Renovations can be ticking time bomb for investors
For prospective home buyers, dodgy home renovations could leave the unsuspecting buyer with some nasty surprises.
A splurge on home renovations has been fuelled by lockdowns and a booming property market, with homeowners having more time on their hands, holiday spending money left in their pockets, and the incentive to sell as prices soar.
But for prospective home buyers and property investors, the home handyman could have left the unsuspecting buyer with some nasty surprises.
Eager buyers should be extra cautious of recently renovated properties that could be masking serious pest and structural issues in sellers’ haste to capitalise on soaring property prices, according to real estate expert and buyer’s agent Patrick Bright.
The director of EPS Property Search said buyers should be more worried about renovated than unrenovated properties which could be disguising pricey flaws.
“When I see renovated properties, I am always concerned as to whether the work has been done by a professional or a hardware store weekend warrior, particularly after the recent lockdowns,” he said.
“Have they tarted up the property and essentially painted over the dodgy bits, leaving unsuspecting buyers to eventually pay the price to fix it?
“A wise person would not buy a $20,000 used car without a pre-purchase inspection, yet I see people spend a hundred times that amount without one, on a property where there’s a far greater financial downside.”
He said structural, pest, damp, electrical and plumbing issues with repair bills in excess of $100,000 were not uncommon estimates at properties that upon visual inspection looked to be in good shape.
A shortage of materials and skilled tradespeople has blown out construction times on homes.
As well as sparking concern among landowners expecting to receive significant government grants that they may possibly miss the deadlines to be eligible, the rush has also made it difficult to secure qualified labour for home renovations.
Design and contracts specialist at Australian Home Inspections, Nicolas Del Carlo, said they had not necessarily seen a significant rise in poor renovations during COVID, but were seeing industry strains as the substantial increase in demand in new construction, thanks to the government grants, resulted in deteriorating performance and quality across the renovation and new home sector.
“The next 12-18 months are going to be difficult, as builders are overcommitted and contractors are struggling to find enough manpower to deal with their project commitments,” Mr Del Carlo said.
“Renovations, however, have always been a mixed bag, depending on the original reason for the reno — people renovating using professional trades with plans to live in the home are generally completed to a reasonable standard.
“Those that have been captured by the DIY home reno bug, looking for quick flip for profit, with little to no industry knowledge, are prone to tackling projects beyond their ability.
“The profit making renovation romanticised by many reality TV shows is often where we’ll find issues with a home.”
Mr Del Carlo said the most common and costly renovation faults and flaws related to water proofing, retaining walls, and roof and structural changes.
“Skipping the inspection process can be very costly.”
“There are no guarantees on a home older than six years — you have a very finite opportunity within the contract to protect your investment by getting a building and pest inspection completed and we will often find homes that need significant reparations,” he said.
Selling agents must inform prospective buyers asking for a contract of sale about previous property inspection reports that have been commissioned. It may be possible to negotiate a cheaper price to repurchase a previous report.
Fair Trading New South Wales recommends using a suitably qualified person such as a licensed builder, a surveyor or an architect to provide a professional building inspection report of the property.
These professions should see through any cosmetic renovation improvements covering up faults that might otherwise be missed by an untrained eye.
Fair Trading outlined the benefits of obtaining an inspection report before buying a property as:
- knowing in advance of problems
- using the information to negotiate a lower price for the property
- gaining specialist advice about any major problems and how they will affect the property over time.