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Crack the Code and Avoid Problems Later On

[Source: Sydney Morning Herald | September 17, 2009]

A building inspection may seem expensive at the time but the reverse may be true if problems are found.

Michael Skillicorn found the house he wanted to buy and paid $440 for a building report and pest inspection. Unfortunately, he was outbid and didn't end up buying it.

He found another house, paid for another report, and the same thing happened. In fact, this happened seven or eight times at the height of the property boom before he was eventually successful. He spent about $3500 on reports for nothing.

Skillicorn, who now lives on Sydney's northern beaches, says he saw no other way. "It's an expensive undertaking when you have so many to do but it gave us peace of mind," he says.

He says if the vendor had to provide such reports, "you are putting your confidence in the vendor or the real estate agent, which is worse. I was uncomfortable with that".

He can see other problems with the current system, however, having seen three or four local inspectors going through the same house with several different buyers, getting a full-price report each time.

In the ACT, sellers provide a building and pest report to buyers, with buyers reimbursing them. This usually costs $710 to $900.

Victorian buyers still get their own reports and the chair of the property law committee of the Law Society of New South Wales, Mary Macken, says her organisation does not believe sellers should provide the reports.

"It is best if the purchaser gets their own report, so they can negotiate the price down or get the problems rectified," she says.

"If the vendor gets it, they may shop around and get the one that shows their property in the best light."

She says the expense is well worth it. "I had some clients who got a building report. It was a newly completed dwelling so you would not expect anything to be wrong with it. But the inspector did notice several issues, such as gardens leaking. We negotiated all the things to be rectified."

However, consumer advocate Neil Jenman says making buyers obtain their own reports is unfair. "I could easily find someone who's spent more than $10,000 [on reports]," he says. This is especially painful when agents underquote property prices deliberately to lure people to properties they can't afford.

Jenman says Australia should follow the system in the US, where law changes are spreading across the states to make sellers provide reports. The ACT's system, he says, is very successful.

Golden Rules
Check qualifications Consumer Affairs Victoria recommends a qualified building inspector, surveyor or architect with indemnity insurance. Macken says building consultants must be licensed under the Home Building Act 1989. Building consultants do both pest and building reports. Contract them directly so that you are covered by their indemnity insurance.

Inspect the house together Skillicorn obtained a written report but also received on-the-spot advice about ballpark figures for repairs and adjusted his bids accordingly.

Shop around The NSW Office of Fair Trading says the average price is $500 for a simple building report, while Macken says a combined pest and building report is between $340 and $600.

What's included It should grade problems from major structural to minor problems. It should include checks on power points, utilities, door locks, windows, walls, floors, ceilings and balconies. It may include an assessment of water pressure, plumbing and down pipes. It should cover the ceiling cavity and sub floor for damp.

What's excluded In Melbourne, standard contracts show inspectors don't move rugs, personal possessions, insulation, appliances, foliage or debris. In NSW, Macken says most reports will not accept liability on freshly painted areas, as they can't guarantee what's underneath such as freshly plastered and painted cracks. Inspectors are only liable for things that are reasonably visible. They generally do not guarantee anything that has been concealed or is not readily accessible. Inspectors are not liable for damage that is caused after the report's creation by problems such as pressure from tree roots, soil movement and water build-up.

Original Release

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