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Home building - A case study

Building a house on solid foundations

Brick wall being builtDamien mentioned to his family and friends that he was thinking about building a house as an owner-builder and received lots of encouragement. Damien was sure he could manage the process and he could turn to family and friends for advice and assistance, where necessary.

Damien needed to get a loan and applied to a local building society, which required a cost breakdown. Damien provided the necessary paperwork to the lender.

In order to get a building licence from the local authority, Damien filled out a statutory declaration, which was sent to the Builders' Registration Board and he paid all the necessary fees.

Without an established network in the building industry, Damien found it very difficult to find tradespeople and to assess the competency of their work. About two thirds of the way through the building work, Damien found that he had underestimated the costs of the project and was running out of money.

Damien wondered whether he should cut his losses and sell the uncompleted house and land. He asked a local real estate agent, Rick, for a market appraisal of his uncompleted house.

Rick explained to Damien that he needed to get home indemnity insurance before the house could be offered for sale and that Damien would be very lucky to find an insurer who would provide cover for an incomplete home. As an owner-builder, Rick told Damien that he would also need to write to the Building Commission to obtain permission from the Minister for Commerce or delegate for permission to sell. Permission to sell was required because it wasn't so long ago that Damien obtained a building licence from the local authority.

Rick also provided an estimate about how much Damien could expect to receive if he sold the land only. Damien had many outstanding invoices from tradesmen and he still needed to pay the building society for the money that he had already borrowed.

Damien's request for permission to sell the land only was granted in the circumstances. It was with much sadness that Damien arranged for demolition of the uncompleted house and he then sold the vacant land through Rick.