The pent up supply and demand simmering away during Melbourne’s extended lockdown is set to result in strong market activity once restrictions ease.
That means fear of missing out (FOMO) is likely to influence buyers’ purchasing decisions amid strong competition for properties.
It’s a mindset that can see buyers overlook key areas of due diligence, glossing over potential red flags that must be identified and evaluated before purchasing a property.
These issues may not necessarily rule out a property, but they are definitely areas that require further investigation before purchasing.
Let’s take a look at some common red flags that buyers should be aware of when they inspect a property.
Fresh coat of paint
A fresh interior paint job can be carried out legitimately to brighten up the dwelling aesthetically, however it can also be used to cover up areas of concern, such as worrying cracks in the wall.
While some cracks can be quite minor and superficial, others can be a sign of structural problems, which could potentially require costly underpinning works and result in ongoing issues.
A fresh coat of paint and some sanding can also be used to cover up rising damp when moisture from the soil surrounding the home finds a way into the structure. It can also be applied to hide mold, if there’s a lack of ventilation due to a poorly working or a non existing exhaust fan; or leaks in and around a dwelling.
Like the majority of property red flags, a good quality building inspection will bring a lot of these issues to light, and help you to understand what may need to be repaired if you are to pursue a property.
While often out of sight and mind, the nature of the space below a house can throw up critical issues that must be identified and assessed. This is especially true of period homes.
Many period homes were built quite low to the ground, which can prevent ventilation, leading to damp issues under the dwelling, particularly impacting the stumps and the joist bearers.
The issue is compounded when the ground level surrounding the dwelling is built up over time, which can occur with the subsequent addition of garden beds, pathways and timber decking. This reduces the airflow and ventilation under the house, which is needed to keep the area dry and free from moisture build up.
While terrace houses make fantastic investments and homes, being low to the ground means often renovations carried out to the flooring cause significant issues.
Owners who have decided to replace the original flooring with a concrete slab can cause moisture issues, as the construction relies on the original brickwork for ventilation.
A common problem we see often is when concrete paving or pavers are laid around single fronted cottages and terraces – to a point where they actually sit higher than the dwelling’s floor level.
As a result ventilation points are built into the paving, and when it rains they begin to act as a drain or plughole, resulting in water flowing underneath the dwelling.
As you could imagine this can lead to significant issues with the stumps, joists, and bearers; and go on to cause serious structural issues to the home.
It’s obviously not something that stands out during a warm Spring open for inspection, which highlights the importance of knowing what to look for when assessing the home before purchasing.
Another red flag that’s often missed is the smell of a property when you enter. If the home has a heavy musty odour, it can indicate ventilation or moisture issues.
Often the smell is caused by moisture and rising damp, which as discussed can cause significant structural issues.
This is often masked by real estate agents by burning incense candles and odour removers. So if you walk into a home and there’s multiple candles then it could be a sign they’re trying to cover something up.
Having said that, it can simply mean a house has been shut-up for a long period of time and hasn’t been getting a lot of airflow. Regardless, it’s important to investigate the issue further.
A spate of sales
Whether it’s an apartment, unit or townhouse complex, a spate of sales within the group can be a cause for concern, which should require further investigation.
It can be a sign there’s a difficult resident in the complex making life generally unpleasant for neighbours, or preventing property maintenance and upgrades.
It could also mean there’s a large expense on the horizon as part of the owners corporation, which some owners are not prepared to, or don’t have the capacity to contribute to.
However, this could actually present as an opportunity to enter at the ground floor, so to speak, before beneficial works are carried out, resulting in a significant uplift in value to the property.
The nature, history and recent activity within an owners corporation is an issue for investigation in itself. This can be assessed by reviewing the contract of sale, with the support of a conveyancer or solicitor.
When buying an apartment, unit or townhouse it’s important to review the minutes from the recent owners corporation annual general meetings, contained within the section 32 portion of the contract.
If the block is looking particularly tired and shabby, it’s useful to know if any upgrades or maintenance is being planned, such as replacing window frames, communal carpets or garden improvements.
Conversely, if a block looks overdone with a high owners corporation fee, it pays to know exactly how and why the money is being spent. It could be driven by an owner occupier, who has certain lifestyle tastes, that don’t actually add long term value to the property for yourself or future buyers.
This is most common and easily recognised in a property with timber floors, particularly in period homes where there might be sections that have been changed or altered. It’s important to find out why that’s the case.
It might mean there’s been damp issues underneath the floor that have required repairs. It could also indicate pest issues, such as wood borer or termite damage, or it could simply mean a mismatched timber or colour due to renovations.
When prospective buyers fall in love with a home, they tend to focus wholly and solely on the property itself.
They may love the layout, style, space and backyard the home offers, but tend to overlook surrounding developments or adjoining property uses.
These factors can have a major impact on the desirability of a home into the future.
Nearby or adjacent alternate uses such as commercial or retail properties may appear to be appropriate at the time, however a change of occupant could significantly impact a residents lifestyle. Issues such as odours, noise or traffic congestion can have a significant impact on livability.
The home’s proximity to a school or shopping complex is also a factor that needs to be considered, as it can create traffic congestion and parking issues.
Take home message
It’s important that eager buyers don’t let their enthusiasm blind them to red flags within a property, especially when FOMO begins to impact the mindset.
Buyers must ensure they are aware of any potential red flags before they purchase, and carry out adequate due diligence to avoid nasty surprises, diminished capital gains – and for homeowners – reduced livability.
Research, preparation and due diligence will ensure you’re aware of potential property pitfalls that risk upending a successful investment strategy.