No one wants to buy a potentially dangerous property or one that has pests lurking behind the scenes. What may look solid, and sound may be crumbling away behind the façade! It does not matter how reputable a builder is or how many times you’re told you don’t need to get a second opinion; the truth is that engaging a building inspector to undertake a property inspection should be one of the highest priorities for any home buyer. Attwood Marshall Lawyers Property Lawyer, Alexandra Hughes, explains why this is so important.
Introduction
Whether you are buying or selling a property, it is vital that you do a building and pest inspection before making further negotiations, so that you know the condition of the property inside and out. If you are a seller, knowing the current state of the property you are about to sell will help you come up with a reasonable offer. It will also help you decide if you should engage a pest control company to clear all pests before putting it on the market. Meanwhile, if you are a buyer, knowing the exact state of the property will help you negotiate the most reasonable and appropriate price for the property.
When purchasing property, it is recommended that a buyer always requests a building and pest inspection condition be included in the Contract. If you are purchasing a property at auction, usually building and pest conditions are not accepted, and the buyer should be advised to obtain a building and pest report for the property prior to auction day to ensure they are aware of any potential issues with the property before they commit to placing a bid. For most properties going to auction, the Agent will usually hand out a building and pest inspection report commissioned by the seller during the marketing period. We recommend that buyers obtain their own building and pest inspection report from an independent inspection company for absolute peace of mind, there have been many instances where a report commissioned by a seller may not disclose all defects with the property.
What is involved in a building and pest inspection?
While inspecting a property to purchase, most buyers will be making decisions based on whether the property is suitable to them, how their furniture will fit in and how they can imagine their life in the home. At an inspection a buyer may open doors and cupboards, turn on taps and check that things are generally in working order, however, many problems that are expensive to rectify lie beneath the surface and a standard property viewing is simply not sufficient to detect many problems.
A building and pest inspection is completed after signing the contract (and once the buyer’s offer has been accepted). The inspection can be done by one expert, or two separate experts:
- The building specialist will check the structure of the roof, walls, floors, fences, and any adjoining buildings, look for things such as cracks, faults, asbestos, water leaks, and movement.
- The pest expert will check for termites, white ants, borers, and other pests.
The inspector is working for the buyer. It can be useful for the buyer to attend the inspection so that they can ask questions and ensure they fully understand what is in the pest and building inspection report.
A buyer has until 5:00pm on the due date to notify the seller in writing, through their solicitor, as to whether they have received satisfactory building and pest inspections. For this reason, buyers should arrange their inspections at the earliest opportunity, and ensure they receive the reports with time to review the contents, well before the due date set in their special conditions. If the buyer fails to provide any notice to the seller, through their solicitor, by 5:00pm on the due date, the seller will have the option to terminate the Contract.
Why is a building and pest inspection important?
Knowing the exact condition of the property
A building and pest inspection report enables the buyer to have a clear picture of the property. When you do an ocular survey of a property, the truth is, you are only looking at the surface unless you have a trained eye to see defects. Often, sellers will attempt to conceal minor or major defects to make the house or building presentable and appealing to buyers. This may mean painting over stains that were a result of a roof leak or touching up plaster where movement has caused cracks in walls and cornices. It is often difficult to know whether there are roof leaks, ceiling problems, water damage, problematic walls, or pest infestation by only looking at the surface. By obtaining a pest and building inspection, a buyer can have peace of mind in obtaining a detailed and expert report on the condition of the house, good or bad.
Saving money by not doing a building and pest inspection may cost a lot more in the long run
One of the main reasons why people don’t want to spend money on building and pest inspection is because they see it as an added expense. On the contrary, spending on building and pest inspections may well save you money in the end. Identifying defects early gives buyers a head start, which means they can repair issues before the problem becomes more severe. If you delay, the condition of the property could worsen, and this means the buyer may incur more costly repairs to undo the damage.
The resale value of the property will increase
A property’s value is largely influenced by its condition. A dilapidated home will sell for considerably less than a home that’s well maintained. By doing the necessary repairs recommended in a building and pest inspection, a home owner can maintain the structure and integrity of the property and increase its potential value. Without a building and pest inspection, the necessary repairs may be ignored and consequentially the value of your home may depreciate.
How much does a building and pest inspection cost?
Building and pest inspections generally cost between $500.00 – $1000.00 for standard properties. We believe that inspections are worth every cent, and most buyers would prefer to spend the money on the report for their own peace of mind, as opposed to uncovering problems after settlement which may very well end up costing tens of thousands of dollars to rectify.
When you are buying a house, it’s important to keep perspective. It’s likely that every property will have issues; some small, some big. This is even more true when a home is older.
The aim of getting a thorough building and pest report is so that there is transparency between the buyers and the sellers as to what the issues are, and how to manage them in the future.
We recommend using a building and pest inspector who will take the time to explain what has been identified and to put into terms you can understand.
Our team have the industry knowledge to recommend reputable and trustworthy building and pest inspectors and are happy to provide further information to our clients for in order to move forward with confidence in their property transaction.
Understanding your rights under the building and pest condition
Under the standard conditions of the REIQ Contract, a buyer must act ‘reasonably’ when it comes to building and pest inspection conditions. This means that a buyer cannot terminate a Contract for minor issues such as loose door handles/hinges, wear and tear that is deemed appropriate to the age of the property, or minor cosmetic damage.
The reports should reveal any potential issues with the property, which may range from small defects to major structural issues. If you have a buyer that has concerns about a property, it is best to discuss these with the building inspector first before making any decisions about the property transaction.
If a buyer is unsatisfied with the results, they should discuss their concerns with their solicitor. Buyers should be aware that sellers are not obliged to fix all issues raised by the building or pest inspector and not every issue will automatically give buyers a right to terminate the contract.
If a building and pest inspection report reveals more serious issues with the property that would be costly to rectify, the buyer has three options:
- They can elect to terminate the Contract pursuant to the building and pest condition.
- They can request that the seller attend to arranging repairs prior to settlement and approve their condition on this basis.
- Or alternatively, a buyer can attempt to negotiate a price reduction with the seller, which would usually be similar to the cost of any required repairs to the property. It is important to note that a seller is not required to agree to complete any repair works, nor agree to a price reduction. If a buyer is unable to negotiate a satisfactory outcome with the seller, they should consider whether they are prepared to proceed with the purchase and accept the state of the property ‘as-is’ or terminate the Contract.
Both sellers and buyers should ensure they obtain pre-contractual legal advice prior to signing a Contract, so that they are aware of the effect of any building and pest conditions, or any other special conditions included in the Contract. Buyers should especially be aware that should they elect to purchase a property without completing building and pest inspections, they will inherit any problems the property has and will have no claim against the seller for any issues that may arise down the track.
Attwood Marshall Lawyers: helping buyers and sellers have confidence in their property transactions
We strongly recommend that all potential buyers and sellers of property obtain legal advice from an experienced property lawyer prior to signing any document.
Our property lawyers can help you review the building and pest inspection reports and offer pre-signing advice on all Contracts. Our team will thoroughly run through the terms and conditions with you, as well as help you negotiate these so that they reflect your best interests and meet your expectations. It is important to get advice before you sign anything!
To avoid risk or unnecessary costs, contact our Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, mobile 0432 857 300, or email jkimpton@attwoodmarshall.com.au
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