The Complete Guide To As Is Where Is Property 2022 | infonews.co.nz New Zealand News

The earthquake-related events in New Zealand over the past years have created an unusual set of property sale and purchase conditions for many homeowners, particularly in Christchurch.

Posed with the sometimes stressful and time-consuming proposition of repairing these broken buildings and making land reparations many Cantabrians opt to sell their earthquake-damaged homes on an ‘as is where is’ basis.

What Does ‘As Is Where Is’ Mean?

As is where is applies to the legal concept of selling and purchasing an item in exactly the condition in which it is presented. This method of sale places the onus squarely on the buyer to make sure they are fully aware of the condition in which they are buying the item. Proceeding with the purchase indicates the buyer is accepting the item “as is” faults and all – even if there are faults that are not immediately apparent.

For quake-effected as-is-where-is property sales, this usually means the homeowner has or intends to accept a payout from either EQC and/or their insurers and has chosen to sell their property without undertaking any or the required repairs or remediation (while retaining their payout from EQC and/or their insurers).

For many earthquake-damaged properties, buying as-is-where-is can mean the buyer is purchasing a property that may have further unseen or unidentified damage, often only to be discovered as repairs commence.

Selling ‘As Is Where Is’ Properties Vs Repairing

For many Cantabrians, having to repair their property on more than one occasion is unfortunately not uncommon due to the re-emergence of inadequately or hastily executed repairs or further damage appearing over time.

5 Benefits Of Selling As Is Where Is

The ongoing repair process drives many to weigh up the pros and cons of selling as-is-where-is versus repairing their damaged homes. Our top 5 benefits of selling as-is-where-is are:

1. Less Financial Strain. If you are unable to afford the repairs to your home or continue paying rent and mortgage payments, selling as-is-where-is can mean a more certain financial future and a reduced strain on the finances.

2. Less Stress. The worry associated with repairing and maintaining the property is no longer your responsibility. As-is-where-is sales can be completed in very short timeframes (sometimes within 24 hours) effectively illuminating the stressful situation overnight.

3. No Drawn Out Sales Process. Earthquake-damaged homes tend to achieve much less desirable sale prices and spend more time on the market in comparison to the more sought-after post-quake-built homes. In most cases as-is-where-is sales can be completed within 24 to 48 hours depending on the circumstances – and there are no open homes!

4. No More Uncertainty. Repaired homes will always be that, a home that was once damaged and is now repaired. Much of the time homes that once held happy memories and experiences are now tarnished by the uncertainty and mistrust created by ongoing earthquake damage, not to mention the possibility of further undiscovered or hidden damage.

5. Able To Let It Go And Move On. For homeowners in the situation of as-is-where-is property, sales have become a lucrative, logical, and safe way to move forward and move on in the property market. Relinquishing their damaged property and taking the profits and the payout to purchase a post-quake build with no questions or surprises lurking.

Seller Considerations For As Is Where Is Properties

For sellers of as-is-where-is properties, this usually marks the end of an arduous process of uncertainty and strain, both on the finances and day-to-day living circumstances. Sellers are usually at the point in which they are simply looking to simply be rid of the property and its associated worry and stress – either to move on and make a fresh start elsewhere or to free up capital investments.

Why Choose As Is Where Is Sales?

To weigh up whether selling your property as-is-where-is is right for you it is important to understand the repair process. When undertaking repairs or remediation to earthquake-affected properties several aspects have to be taken into consideration by the homeowner;

Finding Good Tradesmen. Deciding who will undertake the repairs and whether they are a reputable building company experienced in repairing damaged homes.
Longevity And Quality. Whether the repairs will only last temporarily.
Time And Inconvenience. The length of time you need to be out of the home and finding alternative accommodations for this time.
The End Result. The reality of facing the home may never feel or look the same again.

To bypass these time-consuming tasks and the associated uncertainty, some property owners choose to opt for the option of achieving excellent and timely results by selling their property on an as-is-where-is basis in addition to retaining their EQC/insurance payout. The combined total of these amounts leaves the seller with a more certain financial outcome.

4 Tips For Determining The Market Value Of Your Property

For the as-is-where-is process to be successful for property owners it is important to receive fair market value for the damaged properties. However, unlike traditional real estate sales, there is no one size fits all approach. It is extremely difficult to find appropriate price comparisons within the industry as the damage from house to house varies so greatly even when they are situated on the same street.

When attempting to determine the market value of your damaged house in its current state here are 4 things to keep in mind:

1. Land Value. As with any sale and purchase the value of your section is usually a fairly easily determined figure. This can be estimated using rating information and suburban trends. This figure may however need adjusting in areas where liquefaction issues have arisen.

2. Extent Of Repairs Needed. According to EQC or your insurance company, what is the value of the repairs needed? Is this figure consistent with the apparent damage associated with the property? Is the house still livable or is demolition likely to be the only course of action?

3. Type Of Repairs Needed. Are the repairs your house needs related to foundations, the concrete slab, or other structural issues? These can be extremely costly and sometimes when fully uncovered can result in the need for complete demolition.

4. Timing And Conditions Of Sale. As with every transaction in real estate, offers comprise the price and conditions. In as-is-where-is situations, the conditions (such as settlement dates and timing) can be just as important as the price. It is not uncommon to receive unconditional offers with flexible settlement dates to allow time to search for a new property, stay on after the property is sold as renters, or provide extremely fast settlements within 24 to 48 hours.

Buyer Considerations For As Is Where Is Properties

Purchasing as-is-where-is properties can come with good rewards for purchasers but comes with several risks and hurdles that will often deter even the savviest real estate investor.

Funding The Purchase Of As Is Where Is Properties

Purchasing damaged as-is-where-is properties with no insurance is not for everyone. It is important to understand banks and lending institutions conform to very strict lending criteria which prevents them from fully financing uninsurable properties.

Purchasing an uninsurable and damaged property without the aid of bank-approved finance means the purchaser has to use their resources to fund the transaction. This usually means coming up with the cash or utilizing a 2nd or 3rd tier lender with interest rates that are sometimes far more expensive than mainstream banks.

On the upside – the buyer gets to purchase a property at prices that are likely to be much, much lower than they would be under normal circumstances.

4 Common Risks Of Purchasing As Is Where Is Properties

The very nature of the earthquakes means the effects on the property were felt throughout Canterbury in a myriad of different ways. No two properties face the same damage or prescribe the same repair methodology.

Whether your property is on piles or a concrete slab greatly influences the potential damage and consequently the repair methodology. Purchasers have a plethora of variables they have to take into consideration when deciding if they are prepared to take a risk on an as-is-where-is property, these can include;

1. Land Zoning. Established post-quake, there are now three designated color-coded Technical Categories (TC1, TC2, and TC3) within Christchurch directly related to the stability of the ground. These classifications are used to determine the “level of site investigation required and repair requirements for foundation systems”.

2. Flood Zoning. The movement of land that occurs during an earthquake has meant additional areas within the city (particularly along the riverside) are now more susceptible to flooding.

3. Cladding Type. As a general observation, homes with lighter cladding and roofing materials performed reasonably well in the earthquakes. More solid forms of cladding such as brick and plaster clad brick or pre-cast concrete are more likely to suffer cracking due to their inflexibility.

4. Weather Tightness. Due to the amount of time that has passed since the damage occurred where properties have either been sitting vacant or experiencing issues with water tightness, there may be additional issues related to a property that were not or have not been assessed by insurers.

The Benefits For As Is Where Is Purchases

Purchasing as-is-where-is properties can have several outcomes, depending on the extent of the damage and funds available the purchaser may intend to continue renting the property out, carry out repairs and place the property up for resale, or they may wish to demolish the property with the view to building a more modern replacement such as apartments or townhouses.

Once the property is repaired with the correct documentation insurance companies will insure the property once again, opening up the opportunity for the support of mainstream bank lending.

The bank will always require the property to be fully insured for replacement value and will generally require full details of the repairs that have been completed. If an engineer has been involved, which is generally the case when foundation repairs are required, the banks will also need to see the appropriate documentation from the PS1 and PS4 certifications.

Legal Obligations Of As Is Where Is Sale And Purchase Agreements

As-is-where-is property sales often fall under some grey areas about the legalities of disclosure during the sale process. According to Alan Prescott from Harmans Lawyers, the consensus is that “the vendor has no obligation to disclose matters of quality. That does not preclude the purchaser having a remedy if the vendor has made a misrepresentation in respect of a matter of quality or has fraudulently concealed some defect of quality.”

So essentially it is very much a case of buyer beware – it is up to the buyer to ensure they have done their homework on the property, however, the seller is not allowed to deliberately conceal any known issues.

Here at Your Property Solutions, we are in the business of adding value to every person we talk to so we can create a stronger and more informed marketplace. We offer complimentary property appraisals so you can ascertain the value of your property to make the most informed decision moving forward.

Until next time

Yours truly,

Billy

Your Property Solutions