Question Mark

“I want to know how much this property sold for, but I can’t seem to find out.” It’s a common dilemma among astute residential property investors, who quite rightly want to gauge the likely market value of a property by finding out the sales results for similar properties in the area.

As a property professional, I have access to a range of information not available to the general public yet there are times when I still can’t find everything I need.

Over many years of analysing the residential market, I’ve observed that about 10% of auction sales data goes unreported. This is a real problem in the inner suburbs, where the proportion of properties sold by auction is relatively high.

When it comes to private sales, the percentage of unreported sales is much higher. This makes life difficult for property investors in the outer suburbs, where private treaty is the predominant method of sale.

It’s a nightmare in the CBD, where virtually all residential properties are sold privately and the number of reported sales is minuscule. If you want to know how much that swanky apartment in Docklands or Ultimo or Kangaroo Point sold for, you’ve really got your work cut out.

Companies such as RP Data and Australian Property Monitors do a commendable job in capturing auction data for the general public, but they can only do so by having someone present at auctions. This makes compiling the data an expensive exercise, and ultimately it’s the consumer who wears the cost.

I believe it should be mandatory for all real estate agents to report auction sales data, every week. This should be a requirement of their real estate licence.

All they’d have to do is log on to a central database and type in the property’s address and sale price '” a five-minute task, once a week.

The property industry falls far behind the financial services industry when it comes to mandatory disclosure. This not only disadvantages property investors who are trying to do due diligence on individual properties, but paints a patchy picture of the property market as a whole '” potentially distorting the true state of affairs and leading investors to make decisions based on second-rate information.

About 1.5 million Australians declare rental income from investment properties each year. That’s a heck of a lot of people flying blind when making what is probably the biggest purchase of their lives. Governments must mandate property sales reporting to improve the quality of data available to property investors and help them make informed decisions.

TROUBLE IN VIEW

I own a block of land on the Gold Coast that I bought with my ex-husband back in 1982. The block has great water views and it’s grown in value considerably over the years. Local agents have indicated it is worth $900,000 to $1 million.

I have tried to sell the block over the past year or so but am having problems with a neighbour. He lives in the house behind me and has a view to the water that looks across my land. He has made it quite clear to any prospective purchasers that he will fight any plans to build on the land; he has put up a sign at the front of his house saying he will oppose any development.

Recently I was offered $950,000 for the land which I am happy to accept. The catch that is the purchaser knows about the problem with the neighbour and wants a 12 month settlement to allow time to get a building permit. He’s prepared to pay 10% now and 10% in six months’ time, with the balance payable on settlement.

I am thinking about applying to the local council for a building permit. I know the neighbour will fight it but if I win, he can’t take the protest any further. Then it may be easier to sell the property. What are your thoughts?

The first thing you should do is go to the local council and get an indication of whether they will support you in any legal proceedings. It is better to have them onside rather that working against you.

Depending on how hard your neighbour is prepared to fight, it could take you as long as a year (perhaps longer) to obtain the permit. That’s as long as the settlement period would be, should you choose to accept the offer on the table.

Disputes such as this can also be costly; you’ll be losing a substantial chunk of your money, without the benefits of replenishing your coffers from any sale proceeds

I suggest that, as you have a genuine offer at the right price, you should seriously consider accepting, even if it is on a long settlement. This way, you will eventually get your money, and the purchaser can worry about obtaining the permit.

WATER COURSE

My partner and I recently bought an investment property in inner Melbourne. The house is on the low side of a hill. When we bought it, we had a builder check the structure and he said it was damp under the house. He said the stumps were still solid but we should check the drainage.

Our tenants now tell us that the neighbours have a truck, which they hose down daily. Water is running off their driveway and under our property. I’m concerned that this will make the damp problem worse and that we’ll end up having to do expensive repair work. This will really cut into our bottom line. What can you suggest?

As a first step, I’d suggest approaching the neighbour, explaining the problem and asking them not to hose down the truck in the driveway. However, if the truck is kept for business purposes and they have to clean it so frequently, that may not be an option.

Failing this, you will need to redirect the water away from your house. This could be done in two ways:

• Pave or concrete down the side of your house so the water runs down this surface and out to the street. You could do this by using an above-ground channel known as a “spoon drain”
• Install a pipe that captures the water from the side of your house, and runs it underneath the house so it comes out the other side. To avoid passing the problem on to your neighbour on the other side, connect these pipes to the main stormwater system, which will then take the water away.

Looking at the financial side of things, rectifying the water problem will certainly affect your bottom line in the short term. However, it’s likely that the tax office would consider the work to be a repair of the existing drainage, and consequently a tax-deductible expense associated with holding the investment. Check with your accountant to make sure.

SUBJECT TO FINANCE

A couple of weeks ago I found a really good investment property in Melbourne that was due to be auctioned a week later. I spoke to my bank and they started to get the approval ready for me. A few days after I inspected the property the agent called me to say it was going to be sold prior to auction, and that if I wanted to purchase it I had to make an offer by 5pm the next day.

I went to the agent’s office to make the offer but because I had not yet had the all-clear from my bank at the level I wanted to offer, I wanted to make the offer subject to finance. The agent said I couldn’t legally do this, and that the offer had to be unconditional. I wasn’t too happy about this, and decided not to make the offer. Was the agent in the wrong?

I’m not sure exactly how far ahead of the auction you wanted to make the offer, so I’ll outline two possible approaches in my answer.

If you buy a property in Victoria three days or less either side of an advertised auction date, you are considered to be buying the property under auction conditions. This means you are signing an unconditional contract, there is no cooling-off period and you cannot buy subject to finance.

If you buy a property more than three days either side of an advertised auction date, then yes, you can make your offer subject to finance. However, most vendors will not accept this offer. Most will opt for accepting an unconditional offer, even if it is slightly lower.

This may be frustrating, but consider it from the vendor’s point of view. The vendor has had their property open for inspection for several weeks and spent thousands of dollars on advertising. If you make an offer to purchase subject to finance and they cancel the auction in good faith, only to have you pull out because you can’t get finance, they are left out of pocket and without a buyer.

CREDIT RATING

I read your recent response to a subscriber who had problems getting sufficient finance because they had a black mark on their credit rating (Question Mark, March 15). I recently had a similar problem but had no idea there was a black mark against my name. I have moved house several times in the past three years and some of my mail simply has not kept up with me.

That’s no one’s fault but mine. That aside, I’d like to know who keeps my credit rating information, and how I can get access to it.

When it comes to credit ratings, prevention is definitely better than cure. Taking preventive action to ensure you don’t incur further credit problems could be as simple as making sure all your bills are paid on time, and organising to have the post office redirect your mail when you move.

If you do need to access your credit history, you’ll need to contact a company called Baycorp Advantage. The company provides several levels of service, depending on how quickly you want the information, and how much you are prepared to pay:

• 10 working day turnaround. Mail or fax your details to Baycorp’s Sydney headquarters with a request to access your personal credit file. Once they’ve received your letter, it will take about 10 working days to receive a response. This service is free.
• One working day turnaround. If you’re prepared to pay $27, Baycorp will dispatch your credit history within one working day.

For $30 a year, Baycorp will send emails alerting you within 24 hours of anyone accessing your credit file; for example, if you’ve applied for a loan, or if you have incurred a credit default.

Mark Armstrong is Director of Property Planning Australia www.propertyplanning.com.au, an integrated property advisory and mortgage sourcing service. He also writes for Australian Property Investor magazine www.apimagazine.com.au.

You can email any questions regarding property to Mark Armstrong right here, by clicking questionmark@eurekareport.com.au