 years (as mentioned above in the definition). None of us will be around in 900 years time, but I image when that day comes they’ll roll the lease over, or change the title to a freehold title for each property on the crosslease. The futurist in me suspects that in 900 years time, they’ll be converting most land in to high rise apartments!

The implications of being on a cross lease are that:

1) When you are making major structural changes to your property or making changes that could affect the flats plan on the certificate of title, then as well as approaching the local authority, you’ll need to approach your neighbours to make these changes, and also obtain their written permission

2) You need understand the memorandum of  lease which usually accompanies these titles and understand your rights and obligations under this document. Some memorandums (of lease) cite that the crosslease shall have no pets (I’m not kidding) so it pays to read the fine print.

If you’re keen to find out more then I recommend visiting the consumerbuild website for more information.

Thanks for reading and I hope that cleared a few misconceptions up. Any questions? I am happy to answer as always.

Andrew Simich

How should we connect with you?

Posted: 28th May 2010 by admin in Real Estate Marketing
0

The interesting thing about Real Estate is the way we find our customers, and also the different way our customers respond to our contact with them. So here’s my first ‘revelation:’

Everyone’s different

Told you it was a ‘revelation’ :-)) – This post was prompted by a phone call I fielded last week from a lady who’d had a telemarket call from our office. She explained to me that she did not want any more calls to her home (and I must say she was very polite about it and as a company we have no problems respecting her wishes). I made her aware that we understood and respected her wishes and that I’d advise the agent concerned not to call her again. What really fascinated me was one of her last comments before our conversation ended. She told me that “agents must be getting pretty desperate if they have to call people on the phone to get business.”

In some ways that was a valid comment, and it also struck me that many people aren’t aware of how we go about our business day-to-day. So the purpose of this post is to enlighten you on how we generate business in Real Estate.

Typical lead generation methods:

Agents go about finding business through a variety of means, and these can be summarised into:

Prospecting

Repeat Business

Referrals

Media/Marketing

Prospecting

This is by far the most challenging and yet rewarding aspect of the Real Estate business. Prospecting in Real Estate involves an ongoing commitment to doing what many people would consider unenjoyable tasks. These include activities such as: Door Knocking, Telemarketing, Flyer Dropping, Direct Marketing via posted letters, Calling people with property already listed on the market and calling people that are selling their homes privately.
This is essentially the nuts and bolts of Real Estate and plays an important part in generating future business for an agent – hence why you may get the odd phone call from an agent. Many agents realise this is a relationship business and some will provide a service such as sending out a sales update are market information before asking for your business.

Repeat Business

This comes in the form of clients selling their home through an agent who they have previously purchased through, or sometimes buyers will buy multiple properties using the same agent. As agents we are grateful for the relationship that develops with these clients.

Referrals

People invariably do business with whom they know like and trust. Success leaves traces with good agents and they will often get referral business from clients who were impressed with their service. Referral business is quite literally the “warm-call” to a prospective client as they have been recommended to us by someone they know, like and trust. Once again we treasure this kind of business and are grateful to the referrer for recommending us and the client for choosing us.

Media/Marketing

By this definition, I am meaning the forms of media that most clients find us through, and this can be through such means as: Property Press, various internet sites such as www.realestate.co.nz, www.ljhooker.com, and even via our own Weekly Property Update.
Also other marketing initiatives such as flyers, and card drops are the way to get noticed in a suburb. Profile is another key ingredient in the ability for an agent to get noticed, and as a result creating business opportunities. We also database market to those clients who wish to hear from us regularly, and we furnish those clients with local area sales, market commentary and so forth.

In summary I think that’s a pretty good overview of the types of methods agents will utilise to connect with people. Not everyone will like every method, and that’s the beauty of life – everyone’s different.

So tell me – how should we connect with you?

Andrew Simich

Property Valuations- To C.V. or not to C.V.? That is the question.

Posted: 27th May 2010 by admin in Property Values
0

I had a conversation with a client over the weekend, which was particularly interesting in relation to Capital Valuations (C.V.’s) and I thought I’d share with you this discussion, particularly as everyone has a different view on this. But first, lets look at how C.V.’s are now derived, compared to twenty years ago.

A brief history of Auckland C.V.’s

Twenty years ago, when your C.V. was due to be updated, you’d have a friendly knock at your door by the council valuer who would conduct a thorough valuation of your home. The council –appointed valuer would look at the following areas, in order to derive a value of your home.

1) Floor area of property
2) Size of section
3) Value of chattels (taking into account improvements)
4) Condition of interior/exterior of property
5) Recent comparable sales in the area

C.V.’s of today

Compare this to C.V.’s of today which typically take into account the following:

1) Size of section
2) Recent comparable sales in the area
3) Floor area of property

In a phone call to council to conduct some background research for this article they commented that the following areas are also currently taken into consideration (in conjunction with the above), for the valuation of a property.

- Type of property (townhouse, character home etc)
- Demand to buy or rent in an area (no explanation given on how this is derived)
- Value of the materials (e.g. value of brick, hardiplank etc)
- Improvements on the property
- Property zoning (e.g. zoning 6A – which is 1 dwelling to 365m2 of land)

Auckland City Council has to evaluate 175,000 properties every three years, and thus there is a reliance on using statistical analysis on deriving valuation figures. Auckland City Council is very progressive in their approach to this, as they use a component-building method to deriving valuations (using variables such as land values, zoning etc) whereas other private sector companies use a percentage-gain method based on the last valuation. Auckland City Council also look at a sales window of a few months prior to (sometimes after) the valuation date so that they can factor recent sales into the equation. All in all I feel councils’ do a good job of deducing C.V.’s considering the sheer volume they have to work through every 3 years (especially in Auckland city Council’s case). Whilst these sometimes can be inaccurate, the process of how they are deducted is becoming more robust on the whole.

You will notice that with the Council Valuations, that there is a lack of emphasis on the internal aspects of a property; namely the quality and value of the chattels along with the condition of the interior. A lot of the information derived by the council appointed valuer or outsourced contractor (yes council does outsource this work sometimes) from a roadside evaluation of the property there is no consideration of the internal condition of a property, nor any value added/changes to the property internally.

This dovetails in with my experience with a buyer last weekend. We are marketing a property (3 bedroom town-house in Ellerslie) with a C.V. of $300,000. A buyer was quite adamant that the value must have been around the C.V. and that she couldn’t see how the property could be worth more, despite us producing market sales in the area showing that indeed 3 bedroom properties were selling for a significantly higher price than that in the area. Our vendor has since found that council had on file that the property was a 2 bedroom home. The importance of this, is that it is advisable when understanding values, to give a greater weighting to recent sales data over C.V.’s. Especially if the C.V. is not accurate like in the case above.

This 2008 article on Council Valuations shows what some agent’s think about CSV’s. Whilst I don’t necessarily agree with the whole article, I do agree that C.V.’s can be “erratic….and are not always an accurate guide…”

What are your thoughts on C.V.’s versus sales figures?

Due Diligence: A fundamental of Real Estate

Posted: 14th May 2010 by admin in Market Research
2

I was reading some well-dramatised information about ‘leaky houses’ last week and it planted a seed for writing today’s article on due diligence.

Here is a great definition of “due diligence’ from the business dictionary – “Measure of prudence, responsibility, and diligence that is expected from, and ordinarily exercised by, a reasonable and prudent person under the circumstances.”

So what is prudent and responsible due diligence when it comes to Real Estate?

In my mind there are two separate times when you are conducting due diligence in Real Estate:

1) When you are visiting Open Homes across in different suburbs and evaluation where you want to buy and what type of property you want to buy.

2) Prior to purchasing a property.

For the purposes of this post I am going to focus on the types of due diligence that relate to purchasing a property.

Understanding the ‘playing field’

Due diligence is generally conducted in two ways, depending on the terms and conditions on the sale of a property. If the property is going to auction, then due diligence needs to be conducted prior to placing a (pre-auction) offer on the property or prior to bidding at the auction.

With a private treaty method (By negotiation, buyers – upwards guide, asking price) due diligence can be conduct after negotiating a price. The important point here is that, the appropriate clauses must be inserted prior to the conditional contract being negotiated and finally, agreed upon by both parties. With this method of sale, the advantage is that purchaser’s don’t have to invest any money to conduct due diligence, whereas under the auction terms and conditions, buyers need to invest their money in due diligence up-front without knowing whether they will be successful in owning the property.

With a Tender process, you can opt to place an unconditional offer on a property (or a conditional offer, so your due diligence will be conducted at different stages, depending on your choice of offer.)

What types of due diligence whould I be using?

These are the most common types of due diligence clauses that are seen in Conditional Real Estate agreements:

Conditional on Finance – This allows the prospective purchaser to finalise loan details with their preferred bank, or in other cases organise a loan from a bank/lending institution. Some people may argue that this isn’t due diligence and this is a valid point. The reason for its inclusion here, is in some cases the bank/lending institution will require further due diligence to be undertaken so that they are satisfied that they can lend the mortgage on a safe and legal property.

Conditional on Land Information Memorandum (LIM) – The LIM report is a blueprint on the property and allows prospective buyers to see what has taken place on the property during its lifetime. This includes consents issued by council (resource, building etc) and other important information such as if the property lies in a 1-in-a-10-year Flood zone, if the property used to be on market garden land etc.

Conditional on a Building inspection – This is a most common (and very important clause) and one that should be utilised by all purchasers. The building inspection enables purchasers to understand what areas of the home require attention, and also helps to assessing (with the aid of the professional inspector) whether these are areas of concerns which would warrant a cancellation of the agreement, or if they form part of an ongoing maintenance plan as mentioned in my post on getting a WOF for your home

These are the most common forms of due diligence (by buyers) in real estate. I could have gone in to a lot more detail about this, and I could explain more technical aspects of due diligence in Real Estate however I just really wanted to highlight the most common forms of due diligence that buyers should be aware of. If you want more information, then feel free to comment and ask away. I am here to help.

Andrew

Housing Terminology – Housing Ownership & Rent Measures

Posted: 13th May 2010 by admin in Real Estate Terms
0

Hi folks, I thought it would be a good exercise to include some housing terminology in today’s post. Here’s some excellent information to learn about Housing rent measures and how to calculate a number of important formulas:

Housing ownership and rent measures

• The ownership ratio is the proportion of households who own their homes as opposed to renting. It tends to rise steadily with incomes. Also, governments often enact measures such as tax cuts or subsidized financing to encourage and facilitate home ownership. If a rise in ownership is not supported by a rise in incomes, it can mean either that buyers are taking advantage of low interest rates (which must eventually rise again as the economy heats up) or that home loans are awarded more liberally, to borrowers with poor credit. Therefore a high ownership ratio combined with an increased rate of sub-prime lending may signal higher debt levels associated with bubbles.

• The Price-to-earnings_ratio or P/E ratio is the common metric used to assess the relative valuation of equities. To compute the P/E ratio for the case of a rented house, divide the price of the house by its potential earnings or net income, which is the market annual rent of the house minus expenses, which include maintenance and property taxes. This formula is:

• The house price-to-earnings ratio provides a direct comparison to P/E ratios used to analyze other uses of the money tied up in a home. Compare this ratio to the simpler but less accurate price-rent ratio below.

• The price-rent ratio is the average cost of ownership divided by the received rent income (if buying to let) or the estimated rent that would be paid if renting (if buying to reside):

The latter is often measured using the “owner’s equivalent rent” numbers published by the Bureau of Labor Statistics. It can be viewed as the real estate equivalent of stocks’ price-earnings ratio; in other terms it measures how much the buyer is paying for each dollar of received rent income (or dollar saved from rent spending). Rents, just like corporate and personal incomes, are generally tied very closely to supply and demand fundamentals; one rarely sees an unsustainable “rent bubble” (or “income bubble” for that matter). Therefore a rapid increase of home prices combined with a flat renting market can signal the onset of a bubble. The U.S. price-rent ratio was 18% higher than its long-run average as of October 2004.[16]

• The gross rental yield, a measure used in the United Kingdom, is the total yearly gross rent divided by the house price and expressed as a percentage:

This is the reciprocal of the house price-rent ratio. The net rental yield deducts the landlord’s expenses (and sometimes estimated rental voids) from the gross rent before doing the above calculation; this is the reciprocal of the house P/E ratio. As rents are received throughout the year rather than at its end, both the gross and net rental yields calculated by the above are somewhat less than the true rental yields obtained when taking into account the monthly nature of rental payments.

• The occupancy rate (opposite: vacancy rate) is essentially the number of occupied units divided by the total number of units in a given region (in commercial real estate, it is usually expressed in terms of area such as square meters for different grades of buildings). A low occupancy rate means that the market is in a state of oversupply brought about by speculative construction and purchase. In this context, supply-and-demand numbers can be misleading: sales demand exceeds supply, but rent demand does not.

With thanks to wikipedia for resources in this article

What’s going on? (In the Property Market – April ‘10)

Posted: 12th May 2010 by admin in Market Trends
0

Marvin Gaye wrote a song about it but unfortunately I won’t be podcasting any songs today (I can hear your collective sighs of relief.)What you’re here to find out, is what’s going on with the property market.

I have been reading the April realestate.co.nz market report and there are a couple of important points that have been shared in this post.

Looking at the New Zealand market the:

“volume of new listings coming onto the market fell in April in what is traditionally a quieter month. The 12,225 listings though still represent a 17% increase as compared to a year ago. At that time a year ago the property market was finding an active level of bargain hunters matched to a nervous range of sellers which resulted in a rapid decline in new listings and subsequent inventory.”

So lets have a look at some data that’s come out for April sales from our team.

Compared to April 2009 our sales turnover was up a staggering 59% for April 2010 and we have had a 76% success rate at auction for the month of April.

This suggests to me that even though there has been a vast increase in the availability of properties, most of them have been selling and there is good demand for new listings (-given we are heading into a winter market) and that the central/central-western suburbs (Remuera, Ellerslie, Epsom, Royal Oak, Greenlane, One Tree Hill) have been fairly well insulated to the downturns of the market compared to other suburbs and cities (especially outside of Auckland.)

Also the realestate.co.nz article states:
“The level of unsold houses on the market at the end of April totalled 53,123.This represented the equivalent of 46.5 weeks. The inventory of unsold homes had been rising steadily over the past 10 months, however for the first time the trend has been reversed. A component of this is the seasonal trend which sees greater levels of new listings in summer vs. autumn. At this time last year the inventory levels were at 42.5 weeks as at that time new listings were drying up as sellers were nervous of the threat of collapsing house prices.”

From what we have observed the good properties that are presented well, and offer everything that  the buyer is looking for (i.e. internal access garaging, large bedrooms, quality chattels) have strong enquiry from the market for that property. A classic example of this is 46 Mariri Road, One Tree Hill which sold for higher than the median value figure of the agent feedback from property inspection (typically a margin of error of 4%). Considering the sale price (and agents mean value) was significantly higher than the CV of $690,000 this goes to show what premium results can be achieved with a property which is offering what the buyers’ want. We are seeing those properties which are over-priced, staying on the market for much longer. In this situation, it is more of a challenge to engage with the market (and encourage buyers to put offers on paper), if the market is not seeing value. Despite still making many of our vendors happy, we do note that in this market that if our vendor’s pricing strategy is anywhere more than 5% away from the market, some challenges lie ahead for our clients.

That’s it for today – what are your observations of the market?

Getting a Warrant of Fitness (WOF) on your home?

Posted: 5th May 2010 by admin in Uncategorized
2

I was driving down the southern motorway over the weekend and saw a brilliant advert near Tip Top Corner which was advertising commercial building washing services

It read (something along the lines of) “You wash your car every week, how about washing your biggest asset?”

That got me thinking… We have to take our cars in for a WOF every 6-12 months. Sometimes we breeze through and sometimes we need to replace a set of tyres, replace a tail light, and even sometimes we are sent away to remove rust and make the car safer.  But what about the homes we own? Isn’t it prudent to be getting a WOF on your house? Or is it just better to wait until we come to sell and then find out any issues?

The reason I raise this point is because sometimes vendors can miss out on a sale or have a conditional sale price negotiated downwards if a building inspection conducted by a purchaser, raises significant issues about your home. Typically the big ticket items that can cast a shadow over the sales process are:  re-roofing, the re-piling of foundations, & the re-cladding of the home, and sometimes even the rewiring of a home. If the contract isn’t cancelled for the above reasons, then typically vendors can expect buyers to want to pay less as they perceive these are costs they are going to pay once they own the home.

The big point here is that this type of scenario can be avoided or somewhat mitigated by being aware of any potential issues. One way is to book in a WOF with a trusted building inspector for your home. A building inspection can be anywhere from $250 – $600 depending on how comprehensive you want it to be. If you own a $500,000 this equates to roughly .1% of the value of your home. Is that a worthwhile investment, so that you know what’s happening with your home? I think so, especially if there is some serious work to do, that will protect that value of your home in the future.

This is not typically what people do, and my suggestion is if you are engaging a builder to do such an inspection, ask them to put together a maintenance plan along with an assessment of work to be done. As this work is completed over time you are able to ask the builder to update the plan with what you have done. If there is not a lot of maintenance required, then great! If there are some maintenance works required, then you can plan for these, and also can convey the value you’ve added to the property/or maintained for the property when it comes time to sell your home. Having a maintenance plan means you’ve got something to work to, and something to show for it.

Even if you don’t want to consider this, then at the very least consider a building inspection  a few months before you consider selling. If you know what needs doing on your home and you have a dollar value amount for the cost of any works, if any disputes arise after the purchaser has a building inspection, then the building inspection can be used as a reference document. Or you now have an action list of maintenance items to address before going to market.

Building WOF’s by a professional tradesperson should become the norm for people. Would you like to know the current condition of your home? I’m interest to hear your thoughts on this.

Older Entries
Newer Entries