Questions on section purchase

[NJ2NZ]

Hi all,

We're thinking of making an offer on a section advertised on Trademe. The problem is we don't know where to begin. I tried to contact an agent to see if he'd represent us. He said he couldn't because the seller had a sole agent. Should I start looking for a lawyer first to prepare an offer? What conditions can I include: satisfactory LIM report, geotechnical report etc.?Any advice welcome and sincerely appreciated.

[batgirl1001]

The agent represents the vendor and it would be a conflict of interest to represent you as the buyer. But you do not need to get an agent to make an offer on land purchase. The vendor agent would already have a sales agreement prepared for this and the process is very similar to buying a house.

What you do need is however a lawyer to do the conveyancing. You do also need to have a lender (one in which lends on construction loans) but I presume you've gotten that already.

The vendor usually has a geotech report and LIM report on the land so you will need that too. I would recommend getting your own geotech report and survey on the land. There may be things unknown to you or the vendor.

For our example, our land had a lot of fill and we were concerned that it was unsuitable for building or would have soil issues. The geotech engineer indicated it was feasible to construct a house but that the building costs would be more. He couldn't indicate how much more but still the additional costs 30K in all was a shocker when the house was completed. Fortunately for us, we prepared our financials well and could absorb the cost. It also helped that the value of housing in Auckland has increased substantially by the time we finished.

[Hagabel]

I agree with everything posted above!! Esp the geotech and LIM. And check covenants as well as we found a weird one that put us off one piece of land , and it was not in the LIM. I just happened to find it on the county website.

[NJ2NZ]

I agree with everything posted above!! Esp the geotech and LIM. And check covenants as well as we found a weird one that put us off one piece of land , and it was not in the LIM. I just happened to find it on the county website.

Thanks Batgirl and Hagabel. I appreciate the useful tips.

I'm asking a local lawyer to check the title and I'll ask that they look at the county records as well. They'll take care of LIM. But I'll probably have to arrange for the geotech myself. I'm putting in an offer with 15 working days from acceptance to complete due diligence. Hope that'll suffice.

[Super_BQ]

The vendor usually has a geotech report and LIM report on the land so you will need that too. I would recommend getting your own geotech report and survey on the land.

Like a proper home inspection report, geotech report by THE BUYER is very costly and not practical. Consider if the purchase was auction based, a person looking to buy could have 10 potential houses to pick and end up getting out bidded.

If the section was done by a developer, their macro geo-tech report is more than sufficient. If the section had unknown history with no previous record of site testing, then the sale of the section will be priced accordingly - no buyer will upfront the cost to do geotech but the seller should provide that data.

To give you an idea of how costly geotech reports are, here in Christchurch you're looking at least 2 months waiting time for a 'site specific' localised (regardless of TC1/TC2/TC3 land) using 2 x CPT tests down 10 - 15 metres / augers will be around $4,500. To add to this waste of $, these site specific tests are required to be done upon planning stage of the building consent. That is, you need to know the position of where the house is built on the section before you do the geotech tests.

A house can be built on almost anything. Since the Christchurch earthquakes, there's all new foundation methods to cater for every scenario. Having a geotech report, every buyer must factor the surprise element. A site that is TC1 could end up be TC3.

[NJ2NZ]

Like a proper home inspection report, geotech report by THE BUYER is very costly and not practical. Consider if the purchase was auction based, a person looking to buy could have 10 potential houses to pick and end up getting out bidded.

If the section was done by a developer, their macro geo-tech report is more than sufficient. If the section had unknown history with no previous record of site testing, then the sale of the section will be priced accordingly - no buyer will upfront the cost to do geotech but the seller should provide that data.

To give you an idea of how costly geotech reports are, here in Christchurch you're looking at least 2 months waiting time for a 'site specific' localised (regardless of TC1/TC2/TC3 land) using 2 x CPT tests down 10 - 15 metres / augers will be around $4,500. To add to this waste of $, these site specific tests are required to be done upon planning stage of the building consent. That is, you need to know the position of where the house is built on the section before you do the geotech tests.

A house can be built on almost anything. Since the Christchurch earthquakes, there's all new foundation methods to cater for every scenario. Having a geotech report, every buyer must factor the surprise element. A site that is TC1 could end up be TC3.

Thanks Super BQ. $4.5k for geotech report, wow that is expensive! And at this time we have no idea when we'd get to even getting a building plan.

I feel foolish asking this. What are TC1/TC2/TC3? I've seen these before but never figured how they relate to building sites.

Thanks again.

[JandM]

Technical Category. http://cera.govt.nz/land-information/land-zones

[NJ2NZ]

Technical Category. http://cera.govt.nz/land-information/land-zones

Thanks, JandM!

[batgirl1001]

You shouldn't refrain from a geotech survey simply because you are aghast at the cost mentioned above. That is more indicative of an extensive geotechnical survey that a developer needs to do when developing a site. Your costs are more likely to run from a few hundred to a $1000 depending on how indepth you want the survey to be. With the geotech report from the developer, which is rather technical in detail I'm afraid, you would need someone who is an expert to help you explain the details as well as if there are any issues in relation to your section. You need not do the same geotech survey as the developer has done. Rather you just need to inspect what the developer has done and if it is sufficient.

The issues with building in Auckland is quite different from the issues of building in Christchurch. Obviously there is an earthquake/fault risk associated with building in Christchurch and this is taken into account when it comes to building. However Auckland is different in the sense that there is low earthquake risk. Unfortunately Auckland in general has soft soil issue and erosion is the main factor when it comes to building here. Whether you are in north Auckland (where there is a high content of clay) or south Auckland (which has a high content of limestone), the issue is mainly due to soft ground, and the extra costs needed to build the foundation. If you have a sloping site, the cost to build may be incrementally more due to stricter requirements now by the council. If you have a site like ours, which has fill, then it can be quite expensive overall.

Whatever the bank lends you, construction loans carries a lot more risk because of many unknown factors due to building on a site (the biggest risk is the initial stage of laying the foundation), hence it would be prudent to have reserve funds to tap into when the costs over-run. Banks are generally very reluctant to lend more if you have costs that overrun and the project might just stall then.

[NJ2NZ]

Thanks, batgirl. Since the section is in the South Island (Lake Hawea), I'd feel comfortable with a test. But $4.5k would be simply too much. I'll check to see what will a local company charge.