7 Key Considerations on Buyer Due Diligence
Buying luxury real estate is a complicated process with a level of risk involved. In order to mitigate this risk, it is important to follow a process of Due Diligence. As a Buyers Advocate in Australia I have purchased many luxury properties ranging from Penthouse Apartments to Houses.
Regardless of the type of property you purchase you need to be aware of a range of issues before you commit to purchase a property. These issues may affect the property and impose restrictions and obligations on you. My role is to ensure my clients are well informed of any restrictions and obligations and what they mean to them.
Below are the 7 main considerations you should be aware of when purchasing a luxury property.
1. Is the property subject to an owner’s corporation?
If the Property is part of a subdivision with common property such as driveway, grounds and in the case of apartments, gyms and pools it may be subject to an owner’s corporation.
You may be required to pay fees and follow rules that restrict what you can do on your property such as a potential ban on pet ownership.
It is critical to review the Owner’s corporation rules and regulations and the past annual general meeting and follow up with a phone call to management organisation of the owners corporation to clarify any areas of uncertainty.
I recently purchased a luxury Penthouse apartment which settled on 1st March 2022 (posted on Instagram @agameadvisorybuyersagents) that had strict rules that my client was aware of prior to purchase.
2. Do you know the exact boundary of the Property?
You should compare the measurements shown on the title document with actual fences and buildings on the property to make sure the boundaries match. If you have concerns about this, you should speak to your lawyer/conveyancer or commission a site survey to establish property boundaries.
I purchased a $3M luxury Bayside property two years ago with this issue. Based on my Due diligence the issue was identified and corrected by moving the fence line to reflect the correct boundary in the title document. The neighbours had illegally and unknown to them erected the fence in the wrong area and acquired over 5sqm of land worth over $50,000 AUD
3. Can you change how the property is used or the buildings on it?
Land is subject to a planning scheme run by the local council
How the property is zoned and any overlays that may apply will determine how the land can be used
This may restrict how you can alter the buildings over time or post purchase if the property is in need of renovation or alteration to meet your needs
I contact the local council prior to executing a contract of sale and recommend that you do the same. The council can give you advice about the planning scheme and any restrictions that may apply.
4. Are there any proposed or granted planning Permits?
The value of your luxury property can be adversely affected by any proposed developed in the immediate vicinity.
The local council can advise you if there are any proposed or issued planning permits for any properties close by.
A recent example that I encountered prior to purchasing a luxury home was that a 5 story apartment was approved to commence building in the next 12 months. This information was not widely available and one of the main reasons the vendor was selling. If I did contact the local council and uncover this information my client would have purchased a luxury home which would have immediately devalued as soon as the apartments were complete.
5. Is the Building safe to live in?
I recommend that every client invest in a professional building inspection prior to purchase
Building inspectors can help to assess the property for electrical safety, possible illegal building work, adequate pool or spa fencing and the presence of asbestos, termites or other potential hazards
It is important to do you due diligence on the quality of the company and inspector that you choose and I would recommend that you look at past client reviews, qualifications and industry memberships and accreditations.
6. Have any buildings on the property been altered?
It is critical for you to check that any building alterations have been completed in accordance with the local laws and regulations and approved.
Local council can give you information about any building permits issued for recent building work done to the property. If you can see that there have been alterations and there is no building permit, it is often a red flag that this work has not been approved.
7. Are any recent building or renovation works covered by insurance?
If there have been building or renovation works completed, you should ask the vendor if there is any owner-builder insurance or builders warranty insurance to cover any defects in the work done to the property. This will help minimise any risk due to bad workmanship that may not be visible to you or covered up.
The above 7 key considerations for Due Diligence are proven to work in my experience as a Buyers Advocate and purchasing property for over 20 years.
Published by independent magazine https://www.kizzis.biz/jim-malamatinas-on-buyer-due-diligence-when-buying-luxury-homes/
