Yes, you can sell a leaky home

Home buyers are starting to look outside the Super City for somewhere to live.

Leaky homes sell. The reality is that every year leaky homes find new owners who buy despite the defects. The secret is pricing to meet the market.

First-time buyers may see leaky homes as a way to get into a suburb that they otherwise couldn't afford. However, banks are reticent to lend on them and often require a 50 to 80 per cent deposit, says independent real estate agent Antonia Baker of The Property Market.

Potential buyers need to go in with their eyes open. Typically it is builders or developers who buy leaky homes, with the intention of recladding or rebuilding and selling on.

By law, all sellers must disclose to the buyer details of defects they know about the property, says Baker. If sellers want to withhold information, then the real estate agent is obliged to bow out of the sale. If not, the agent could face disciplinary action from the Real Estate Agents Authority.

Inspections don't always identify a weather-tightness problem, says Philip O'Sullivan, director at Prendos. "Homes that have been subject to Weathertight Homes Tribunal claims should be noted on the LIM.

"However, claims made through the courts do not have to be identified."

Any house or apartment built from 1994 to 2004 has to be suspect and invasive specialist testing is often needed to ascertain the extent of the problem.

Sellers aren't going to get the value of an equivalent property built outside the leaky home era. Buyers are taking a huge risk and typically they expect a reward for undertaking the project.

Deciding on the market value of the property is a matter of working out the amount a property would exchange for between a willing, well-informed buyer and a willing, well-informed vendor, says Jan O'Donoghue, operations manager northern for QV.

The million-dollar question is the cost to rectify. This can vary hugely from one home to the next, says O'Donoghue. "Therefore, valuing leaky homes by lining them up against one another is generally not a good approach."

QV has valued homes in terrace house developments where all the properties required similar levels of remediation work and the actual cost was known. Also helpful is where there have been recent sales within the development. This makes a direct sales comparison possible, says O'Donoghue.

It's more difficult where there is no sales evidence, she says, and the cost of repairs is unknown.

If as an owner you have sought recladding costs, including building, council costs and site development, this can make the sale easier.

Once quotes are obtained and the remediation costs are known it's possible to come up with a market value, which will include deductions for a profit and risk margin, the cost of financing during the rebuild is also a factor and, because of the uncertainty, there is also a contingency fund to allow for as well.

Sometimes, says Baker, builders and developers only pay land value for the property. More commonly there is still a premium over land value for the parts of the dwelling that can be salvaged.