I have recently been involved with the buying & selling of earthquake-repaired homes, which made it clear just how incredibly difficult it can be for a lay person, lawyer, bank or insurance company to decipher whether the home in-question has been properly fixed, or not. These two examples appear very similar on paper, but are at opposite ends of the spectrum in terms of the standard of work involved.
In the first example a friend asked me to look over the paperwork for a repaired 100-year-old villa on TC3 land. The insurance claim had been cash settled in 2013 and the property sold as-is, where-is. The purchaser repaired the house and the home was now back on the market. It was well presented and on the face of it everything seemed in order. A structural engineering report and repair details had been obtained, an exemption from consent had been approved by the council and repair work overseen by the engineering firm. Digging a bit deeper however, I discovered that whilst the insurer’s scope had proposed a complete foundation replacement due to the floor level differential of 120mm, the engineer’s scope involved little more than jacking and packing the floor in the worst part of the house so that the level differential was reduced to less than 100mm, ie: the guidance threshold between foundation repair and replacement. Some fairly significant foundation cracks were then epoxy repaired. It might look fine, but it’s more patch-up than repair and surprisingly the home had obtained full insurance, presumably on the strength of an engineer’s dubious sign-off.
The second example was the sale of my own home in Redcliffs. We too had cash settled our insurance claim and organized the repairs ourselves using a respected building firm. Our office prepared the drawings and a detailed scope of work, we had obtained advice from a structural engineer and had received an exemption from consent approval from the council. Full insurance was obtained on completion and the house put up for sale shortly thereafter. Surprisingly, one of the interested parties could not obtain approval for a loan on the property as their bank (which incidentally was the same one we used) was not satisfied the home had been properly repaired. It appeared they made this decision on the basis that we, as home owners, had cash settled and undertaken the repairs ourselves, instead of having a managed repair. The inference being that we had taken shortcuts and pocketed the resultant savings. The purchasers bank demanded to know how much we had settled our claim for and how much we had paid to have the home repaired. We divulged all information relating to the repairs including a detailed quote for the work, but did not divulge our settlement quantum. This failed to get it across the line for that particular purchaser and we ended up selling to another party.
There is clearly a wide-ranging appetite for risk from banking and insurance companies in post EQ Christchurch. Our advice to buyers is do your research and invest in professional advice from someone that can accurately interpret the information being supplied. For sellers, the quality and accuracy of records pertaining to the repair work is critical.