Over the years, we’ve had many clients who are reluctant to pay money for so-called ‘extras’ like building and pest inspections. It’s understandable, especially when properties go to auction. You can end up paying out hundreds or thousands of dollars, but still not have a property.
It’s important to realise that you risk losing far more than that by not having a building or pest inspection.
Generally, your contract says that you are purchasing the property in its present condition and state of repair. The vendor is not obligated to fix anything for you. That’s quite different from buying an appliance at the store, when you can take it back if it’s faulty.
The more you know about the condition and state of repair,the better positioned you are to negotiate. A formal report also gives you moreauthority and negotiating power.
It’s always best to organise inspections as soon as possible.
When you’re going to auction, you need to have the inspections done before the auction. There is no cooling-off period, so if you find issues after the auction, you’re stuck. The price is set and you have no room to negotiate. If you know about issues in advance, you can adjust your bidding limit to protect yourself.
When you’re buying via private treaty, we still recommend getting building and pest inspections before exchange if possible. You could organise them after exchange while you’re still in the cooling-off period. But that’s only 5 days, and you still need time to decide what to do based on the information in the report.
Some vendors may agree to a clause saying that the price is subject to building and pest inspections. This gives you more options.
You have a few choices:
· Do nothing and accept the agreed price
· Withdraw from the contract (either undercooling-off or under a clause as mentioned above)
· Negotiate a lower price based on the issues identified and cost of rectification
The most common path is negotiation.
Vendors themselves are often unaware of defects. They’re human beings like you, and when they realise there’s an issue, they may be happy to compromise.
In one case, we represented an older couple selling their home and downsizing. We prepared the contract, they found a purchaser, everything was proceeding smoothly. Then the purchaser got a pest and building inspection, and the report identified that the roof was almost falling down. Our clients had no idea. They’d been in the house for years and never had any leaks. At their stage of life, they didn’t go up into the roof space. They were very happy to review the price based on new information.
In another case we were acting for the purchasers when aroof defect was identified. We renegotiated the purchase price, reducing it byabout $20,000. Compare that to the cost of a building and pest inspection,which in 2024 is around $600 to $800.
For these clients, we also arranged to have a new contractdrawn up. The lower price meant that the transfer duty also dropped – by morethan the cost of drawing up a new contract. That was another saving for them.
Whether a new contract is worthwhile depends on the price and the change of price in each case, so it’s something we discuss with the client each time. We give you the information and you can decide.
One of the biggest misconceptions amongst buyers is that for new properties you have a certificate of occupancy, so you don’t need inspections.
The certificate of occupancy is certainly important, but it’s only one of the things to check. It confirms that the property matches the development application, and that it complies with requirements like fire ratings, but it does not address the quality of the build.
We’ve seen newly built properties with all kinds of issues:
· A townhouse with roller doors which didn’t close, because the tracks were installed incorrectly
· A home which was on a tilt already, thanks to subsidence under one section of the house
· Numerous cases where cupboard doors didn’t close properly
· Cracked tiles and slanting range hoods
· A bathroom with no silicone sealing to waterproof the shower
· Power which cut out whenever appliances we returned on
Some of these issues are actually more likely in a new home, which has never been lived in. If you lived in a house with a leaking shower, you’d get it fixed pretty quickly!
Whether you’re looking at a unit or a standalone house, we recommend a building inspection to identify problems before you settle, let alone before you move in. We can then raise them on your behalf with the developer, builder or real estate agent.
For freestanding homes, we also check that there is Home Warranty Insurance in place. This insurance is required, and means the builder has to make good any defects for a set number of years. If they go out of business, the insurance will pay for another builder to do the work. It’s aback-up, but wouldn’t you rather have everything up to standard before you move in?
If you’re buying from an owner-builder, there’s no requirement for them to have Home Warranty Insurance. In this case, the building inspection is vital!
Another common misconception is that you don’t need inspections for a unit.
This stems from the idea that if there’s anything wrong, strata will take care of it. That’s not correct. If there’s an issue inside the walls of the unit, it’s your responsibility.
In one situation where we were acting for the buyer, the building inspection found evidence of water leaking from the shower recess into the bedroom next door, and of attempted repairs. There was damage to the wall and to the carpet. The vendor advised that it was a strata issue, but when we checked directly with strata, they disagreed. The shower unit was completely inside the walls of the unit, not in a common area. That meant the unit owner was responsible.
Without a building inspection, the damage might not have been identified. And if we hadn’t checked with the strata company, our purchaser might have assumed that the issue would be fixed at no cost to them.
We also strongly recommend a strata report review for allstrata purchases, but that’s a separate topic.
For rural sites and others not connected to mains sewerage, were commend getting a plumber to inspect the site as well as the standard building inspection.
We had one case where an elderly man was downsizing. He lived alone in a five-bedroom property, but our clients who purchased the property were a family of five. The vendor advised that there were no issues with the sewerage system, but shortly after the family moved in, the system backed up and there was raw sewage throughout the house.
The plumber we sent out identified the problem immediately. A tree root had grown around the sewage pipe, cracked it, then grown inside the pipe too, creating a partial blockage. With a single person living in the property, there was time for the waste to seep through, but with a large family, the pipe couldn’t handle the volume.
Not only did our clients have to pay to fix the pipe, it wasn’t the start they wanted to living in their new home!
Vendor-organised inspections are becoming increasingly common, especially when houses are sold at auction.
The principle sounds good. Buyers want information and certainty before bidding at auction because there’s no cooling off period, but they don’t like paying for inspection after inspection when they miss out on properties. So instead, the vendor organises one inspection and every potential buyer can access the report for a much smaller fee.
Unfortunately, it doesn’t always work that well in practice.
We had a client who didn't take up the option of the vendor-sponsored building report, but organised his own building and pest inspector to visit the property.
The real estate agent’s first reaction was to tell him that an inspection had already been done, so he wouldn’t let him in. When the inspector pushed back, the agent said he could do the inspection but there was no access to various areas, including the subfloor, the roof voids and so on. The inspector was on site and could see that access could be made possible by clearing away furniture and other items, so requested to come back another day. When he finally got access to the subfloor, it was immediately clear that the entire floor was about to give way and needed replacing.
Now, there are often areas where access is genuinely not possible, and most building reports have disclaimers covering these areas. But in this instance, it seems the vendor/agent-organised inspector had not pushed hard to get access.
There are two key lessons to take from these stories, and three practical pieces of advice.
The lessons:
1. A real estate contract means you buy the property ‘as is’. It’s up to you to make sure you understand the state it’s in.
2. Assumptions are dangerous and risky. It’s always better to check.
And the advice which comes from those lessons:
1. Always get a building and pest inspection.
2. If you choose to rely on a vendor-organised report, be aware that it was not done independently on your behalf. Look verycarefully at disclaimers, as they may mean you have no recourse against theinspector at a later date.
3. Talk to building inspectors directly. They willoften tell you things which they do not put in the report.
These people look at houses every day. Their experience means they form opinions about the overall state of a property. Getting a feel for that opinion can be more valuable than the report itself.
What all this really demonstrates is that it’s dangerous to make blanket assumptions. It is always better to check. That’s the idea behind getting building and pest inspections.
