To inspect or not to inspect - should I pay for a building and pest inspection?

There is an interesting article in the Sydney Morning Herald Domain dated 5 and 6 June 2010. Lucy Macken investigates the pros and cons of paying for building reports in her article, "Tales of the Unexpected".

Why obtain a building and pest inspection report?

At Buyers Domain buyers agents, we advise all our clients to commission an independent building and pest inspection report. As indicated by Lucy Macken, the benefits are obvious:

  • A building and pest inspection report will highlight any defects and can prevent a property buyer from making a costly mistake. For the sake of a few hundred dollars, it is well worth knowing what hidden costs may be in store. If any serious problems are revealed, this allows the buyer to consider withdrawing from the sale.
  • Alternatively, the list of defects can be used to negotiate a lower purchase price. At Buyers Domain buyers agents, because we are acting exclusively in the buyer's best interests, we use whatever means we can to purchase the property at the lowest possible price.

In one recent case, we made an offer to purchase a property subject to a building and pest inspection report. The offer was accepted. The building inspector then revealed that there was a defect to the the property. We obtained a conservative estimate of approximately $20,000 to fix the problem. We then used this information to successfully negotiate a further $20,000 off the agreed price. Our clients were delighted.

In our opinion, as leading buyers agents in Sydney, the only time that clients should even consider not obtaining a building report is when it is clear that the existing house is going to be knocked down and rebuilt.

The pitfalls in obtaining a building and pest inspection report.

In spite of the overwhelming justification for obtaining a building report, there is a worrying rate of buyers who do not bother to engage a building and pest inspector. Perhaps the reason for this is that the reports can often be hard to read, misleading and covered with disclaimers. In cases where we at Buyers Domain buyers agents have had the opportunity to compare more than one building and pest inspection report carried out on the same property, no two reports are the same. It is clear that there can be a high level of inaccuracy in some building reports.

All the more alarming then that the NSW Government is considering a review into the issue of vendor-supplied building and pest reports. The Real Estate Institute of NSW (whose members are predominantly selling agents) is in favour of making it compulsory for a vendor to supply a building and pest inspection report in the Contract of Sale. The problem with this is that the vendor is keen to sell their property and is likely, along with the agent, to engage the least discerning of building and pest inspectors. Why would a vendor be keen to highlight all the defects with their property? The concept of the vendor-supplied building and pest reports is fundamentally flawed.

Advice for Buyers.

It is crucial to find and stick with a good building and pest inspector. At Buyers Domain buyers agents, we also attend the property with the inspector. The reasons for this are: This helps to give us a better understanding of any defects so that we can provide suitable feedback to the client. Also, the more we know about the defects, the more we may be able to use this information to negotiate a lower purchase price.

It usually takes up to two business days for a building report to be prepared after the inspection. In cases where there is a lot of competition for a property and timing is crucial, this could mean losing out on the property to another purchaser. Accordingly, we ensure that the inspector speaks directly to the client after the inspection to provide a verbal list of all the defects. This is clearly less desirable than having the written report but it does provide the client with the opportunity to purchase the property without missing out on the property.

Summary - Tips for Buyers.

  • Always consider engaging a building and pest inspector unless you are buying a block of land or a house that needs to be demolished.
  • Make sure that you find a good building and pest inspector. Do not rely upon a recommendation made by the real estate agent. If in doubt, seek a recommendation from a buyers agent since buyers agents deal with building inspectors on a daily basis.
  • Discuss the results of the building inspection directly with the building inspector. He will be able to explain and clarify any issues. Written reports can be misleading and confusing. Make sure that you understand all the essential issues.
  • Use a good buyers agent to assist in understanding the report and whether any defects may be common for the type, age and location of the property in question. A good buyers agent will obtain quotes for any work needed and even use those quotes to negotiate a lower price.
  • A building report is an essential part of the due diligence process. A good buyers agent will co-ordinate and take care of the entire due diligence process for you.

For any advice in connection with the purchase of your next home or investment property, speak to an experienced property buyer's agent. Call us today on 02 9568 6330.