Buying a home is the biggest investment or financial outlay that most of us will make in a lifetime. It is critical to your financial future that you make well-informed decisions when you purchase a property, whether it be for your own home or an investment.
The Contract for Sale of Land basically follows the common law of “caveat emptor”– let the buyer beware. This means that the purchaser must make their own enquiries and investigate the quality of the improvements on the property before they enter into a contract to buy that property.
A vendor or seller of the property is not allowed to deliberately hide defects or deceive the buyer by fraud but the purchaser should undertake searches and inspections of the property to discover any defects in the property. Failure to do this may result in the buyer ending up with a property that needs expensive repairs.
Pre-contract Inspections
There are various inspections that a purchaser should get done prior to entering into a contract to buy a property. The number of inspections and searches depend on the location and type of property you are purchasing, the inspections may be different for a residential house in town, a strata unit, vacant land, rural property or industrial property.
In this article we look at pre-contract inspections for a standard residential house.
Timber Pest Inspection
In locations which are susceptible to pest infestation a qualified and insured pest inspector will conduct a visual inspection of the property to discover if there is any termite or other pest activity at present or in the past.
More detailed inspection such as thermal imaging or photographs of the walls and bathrooms to highlight any damp areas that should not be present may also be conducted if required. The inspector will also conduct a moisture meter reading of the bathrooms and other wet areas as termites are attracted by damp timber. They will also examine the property for any wood decay, borers or rot that will affect the structure of the home.
Termite damage undiscovered can not only increase but can cost many thousands of dollars to repair. Sometimes if the damage is really bad that part of the house might have to be demolished and rebuilt wreaking damage on your investment.
Building Inspections
A qualified and insured building inspector should be commissioned to inspect the property including the house, any garage or other buildings located on the property.
The Inspector will investigate the interior and exterior of the buildings including the most costly items to repair being the roof, kitchen and bathroom/s, looking for any defects that are not usual “wear and tear”.
In an existing home there are usually small defects which accumulate over time due to use and are readily visible but it is the not so visible defects that are costly like a leaking roof that can cost tens of thousands of dollars to repair.
If the inspection reports show issues of concern, other specialist tradesmen may be required to check specific areas or issues.
Plumbing and Electrical
A licensed plumber may be required to inspect drainage issues.
If there is any indication that electrical wiring may be faulty or the house is very old, an electrician may be requested to evaluate the property.
Pools and Spas
If the property includes a pool or a spa then the pump and any ancillary equipment as well as the pool or spa itself should be investigated to ensure good working order.
Title Insurance
Other problems associated with the property and the building can be mitigated by purchasing a Title Insurance Policy, which covers the following:
- Demolition or upgrading orders issued by Council in relation to structures illegally built on the property by a previous owner or in relation to illegal alterations to your strata unit for which you are now liable to comply with (maximum of $160,000 to be provided for a claimable event);
- For properties with a land area of 50 acres or less, any adverse matters that would have been revealed in an up to date survey report;
- Forced removal of a structure illegally built by a previous owner over an adjoining boundary (excluding boundary walls and boundary fences);
- Non-compliance with zoning and planning laws and conditions;
- Non-compliance with easements and covenants which burden your land;
- Non-compliance with By-Laws or other obligations which are registered on your title; and
- Complete loss of legal ownership due to a fraudulent sale or mortgage of your property.
The premium is a one time payment and cover provides protection forever.
Survey
A survey shows the dimensions and boundaries of the property. It will also identify any encroachments by structures erected on the land.
In areas inhabited for a long time the fences are often not right on the boundary or there may actually be part of a building encroaching on your land. In more extreme cases, a driveway which appears to be on the property you are buying may actually be on the next door neighbour’s property which would mean you may end up with no access to your new home.
Strata
If you are purchasing a strata property then a full examination of the strata management records should be undertaken by an experienced person. The strata records will show not only the financial details of the administrative and sinking funds but will also show plumbing, drainage, fencing, driveway and other problems that may exist or which have been repaired in the past. Any proposal for additional works or levies should be identified via a strata inspection.
A penny saved is a penny earned
Not doing pre-contract inspections before you buy a property is not only risky but it is also false economy. Considering that the cost of a building and pest inspection for an average house costs about $500-$650 the outlay represents about 0.1% of the purchase price of an average home!
The traps when buying a property are easily avoidable and the risk far outweighs the cost of proper and diligent investigation before you buy.
This is general information only, and you should seek professional advice specific to your circumstances. If you or someone you know wants more information or needs help or advice, please call 02 9548 5199 or email ad***@***********************om.au