The purchase of a property is probably the most expensive purchase that you are likely to make in your life.
With this in mind you need to carefully consider the importance of obtaining a Pre-Purchase Building Inspection.
Here; for your consideration; are two articles explaining why obtaining a Pre-Purchase Building Inspection is a wise decision before purchasing a property.
There are two types of pre-purchase inspection:- building and pest.
You can do either or both or none.
There are two ways you can do a building/pest pre-purchase inspection:
The costs can vary from a few hundred dollars up to $1000, as level of detail and qualification of the inspector will vary.
At a minimum, you should make sure that your inspector has full professional indemnity insurance.
Should you do it? This is a matter for you.
Yes, you are about to make a very big investment and a pre-purchase inspection can identify future liabilities that will cost far more to fix than the price of the inspection.
And I have helped clients use pre-purchase reports to negotiate significant discounts on the purchase price and generous special conditions where the vendor agrees to rectify identified issues prior to settlement.
But if you are bidding at auction, and in a part of Melbourne where most properties go to auction and have 10+ bidders and you might need to bid at 4 or 5 before you get lucky, doing pre-purchase building and pest inspections for all properties can get pretty expensive.
And even if you identify faults, you aren?t going to be able to use this knowledge to negotiate on price.
Similarly, if a vendor is presented with two offers for the same price and only one offer is subject to building inspection, you know which one they?ll choose.
So what should you do? It depends on your appetite for risk and your budget.
Stumping up the cash for the reports is always the safest option.
Otherwise, if you have a mate who is a builder or architect, you could ask them to walk around with you, but you won?t have any legal recourse if they miss something.
Where there is an owners corporation, the minutes of the last year's AGM in the certificate in the vendor's statement are a goldmine in finding out what kind of building issues affect the property.
If several are mentioned, treat this as a red flag or, at the very least, a sign that you should pay for a detailed pre-purchase inspection.
The property's tenants and neighbours, if you can manage to strike up a conversation, can also be a wealth of honest knowledge.
It is also important to have realistic expectations of what can be uncovered by a building report and to keep perspective on any issues identified.
If you do decide to make an offer subject to a satisfactory building inspection, don't let the agent or vendor's solicitor use their preferred wording (if you can help it).
The typical clause only allows a purchaser to get out of a contract if the report identifies a major structural defect, which may not cover issues such as dodgy wiring.
I've also seen clauses that only allow the purchaser to get out of the contract if the issue would cost more than 1% of the purchase price to fix.
Propose something along the lines of the following instead:
The purchaser may have reasonable access to the property to inspect buildings personally or by agents.
This contract is conditional upon the purchaser obtaining at her own expense a building/pest inspection report and accepting it as satisfactory within 10 days of the vendor signing the contract.
If the report is not to her satisfaction, the purchaser may terminate this contract by written notice to the vendors' solicitor/conveyancer within 10 days of the vendor signing this contract, whereupon the contract shall end and all monies paid shall be repaid to the purchaser without deduction.
You can propose this by emailing it to the real estate agent prior to coming in to make a written (i.e. signed) offer. They can then either cut and paste (or handwrite) it into the contract or ask the vendor's solicitor to do the same (if they don't yet have hard copies of the contract).
You could even print four copies of the clause and keep it in your handbag for pasting in (which may prevent the agent going back and forth about the details of the clause).
If the clause is added after printing, it should be initialled by all parties.
If your offer is accepted then organise the inspection straight away, as the clause will expire after the stated timeframe.
Most inspectors can turn something around in 3 days and some within 24 hours.
If defaults are identified, you don't necessarily need to terminate the contract.
The vendor may be happy to agree to a reduction of the purchase price (adjusted at settlement) or agree to fix certain things prior to settlement.
Make sure any subsequent agreement is properly recorded.
Principal at Nest Legal
Buying your first investment property can be a daunting experience, but learning from other people's mistakes can put you one step ahead.
Blogger: Peter Gianoli, General Manager, Investor Assist Don't skip the inspections
If you are buying a new or established home, don't scrimp on the money for a building inspection because it will provide you with a comprehensive snapshot of exactly what type of property you are buying. It might seem like just one more cost to come out of your pocket but it could end up saving you thousands over time.
Same thing if you are building a new home. Consider the option of hiring an independent building inspector to monitor the quality of workmanship throughout the building process of your new home. If you are building with a reputable builder, you shouldn't need one, but it will keep your builder on their toes and help you to identify any defects early in the process????
Knowing as much as you can about the condition of a property before you buy will help you avoid problems and extra costs down the track.
Besides inspecting the property yourself, you can also arrange a property inspection report - commonly known as a building inspection.
This information explains what you need to know about property inspections.
You should personally inspect a property that you are interested in buying.
You may wish to take someone with you to gain another perspective.
Property viewings usually last half an hour to an hour, so use the time wisely.
On top of getting a general feel for the property, do the following checks:
A building inspection is just one check you can get done before buying a property.
Sometimes referred to as a "standard property report ", a pre-purchase property inspection report (subsequently referred to as a "building inspection report") is a written account of the property's condition.
It will include any significant building defects or problems such as rising damp, movement in the walls (cracking), safety hazards or a faulty roof.
It is usually carried out before you exchange sale contracts so you can identify problems which, if left unchecked, could prove costly to repair.
Note: A building inspection report is different to a "pest inspection report".
While a building inspection report should identify any visual damage that may have been caused by termites, it usually won't include termites or other timber destroying pests.
You may choose to get a separate pest inspection report done before you buy a property.
Benefits of getting a building inspection report done before buying a property are:
Always use a suitably qualified person (such as a licensed builder, a surveyor or an architect) to provide a professional building inspection report of the property you are thinking of buying.
These professions should see through any cosmetic improvements covering up faults that might otherwise be missed by an untrained eye.
A professional person will ensure that the format and content of the report complies with the relevant Australian Standard.
Ensure that the person you choose has adequate insurance cover, particularly for professional indemnity.
The report's format, detail and cost will depend on the type of property (including its size, age and condition) and the process used by the consultant or organisation to prepare it.
There is an Australian Standard for pre-purchase building inspection reports which must be complied with, but the report may otherwise vary in style and content.
Some use a comprehensive checklist, include photographs, adopt a standard format or are individually tailored to the property.
The report should make you aware of the property's condition and any major problems.
A standard building inspection report is generally a visual inspection only.
It may not identify major structural defects or other hidden problems.
You may choose to gain an additional assessment of the property from a suitably accredited specialist (eg. pest inspector, structural engineer, geotechnical engineer, surveyor, electricity supply authority or water supply authority).
You may also ask for a particular item or part of the property to be inspected, such as:
The following would normally be included in a building inspection report:
Make sure you specify any particular items or areas on the site that you would like to be inspected.
The inspection report should also include the following information:
A building inspection report should not be seen as an all-encompassing report dealing with every aspect of the property.
It should be seen as a reasonable attempt to identify any major problems visible at the time of the inspection.
A problem's extent will be influenced by the age and type of property.
While providing valuable expert advice, the report will not generally include:
A building inspector would not normally check such things as:
With strata scheme and company title properties, the building inspector will normally only inspect and assess the condition of the interior and immediate exterior of the unit you are thinking of buying.
If you want the consultant to inspect other common property areas you will need to request a "special purpose" property report.
Most properties will have minor defects such as blemishes, corrosion, cracking, weathering, general deterioration, and unevenness and physical damage to materials and finishes.
If you want the consultant to report on minor defects and imperfections you will need to ask for a "special purpose" property report.
Certain conditions will affect the final report including:
It may be difficult to detect leaks and other problems if services, such as water, have not been used for some time. For example, if the shower has not been used recently, leaks or damp may not be obvious.
The main purpose of a building inspection report is to give an expert's view of the condition of the property you are interested in buying.
It is not intended as a certificate of compliance for any law, warranty or insurance policy against future problems.
Nor is it intended to estimate the cost of fixing problems, for which a "special-purpose" property report is required instead.
Normally your conveyancer or solicitor will deal with all law?related matters.
The building inspection report cannot comment on things like the location of fencing in relation to boundaries, as this needs to be done by a registered surveyor.
Most consultants need a minimum of 2-3 days notice to do a building inspection.
When ordering your building inspection report, give yourself enough time to make a decision.
You should get the vendor's permission to have the property inspected as early in the sale negotiations as possible.
This will help you decide if the property is worth buying. There may be little point in spending money on conveyancing until you know the condition of the property.
When you buy a property in NSW, there is a 5 business day cooling-off period after you have exchanged contracts.
During this period, you may get out of sale as long as you give written notice.
The cooling-off period starts as soon as you exchange and ends at 5pm on the fifth business day.
A cooling-off period does not apply if you buy a property at auction or exchange contracts on the same day as the auction after it is passed in.
You should always check with your solicitor or licensed conveyancer that you have a cooling-off period, and make sure the process is explained to you.
To get a building inspection done during the cooling-off period, give the consultant as much notice as possible.
They will have to do the inspection, prepare the report and still give you time to decide and potentially withdraw from the contract (requiring a letter to the vendor or their agent saying so).
If you decide to withdraw from the contract, you forfeit 0.25% of the purchase price to the vendor.
Special-purpose property reports
A special-purpose property report normally covers the same items as a building inspection (pre-purchase property inspection) report but may also include:
Check with the building consultant on information normally included in their pre-purchase property inspection reports.
Inform the consultant if you need extra information.
While the building inspection report should identify any visual damage caused by termites, it won't include whether termites and other pests that destroy timber are still around.
Consider getting a pest inspection done as well, especially if the property is located where termites are a known problem.
Vendors sometimes get a building report on the property they are selling to give to interested buyers.
While this can help, it is not a substitute for your own independent report.
Canberra-based company Mr Fluffy installed loose-fill asbestos insulation in the ceiling spaces of ACT and NSW premises in the 1960s and 1970s.
If disturbed, loose-fill asbestos fibres can become airborne and breathed in, which may cause health risks.
The NSW Government has determined that demolition, comprehensive site remediation and disposal are the only options to remove the health risk from affected properties.
Loose-fill asbestos is unlike other forms of asbestos. The building inspection report won?t confirm the presence of loose-fill asbestos and it can't be identified by sight alone.
The only way to confirm whether a home is affected by loose-fill asbestos insulation is to have it tested by a competent person, such as a licensed asbestos assessor.
The NSW Government is providing free sample testing to owners of pre-1980s residential premises in 27 identified NSW local government areas.
Owners of premises built before 1980 have until 1 August 2016 to register for free testing under the Government's Voluntary Purchase and Demolition Program.
For more information on the Program, visit the Loose-fill asbestos insulation section of the Fair Trading website.
If you are dissatisfied with any aspect of the report or your dealings with a consultant, try to resolve the problem with them first.
If they are members of an industry association, you may be able to get access to a free complaint handling service.
If you buy a property and later find problems not identified in the building inspection report, you may need to seek legal advice, particularly if the consultant's negligence ends up costing you a lot of money.
If you can show that the consultant was negligent in doing the inspection, you can take legal action against them.
It is therefore strongly recommended that you only use consultants that have adequate insurance cover, particularly for professional indemnity.
If you end up buying the property, you may need to organise repairs or renovations before you move in.
When using a builder or tradesperson for work where the value is over $5,000 the builder or tradesperson must:
Several major changes to home building laws take effect in early 2015 in relation to contracts, owner builders, licensing, disputes, defects and statutory warranties.
For more details, visit the Fair Trading website.
Check the licence details of a builder or tradesperson before you engage them.
Refer to our online licence check or call Fair Trading on 13 32 20.
You can download the above information as a fact sheet