Ticking off the Pre-Purchase Inspection Checklist

The ‘buyers beware’ culture of the property industry means that the responsibility falls squarely on the buyer to ensure that all inspections, paperwork and reports are in order before a sale goes ahead.

Potential buyers attending open house inspections will usually know pretty quickly whether it is the right property for them. The first impression will be either a resounding ‘yes’ or a definitive ‘no’. Most buyers will tune into and trust that gut instinct and decide well within the first three minutes of inspection time if it is worth pursuing.

So that gives you a long 12 minutes left in the inspection and like all the other house hunters meandering from room to room turning on taps, looking in the cupboards and wardrobes, you act as if you are doing your due diligence. But whether you are serious about a property or not, do you know what you should actually be looking for?

The property industry is based on a ‘buyers beware’ culture. This means the buyers bear the responsibility of doing their own due diligence when checking out a property.  Unless it’s outlined by law, like the presence of asbestos, the selling agent and/or vendors won’t usually go out of their way to tell you anything negative about the property – no matter how helpful or friendly they appear.

Many buyers worry that they might miss something and don’t really know the extent of their personal duty of care.

To help you understand more about your buyer responsibilities and what questions to ask, the following is a list of inspections and other paperwork you need to tick off before you are ready to make an offer.

  1. Financial Pre-approval

Your finances are absolutely the first thing you need to attend to above everything else. There is no point wasting time attending open inspections when you don’t have a preapproval. If you want to buy well, you need to reverse engineer your goals.

Applying for a home loan pre-approval will give you an advantage when it comes to Australia’s competitive home buying market. If there are multiple offers for properties, vendors will sell to someone who has a pre-approved offer of finance. Pre-approval costs nothing and most lenders offer this service even before you begin your search.

Do your research on which lenders will offer a home loan that is most suitable for your situation – not just which institution has the lowest interest rate. Think about things like whether you want to use an offset account, redraw facility, or make additional repayments to repay the loan faster.

  1. Open Inspections

This is the time-consuming part. Don’t expect to find the house of your dreams straightaway. You will need to start with a realistic wishlist of features and regularly trawl the online property searches, speak to real estate agents and even drive around your favoured suburbs/streets keeping an eye out for new listings.

See if you can take someone else along with you when you go to inspections. Having that second pair of eyes can help you pick up the pros and cons that you might otherwise miss. Inspection times can clash so be prepared to prioritise and have an ordered list and good idea of where you are going each weekend. If you can manage it, weekday inspections are obviously quieter and give you a better opportunity to talk to the selling agent about the market, other suitable properties and ones that may be listed soon. It’s also advisable to keep track of what you have inspected (with some notes about each one) and what it sold for.

Some of the things to ask yourself when you are inspecting a potential property include:

  • Is it located near the things that matter to you, such as public transport, schools and parks?
  • Does it have any west facing bedrooms that could get hot during summer?
  • How noisy is it? Can you hear traffic, planes, barking dogs, sports ground whistles, air conditioners etc.?
  • Do you see any construction going up nearby or development signage?
  • What are the council fees or apartment strata ownership costs (body corporate fees and levies) like?
  • If you looking to rent it out, what are the current vacancy rates?
  • Is there enough natural light in the house?
  • Can you see any sign of leaking pipes under the kitchen sink or in the bathroom?
  • Are there any signs of flooding, termite activity, mould on the walls and ceilings (or a damp smell), or rotting floorboards hidden under carpets or rugs?
  • Do the lights flicker when you turn on the light?
  • What’s the water pressure like?
  • Have you noticed bouncy floors, cracked walls, a sagging roof, damp walls or peeling paint, which all may indicate an underlying structural or other serious problem?
  1. Pest and Building Inspections

Once you’ve done the basic tests and are serious about putting an offer on the property, it’s a must to bring in a qualified pest and building inspector to do a comprehensive search of the property. They will inspect everything from the soundness of the foundations and retaining walls through to electrical wiring and conformity to Australian building codes. They will also identify any safety or repair issues related to rising damp, lead paint and asbestos. Don’t underestimate the damage that termites can do to walls and supporting beams or it will cost you big bucks to repair down the track. They aren’t usually covered by home insurance so it’s an important to ensure that the existing damage isn’t too expensive.

You will never find a house that is perfect but if you have a heads-up on what you will need to fix both short-term and long-term, you will be in a better position to proceed with an offer or walk away. You can also use this knowledge to help negotiate a lower price which can be put towards the necessary repairs.

  1. Legal Inspection

A standard conveyancing process involves the transfer of a property’s title from one person to another and is only concerned in passing ‘good title’ meaning a title free of encumbrances.  Encumbrance is a term used to cover all subsisting third party rights such as leases, rent charges, mortgages, easements and restrictive covenants. It has nothing to do with the due diligence or the quality of the property.

You must request information about anything unusual in the contract or any development happening in the surrounding areas. Even issues that may arise about a neighbour’s tree roots and branches or retaining wall can lead to an expensive dispute down the track. While going the extra mile to cover all bases might cost more than a basic conveyancing cost, it is money well spent. A good lawyer keeps you out of court – not in court!

  1. Other Reports to Consider
  • Surveyor’s Report: If you are unclear about a property’s boundaries, a surveyor can give you a report showing where they are and whether there is anything currently blocking that. It saves demarcation arguments with neighbours in the future.
  • Swimming Pool Inspection: A pool must meet the safety regulations and construction standards of your state or territory, including having safety and CPR signs in the area and appropriate fences.
  1. Pre-Settlement Inspection

The last step in buying a property is the final inspection or pre-purchase inspection that usually takes place on settlement day or 2–3 days beforehand either by you or a building inspector. It allows you to check that everything on the property is in the condition you required when you signed the contract and that the fixtures remain (and are in working order), and that owner’s belongings and rubbish have been removed.

If the previous owner had a tenant who was reluctant to leave you can ensure they did not damage the area on their way out. There may have been conditions specified in the contract such as repairs or painting that should have been completed. If these conditions haven’t been met or there are serious problems, then the seller will be in breach of the contract and you as the buyer should have the right to delay settlement until the issue is fixed.

Be aware however that in some hot markets, such as in many parts of Sydney, properties require a waiving of the cooling-off period, which puts the pressure back on the buyer.

If a property does not pass muster and the vendor is unwilling or unable to do any further required work, or the agent is giving you a vibe that there is no chance you will secure a property unless you beat the many other waiting buyers, your best approach is to appoint a buyer’s agent. They have the necessary experience and professional negotiation skills to ensure a satisfactory outcome and the very best result for you.

If you are looking at buying a residential or investment property, Cohen Handler can help you negotiate and advise you on the inspections and reports you need to complete for an efficient outcome. Contact us now to find the right property at a price that suits your budget.

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