House hunters need to look beyond good school zones and street appeal, and make sure the property is structurally sound, doesn’t leak and isn’t prone to natural hazards before buying it, especially as homes around the country have been struck by natural disasters in the last two years, an insurer says.
As more properties are expected to hit the market during spring, AA Insurance head of home claims Tom Bartlett is warning people to make sure they do their homework because buying a problematic property could impact whether they get insurance and therefore a mortgage.
The extreme weather events such as flooding and cyclones have affected properties all over the country, Bartlett says, and has reinforced how important due diligence is. “... because while weather events of this magnitude are not an everyday occurrence – they can and do occur.”
Those checks should start as soon as a would-be buyer steps in the door from doing a sniff test to make sure it doesn’t smell damp or musty or have cleverly placed smellies to disguise it to spotting dark signs on the carpet which might signal a mouldy home.
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“Not all damage is noticed when you’re viewing a property, and many buyers don’t notice prior damage during the initial ‘honeymoon’ phase of open homes. Remember to pay close attention to the details and don’t skip the building report,” Bartlett says.
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Along with carrying out their own checks, he says buyers need to obtain a builder’s report to ensure the property is structurally sound and does not leak. A particular focus should be on the foundations, cladding and roofing.
“Not doing all your checks in advance can end up costing you more in the long run. A building report and LIM can highlight issues that may not be immediately obvious when viewing a property online or at an open home.”
A moisture test can be included in the builder’s report and can add an extra $1500 to the cost depending on the technology used, he says.
“Most insurance policies do not cover gradual damage caused by hidden leaks, so a moisture test is a great investment.”
Home buyers should also get the Land Information Memorandum report from either the local council or real estate agent so they can check whether a property is prone to natural hazards such as flooding or slips and what work has been done to mitigate the risk, he says.
Other useful tools are the EQC Natural Hazards Portal, and if buying in Auckland, the Auckland Flood Viewer, which allows buyers to see the natural hazard risks for specific addresses.
Bartlett told OneRoof that properties in locations such as low-lying coastal areas that could flood, which is a major climate risk for New Zealand, should expect to see home insurance premiums rise over time to account for the increased risk so owners need to take this into account when purchasing a property.
They also need to make sure the property’s Code of Compliance Certificates and council consents are up to date, which is especially important if a house has been renovated.
And when it comes to working out insurance don’t rely on market value to determine the sum insured, he says, because often the cost of rebuilding a home differs from the purchase price. Owners should calculate everything it would take to rebuild the home from the ground up and online calculators such as this one from Cordell can help.
Insurance should also be arranged ahead of time, especially because it’s a condition of a mortgage so people should work backwards from the settlement date, he says. Most insurance quotes are only valid for 30 days and cover can start 45 days in advance.
While house hunting can be a long process with lots of ups and downs, he says, having a list of things to tick off can relieve the stress and help people focus on what’s important.
“Having the appropriate checks completed by the relevant experts will confirm whether the home is safe to live in, tell you what previous work has been done on the property and highlight future risks.”
Insurance tips for house hunters:
- Get a builder’s report
- Check the LIM
- Calculate the sum insured amount
- Focus on the smell to make sure it is not damp or mouldy
Source: AA Insurance
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