Building and Pest Inspection Reports - who needs them?

There is an interesting article in Sydney Morning Heralds Domain dated 5 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, 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, because we are acting exclusively in the buyers 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 the front retaining wall was defective and needed replacing. 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, 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 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, 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

1. Always consider engaging a building and pest inspector unless you are buying a block of land or a house that needs to be demolished.

2. 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.

3. 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.

4. 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.

5. 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.
Question asked via Homely.com.au The opinions expressed here are those of the individual and not those of Ray White.
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4 Comments

Allied 2yrs+
Hi Nick

You had some good points in your posting. Especially regarding clients speaking to their inspectors if they do not attend their inspections. Our reports can be confusing at times for our clients and we understand that.. they are not building professionals so we always recommend they attend their inspections if they can so they can talk to the inspectors while at the property. It is much easier for the clients to see their problems than read about their problems by just reading the report. If they cannot attend our inspectors phone them after the inspection and go through it all with them before they get the report. It is very important that a client understands exactly were they stand in plain English as well as having their written report. Also making reports compulsory before a sale provided by the vendor... this can only end up bad for the purchaser as vendors will seek companies who give soft reports. Agents will also recommend companies that give soft reports. These could be helpful for a property going to auction but we would recommend buyers to seek an independent report on property to avoid this situation. We have already seen a trend on the Gold Coast were the clients are not using companies recommended by their agent so much these days and are seeking their own inspectors. The purchasers are becoming educated about soft reports. We are Allied home inspections - Gold Coast http://www.buildinginspectionsgoldcoast.com.au and we advertise we do not have any affiliations with agents etc and the feedback from our clients has been very positive for doing this. This way we are all independent of others in a property sale while still having a healthy respect for each others roles. I dont believe compulsory reports to be supplied by the vendor is the way to go.
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DanielJ 2yrs+
Building and pest inspection must be done on regular basis of the interior or exterior part of your house. it provides safety from white ants, termites etc.
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erikj Feb 20, 2017
Pest Inspections will provide a comprehensive visual pest or timber termite inspection. http://www.dunrite.com.au
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erikj Feb 20, 2017
Pest Inspections will provide a comprehensive visual pest or timber termite inspection. http://www.dunrite.com.au/
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The opinions expressed here are those of the individual and not those of Ray White.

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