Hi Folks,
I have a dilemma on my first PPOR that is currently under contract offer. I could really use some advice from the more experienced amongst you.Note that our hearts are not set on this place, it is more an expensive inconvenience if we don't get it.
We had an offer accepted on our first PPOR. The price drop from vendor asking was 13% and we thought we were getting a pretty good deal as it was below median house prices for the area and the house seems to be above average for the area. RPdata and residex reports indicate that the suburb is in the upper quartile for growth over the next 5+ years. We have kept a close watch on the suburb and other houses inspected in the area and our subjective view is that we have a reasonably good deal.So here is the series of catches that create the small dillemma for us;
The bulding and pool inspections showed that there is around $30k of work required, some listed below;
Pool fence not legal and has some very nasty holes in it. (We have a small child so this is also a personal family safety concern)
Potential sturctural damage on pool concrete. We need to pay a Pool Builder to inspect to determine if the concrete structure has been severely compromised or is only cosmetic. No idea at this stage what that could cost so the $30k could go up.
Pool filter system needs replacing as it is currently not working. The pool inspector said he wouldn't swim in it if you paid him.
Downpipes not connected
Some small internal plastering work needs fixing in bathrooms.
One external facing door needs replacing
The back deck is unsafe, needs to be torn down and replaced. (2 level home).So, without the pool structure fix, we estimate around $25-30k to fix all these things and a few minor others.
In its current state, we cannot proceed with the current contract, there is simply too much for us to fix and a couple of real safety hazards.
We did place clauses int he contract covering the pool and structure, so we should be ok pulling out under these circumstances. At least the way I understand the contract terms. Will be consulting our solicitor tommorrow.
We are still interested in the house, so are thinking of presenting a couple of options to the vendor;
1) We take the house "as is" but lower our offer price by ~$30k. Additional clause that they pay for a Pool Builder report to show that the pool is structurally sound. (This assumes also that all other legals etc are ok).
My only problem with this approach is that the rennovation/repair costs come straight out of our savings. We put down 20% deposit and this will reduce only slightly with the reduced loan. e.g. 6k versus 30k for repairs. (If there is a cleaver way to deal with this, please let me know). We prefer not to use the savings as we want to buy again in 3-6 months for an investment property.2) We drop the offer rpice by ~15k and have the vendor fix the pool filter system, minor internal repairs and downpipes. Also pay for Pool Builder report to show pool structurally sound. We cover the costs for the new deck and pool fencing. Extend the settlement terms by say, 6 weeks to allow the vendor work to be completed. We like this option because it allows us to pick the style of pool fence and deck that we like. Also means less savings are chewed up.
3) Maintain current offer price contingent that the oner fixes everything. This is appealing financially as it doesn't eat savings so much. But they will no doubt choose the cheapest options for all components to get the job across the line. I think they are unlikely to go for this unless they have cash to burn.
It is somewhat complicated for our first home, but I think we might be able to make this work in our favor.
Any help or advice greatly appreciated,
emptyvesselLook at how much it costs to fill in the pool with soil as an option.
Downpipes that go now where put in a water tank.Walk away and start again.
If the property has that many building issues any potential buyer will come back with the same problems highlighted when they undergo their Building Inspection.
Sounds too me like there are too many issues to be fixed overnight and very unikely that the Vendor will have any interest in repairing the work other than on the cheap.
Richard Taylor | Australia's leading private lender
If theres money to be made out of this property then don't walk away, I think $30k to do the repairs is plenty but with out seeing it i can't be 100% i would try get $30k taken of todays purchase price and do the repairs properly.
Scenario 3 would be the way to go so you don't outlay your cash but the vendor is less likely to go for this and probaly doesn't have the money to spend.
Don't fill the pool in it will devalue the property and if you were to fill it in it will cost just as much because the hardfill you put in should be compacted and you will require machinery to do this.
Unless you have $30 in cash you will not be able to fund it.
Richard Taylor | Australia's leading private lender
Thanks for the advice folks.
I have about and extra 80k available. Plan was to sit that in the redraw facility on the IO loan until be find 1 or 2 small investment properties in a couple of hot areas.
30k out of that hurts us a bit on the investment front.
I don't think I will fill in the pool. Would rather walk away. This is a hot climate (QLD) and pools do pose a good asset almost all year round. We will probably rent the property out in 3-5 years when I relocate overseas or interstate for work.
I think we will present them with options 1 and 2, but make the numbers a bit lower. Time to play hardball and see how keen they are to sell.
We are prepared to walk away. Although I think the fact that I have to foot the bill on inspections that fail is absolutely criminal. The government should at least make these tax deductible for 1st home buyers. I am lucky because I have saved for a long time and earn plenty of money, but the average first home owner cannot afford to do this on 2 or 3 homes. Thus the disadvantaged are more likely to be ripped off and buy a lemon. This is plain wrong and actually acts as a barrier to the free trade of homes.
Apology for digressing but I have discovered many things about the real estate industry over the past 18 months that make me extremely wary. Lots of dodgy agents, vendors and spruikers out there. Marginally better than the clairvoyant industry in my mind. No offence intended to those of you who are genuine, you know who you are.
Having been through a rather complex pool saga which is well documented on this site I will put in my 2 cents worth.
(1) Is the pool currently filled with water? Check the water level and this should give you idea if it is leaking but allow for natural evaporation. Is it a complete concrete pool or partly fibreglass? Depending on the size you could either fit a fibreglass mould inside or a decent concreter can resurface the old pool and reduce the depth by 10 cm all round.
(2) Depending on access to the pool you can back fill with rocks, soil and a bit of mulch, followed by a wood decking over the top can be done rather cheaply and add to the appearance of the back yard. You could also put a layer of sand instead of mulch and have a sand pit for the kids to play in.
(3) Filter systems are rather cheap and not that hard to take apart and clean. Make sure the filter is given a good acid wash to clean it out. They are a very straight forward system to work on. the pump might be another issue but even these are not that expensive.
(4) Fencing also isn't that expensive to fix and if it is only in places then wont cost an arm and a leg.
Most other stuff doesn't sound to serious or expensive except for the decking? How much of the 30K will the decking take?
How much does it cost for an building inspection and a pest inspection
eldredni – ~Most were $400-$5000 for the building and pests that I found. I went with a reputable name company to be safe. There was another at around $620 but was more thorough.
The pool inspection (recommended to be done separately by the building and pest inpectors) was done by the local pool shop (reputable chain) for around $80.C2, thanks for the detailed response. Answers below;
1) Pool currently filled with water. Does have a history of blackspot. Pool guy says the water reading were off the scale so he couldn't get a number.
Concrete. We don't know yet if there is a structural problem. From the surface there is cracking to the pebblecrete put on the pool years ago. Essentially both the pool and building/pest guys said we need a pool builder to inspect the structure to advise if the cracking continues into the main structure. If it does, the underlying concrete and steel could be decaying and the expense to fix is rather high. Such as filling in the pool more as you mentioned. IT isn't a huge pool as it is and taking 10cm off wouldn't be acceptable for us.2) Thanks. We won't fill it in. Either the pool is ok or we walk away. We need to live in the house for a few years so the pool is a requirement.
3) The pump, filter and meter system are all on their last legs. IT cannot keep the pool in balance as it is struggling so hard. The unit hasn't got a weather cover so it has been hammered by the sun/heat and rain. No surprise it is dying. Pool guy reckons that there are about $1000-1500 of repairs to do in order for current system to get back to baseline. For $1700-2000 we can get a new system with a salt water conversion and a cover constructed. (I haven't got time for any handy work, my daytime job pays very well but it is extremely demanding on time)
4) Oh the fence. Hmmm. Essentially it is a hodgepodge of 3 different fences. 2 of which are commmon property fences with neighbours. None of which are legal height. Apparently they would get a large fine from the council if an inspection was done. I am not going to tell as it isn't my place, but it does suggest major fence work. I estimate it requires about 30-40 meters of fencing. Probably some concrete drilling work in places. We are thinking of paying for this ourselves and putting in a nice glass fencing system as it will fit in very nice with our landscaping plans.
Decking – estimate 10-15k to get current one removed and replaced with long-lasting wood. (current is a cheap pine that was always going to sag and rot early). The stairs also need removing and replacing. These are a crappy concrete and steel job that are falling apart. We would switch this to wood/steel.
to be honest, I think we could do it on the cheap, say 15k for all, if we had to by just doing the bare minimum. We have to live in this home for a few years so the bare minimum isn't really all that desirable. Probably better we spend more money on a house that meets our needs rather than skimping on the renno's.
Talking to solicitor today about where we stand and making new clauses for the offer. then we work out how to present it to the agent. I am thinking of not saying anything to the agent until we have a new offer document ready to go. Thoughts?
I nearly bought a similar property last year. In hindsight, Im glad I didnt. it wouldnt have been worth the stress & inconvenience.
walk away
everything you have listed is quite simple for a contractor, and if the pool is buggered rip the old one out and put a new one in a new one is probaly around $20k. if you have a couple of decent contractors that will turn up everyday it should not take very long to do everything.
$20k? Does that include ripping the old one out of the ground? Probably alot of jackhammer and disposal work to do. I would have thought 5k just to pull it out. 15k for a new pool sounds a little on the low side. But I don't really know all that much about it.
I don;t know any contractors, but I assume there should be a few on the shelf to pick from at the moment with the downturn. So rates and quality should be reasonably good.
We have our solicitor putting in the alternate offer as we speak. Don't know if we will hear back this afternoon or not. I don't think the vendor will have expected this so may be a little pressured. If I was them I would slow it all down to reconsider.
But if they take the low-ball offer, we are looking pretty good.
Sounds like you have made your mind up about what to do.
What is the size of the pool LxWxD1-D2?
1) Pool currently filled with water. Does have a history of blackspot. Pool guy says the water reading were off the scale so he couldn't get a number.
(Has he heard of pool shock? Throw it in and wait over night. Take reading in morning. Seriously though just empty the pool out if really worried about water quality)
Concrete. We don't know yet if there is a structural problem. From the surface there is cracking to the pebblecrete put on the pool years ago. Essentially both the pool and building/pest guys said we need a pool builder to inspect the structure to advise if the cracking continues into the main structure. (this is as simple as just drilling the area were the cracks are) If it does, the underlying concrete and steel could be decaying and the expense to fix is rather high. Such as filling in the pool more as you mentioned. IT isn't a huge pool as it is and taking 10cm off wouldn't be acceptable for us.
2) Thanks. We won't fill it in. Either the pool is ok or we walk away. We need to live in the house for a few years so the pool is a requirement. (It took me 2 days to fill in a 11×3.5xD.8-2.2 and then cover the top with mulch. All up cost was about $450 including hiring a 2 ton truck for a few hours)
3) The pump, filter and meter system are all on their last legs. IT cannot keep the pool in balance as it is struggling so hard. The unit hasn't got a weather cover so it has been hammered by the sun/heat and rain. No surprise it is dying. Pool guy reckons that there are about $1000-1500 of repairs to do in order for current system to get back to baseline. For $1700-2000 we can get a new system with a salt water conversion and a cover constructed. (I haven't got time for any handy work, my daytime job pays very well but it is extremely demanding on time) (2K is an okay price) (Depending on the type of filter it may take less than 5 minutes to take it apart and then clean the filter)(the pump should be held down by only a few nuts and then dropped off at a pump place)
Thanks again for the feedback.
Yes, making a decision was critical as we were out of time on the pool clause of the contract. No time to procrastinate.
We made the new offers and the vendor is considering over the weekend.
If they accept and everything is as cheap to do as you say, we may have negotiated a real bargain. In my profession I have witnessed too many projects going over budget and time estimates. It seems to be a common trait of human nature to underestimate time and effort. Thus I tend to be conservative with cost and effort estimated for all my projects.
Will keep you folks posted on where the saga goes.
Probaly about $20k for the new pool and depending on access to pull the old one out the price would vary if you can get a reasonable size digger in and he demolishes pool loads it straight on truck it should be under $5k but if you have to have digger demolish pool and bobcat run the debre out to truck on road side then it may be more than $5k. Just get a couple of quotes, cheapest way would probaly be to buy a pool from somewhere and organise a local earthmover to sought the old pool and put the new one in
It sounds like you have invested time & effort into researching the viability of this property. In my experience, once you lay down cash for pest & building inspections you are subconsciously committing to purchasing the property making it more difficult to walk away. But walk away you must as this is now a bad deal for the following reasons.
1) Getting the owner to fix probs is a false economy as he will try to do it as cheaply as possible. Expect probs to resurface.
2) I'm guessing the house is a few years old & perhaps 30k would be better spent on updating kitchen/bathroom?
3) I would never buy a house with a pool that I plan to rent out as renters never look after things (in my experience)
4) I had a work mate whose "10k concrete pool problem" ended up costing him 35k – more than a new pool.
5) 30k fixing a deck/pool/pool fence – would it add to the value of the house at the end?
6) A wise man (my dad) once told me – never buy another man's problems…JAMBV
Update –
Agent tells me I am missing out on an absolute bargain. This is to be expected. I told him that if it is such a bargain he won't have any trouble selling it to somebody else in a flash.So he asks me if I want to walk away. I told him that he and the vendor should at least try to come up with a creative solution to entice me. I mean, god forbid that an agent has to think for a living and earn his keep…..so far no solutions are offered which I find pretty lame. I would have thought that they would try some kind of counter-offer with me….but alas no negotiations to be had here.
So we are on the hunt for another property…….
Thanks again for all the advice, this has been a great learning curve.
You would have thought had it been that much of a bargain the agent would have declared his interest and purchased the property himself.
Think you are wise to look elsewhere as there are bargains everywhere at the moment.
Richard Taylor | Australia's leading private lender
you will find some agents do that especialy the stupid ones if i was an agent i would present every offer because you never no what the vendor will do, Ive made offers that i no were never presented because the agent thought the offer was to low so i go past the agent straight to the vendor and sometimes you get a deal, he probaly never even took your offer back to the vendor
keiko wrote:you will find some agents do that especialy the stupid ones if i was an agent i would present every offer because you never no what the vendor will do, Ive made offers that i no were never presented because the agent thought the offer was to low so i go past the agent straight to the vendor and sometimes you get a deal, he probaly never even took your offer back to the vendorAgents are required to present all offers to the vendor (unless the vendor has instructed otherwise). http://www.legislation.nsw.gov.au/fullhtml/inforce/subordleg+490+2003+FIRST+0+N#sch.1 See Part 3
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