Be Wary – A case study in purchasing TC3
Maiden Group recently attempted to purchase TC3 land for a planned build project – I thought you might be interested in the process we went through and the result.
It highlighted potential, very expensive mistakes that an unwary or inexperienced buyer could easily make. Once again, it emphasises that vendors and real estate agents are not interested in providing full and frank disclosures. Instead, they are interested in securing a sale at the best possible price (as if we didn’t know that already).
The property ticked a lot of boxes for us – a TC3 section, with consented plans for a nice town house development.
Perfect, we could get on with the development straight away. We requested the information pack and received a mountain of information. This included (what appeared to be) the detailed consented plans, a CCC LIM and a geotech report.
All good we thought, and we started looking over the documents. The plans looked OK and would make for a nice saleable development, hopefully with an acceptable profit margin. However, the geotech report seemed to indicate trouble with the ground conditions.
We looked further into the plans for a detailed engineers foundation design. No information was provided by the agent.
We asked the agent to provide the engineering drawings. They responded by text confirming it was a waffle slab. We insisted on seeing a copy of the engineering design details, which must be submitted for a building consent to be processed… eventually, and it would seem begrudgingly, the engineers drawings arrived.
Sure enough it was indeed a waffle slab – and a pretty simple one too. But the kicker was the stated waffle slab was designed to sit on 14m deep screw piles. The screw piles were required to reach the first suitable bearing layer on the site.
In our estimate, this omitted detail (presumably deliberately) from the agents information pack would add around 80-100k to the cost of building this development.
Given our assessment of the ultimate sale price for the completed property. This cost would infer a land value close to zero in the current market. Our initial thinking was that the land (a very small parcel at that) was probably worth paying $140,000 if a reasonable cost foundation was feasible.
We decided not to make an offer on this property, thereby saving ourselves at least a 100k loss.
Anyone building a house hopes not to go backwards. It pays to have your eyes open people, and to have a trusted construction partner as an advisor – or alternatively very deep pockets and a strong emotional desire to live in the subject location. If you need any advice buying TC3 land, get in touch.