Should I fix up my house before I sell, or go for an ‘as is, where is’ sale?

Belinda Moffat is the chief executive of the Real Estate Authority. She answers your house buying and selling questions.

Q: I bought my first property in the mid 2000s, but it was built in the 1970s. Our family is growing, and so we’re planning to sell and move into a bigger house.

The previous owner renovated in the 90s, but it turns out that the code compliance certificates for a lot of this work were never completed. There is a lot of work to be done to bring it up to code – we’ve had one estimate of around $25,000 – $35,000.

This has really put a spanner in the works. Do you think we should get the work done before we sell the house, or will it be easier to sell it “as-is, where-is”?

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A: I’m sorry to hear that you have encountered this issue. If it’s any comfort, you’re certainly not the first person to think, “if only we had checked these things properly at the time we bought the house”.

However, things can easily get missed, particularly if you are new to the real estate process and don’t yet know all the best steps to take before purchase. Missing key due diligence steps can also occur when people are tempted to cut corners in order to secure a home they’ve fallen in love with.

Either way, it’s a really important reminder to make sure you check the council files and get advice on what if any building consents your next property should have before you buy.

Your next purchase

In terms of pre-purchase due diligence, a great place to start your research on a property is REA’s online Property Checker tool, which you can find on settled.govt.nz.

By answering some basic questions about things like the property’s age and building materials, it will give you a list of specific things to look for and ask about to start identifying potential issues.

From there, if you’re definitely interested in a property, our advice at the Real Estate Authority (REA) is that you get a LIM report from the local council and your own building inspection report from an accredited building inspector (and the help of a property lawyer or conveyancer in interpreting these documents) before completing the purchase.

What to do now

In terms of the sale of your current home, your first step should be to get a proper written quote from a reputable builder for the remedial work required. This will help you weigh up your options as to how to proceed. A key consideration is what proportion of the total value of your home does the required building work represent.

If you decide to repair, talk to your builder and your council to be sure you understand all the steps required and the likely timeline. Even if you end up deciding to sell your home “as is, where is”, you are required to disclose the compliance issues to prospective buyers, and the builder’s assessment and quote will be particularly useful information for anyone considering taking the property on.

If you use a real estate agent, they will also need to ensure this information is disclosed to a potential buyer.

You must be forthcoming about the property’s issues with your real estate agent and prospective buyers. Inaccurate or incomplete disclosure would leave you vulnerable to legal issues down the track, and if your real estate agent fails to disclose this information, it could represent a breach of the Code of Conduct overseen by REA. The agent requires your consent to share information of this kind with buyers, but if you are unwilling to provide that consent, the Code of Conduct requires the real estate agent to cease working with you, in the interests of fairness and transparency.

To ensure a smooth and fair process, we strongly encourage all sellers to be honest and upfront in providing information about their property.

When deciding your options for the sale of your home, it may be useful to look at this issue from a buyer’s perspective. If you were the buyer, would you prefer making an offer below market value that reflected the uncertainty of what you were signing up for? Or would you prefer a property that had all the correct paperwork in place, and any building issues fixed?

Deciding to sell “as is, where is” may seem like the easier, quicker option, but it is important to seek legal advice before taking this route because the sale and purchase agreement will need to reflect that the property is being sold “as is, where is”. This can affect the clauses and conditions in the agreement.

Ideally, you should be able to have an honest conversation about your options with your real estate agent. It is likely that they may have seen a similar situation before and should be able to help you weigh up the pros and cons for each scenario.

Be wary of an agent who seems fixated on getting you to sell as soon as possible, no matter what – an agent you can trust should be prepared to support you to achieve your objectives with the sale and to ensure a fair transaction for all parties.

Regardless of which option you choose, best of luck with your sale!

For more information about the process of buying or selling property – and what to expect when working with a real estate professional – visit settled.govt.nz. Have a question for Belinda? Email homed@stuff.co.nz.