By Tim Stokes
Building your own home can be a hugely rewarding experience. You get to stamp your mark, your personality on the project. Not to mention the fact that you also get a pristine place to live, fully insulated and with no maintenance required. Quite significant benefits really.
When building there are a whole new set of issues to deal with - issues that are completely different from purchasing an existing property. And it's these issues you'll need advice for. Some of these issues relate to how you will have to deal with a bank to finance a building project, and often, a valuer who is also involved in the process. I briefly outline some of the issues below.
Most people don't have the cash available to have a house built from scratch. It therefore becomes necessary to borrow the funds, usually from one of the main banks. The bank will just about always require a valuation of the property based on "As-if-Complete". This simply means what the property will be worth once complete including planned landscaping of the site and installation of chattels like carpets, drapes, dishwasher and light fittings.
The bank will not normally lend you all the money at once. The money is normally lent in stages during the building project. The reason for this is so that the bank protects itself from financial loss should your building project not be completed. In essence, the bank wants to keep enough money spare just in case something happens and they have to finish the project off.
The Role Of The Valuer
It is the valuers role to assess the "as-if-complete" value, and to provide progress payment valuations throughout the building process. The valuer is basically an independent party who acts primarily for the banks protection, but who also has a duty of care to the clients undertaking the project.
The valuer will need a copy of the plans and specifications for the project. He/she analyses these plans, looking at the overall quality of construction, size of the dwelling, and floor plan and flow. The valuer will then visit the
site and assess the overall quality of the lot, things like contour, aspect to the sun, views if any, position within a development, and the overall quality of the neighbourhood. The valuer will also recheck the plans to see
how the new house "relates" to the site and to assess any planned landscaping.
During the build process the valuer may have to revisit the site anywhere from once to possibly five times. The number of visits is often determined by when the client needs to draw down more money to pay builders and/or suppliers. It is a good idea to get a schedule of draw downs from your builder, so you know exactly when you will need a progress report and can then pre-book your valuer.
Always remember this advice: with progress reports and building the valuer cannot include any items that you may have paid for, but are not installed. Say you go out and buy all your bathroom fittings early on in the project. The valuer cannot include these if they are not installed. The reason behind this is that in a worse case scenario, where a bank has to finish a project, they may not have access to the uninstalled items (they may have been repossessed by the suppliers).
This article is used with kind permission from Homewardfound.co.nz, a resource of free articles and information for first home buyers and newbie investors.
Visit www.homewardfound.co.nz for more information.
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