Is a Residential Building Inspection Worth the Cost?

October 27, 2021

More and more people are ignoring damage and issues with properties in a bid to secure a home and get an edge over everyone else fighting for homeownership in Australia.

There was a property last month in Sydney that sold for $400,000 above reserve even though it was riddled with active termites and the roof needed to be replaced. This wasn’t the first instance of properties in poor conditioning selling well in the current market which is red hot for sellers. Even the representing real estate agent said that the sold price was far more than the property was worth and the figure was surprising.

Buying a home that has known damage or needs significant work is a really dangerous risk to be taking with your property investment, but knowing what you are buying is far less dangerous than going in blind.

Even if you are determined to buy a property, no matter the outcome, you still need to get a pre-purchase building report completed so you know what you are up against.

When you know what the damage is, you can look at your budget and make sure you can cover the costs. If you buy a property for the full asking price (or even choose to go above that) you want to be sure you can get that value back again, even with the added costs of renovations. 

Compared to the significant costs and commitment of purchasing a home, going that little bit further to secure a pre-purchase expectation is really no time or money. If you can’t afford a residential building inspection because of the enormity of covering the purchase and related costs, you definitely can’t afford any significant repairs.

A pre-purchase inspection on residential property will give you a heads up on building defects, unapproved structures or any legal or financial issues you are buying with the property.

Inspections will reveal not just structural defects but also risks from water damage and make sure that any renovations or extensions completed over the years conform to registered plans. Something that seems insignificant, like a minor dispute about a fence line with a  neighbour can cost thousands in legal fees to rectify.

A pre-purchase building inspection will be conducted by a qualified inspector and should come with a written report on the condition of the building as well as any recommendations they may have for repairs.

What does a residential property pre-purchase inspection cover?

It’s important to check the terms of the purchase before you commit as different companies offer different services and some will be classes as add-ons, i.e. asbestos inspections aren’t required for all properties so you may need to request this as an additional service if you are looking to purchase a home built before 1985. 

Typically a pre-purchase inspection will cover:

  • Building defects (flagging those that are potentially dangerous or expensive)
  • Roof space, ceilings and gutters
  • Water damage, including mould
  • The ability to withstand local environmental issues
  • Renovations and extensions are up to code
  • Any guarantee of title or financial or legal encumbrance hanging over the property
  • What repairs are recommended and how much they estimate the costs to be
  • Plumbing and electrical condition
  • And also external areas like retaining walls and driveways

Some building inspections will also cover pests like termites, however, usually, it is best to get a pre-purchase pest inspection completed in addition to the building report.

How much does a pre-purchase building inspection cost?

The costs will vary depending on who you use and how detailed their coverage is. 

Expect something around $400–$500 mark in regional areas and $800–$1000 for the metro on a standard four-bedroom home.

Make sure you are getting quotes on pre-purchase inspections for both building and pest checks as regular inspections are not as thorough and will cost less but won’t give you everything you need to make a solid buying decision.

Things that will affect the inspection price will include:

  • Property size
  • Any slopes or unique building aspects
  • Location (city or regional)
  • Pest inspection included
  • Building certificate included

Is a building inspection enough to cover what I need before a property purchase?

It’s worthwhile playing it by ear and getting additional checks done in certain circumstances. Assuming one check alone is enough may cause problems if there are situations that need to be addressed with a particular property.

Other factors that may require additional checks include:

  • Issues with stumping (seek advice from a structural engineer)
  • Bushfire zones
  • Floodwater zones

Is it okay to skip a building check if I need to buy a house quickly?

You don’t have to forgo an inspection to secure a property quickly. Simply write on your buying contract that the sale is subject to a building and pest inspection. 

For this to stand up legally and allow you to walk away from the purchase without losing your deposit, be sure to work with your conveyancer around the language you use. When written correctly (and accepted by the vendor) stipulations like this in your sales contract can allow you to opt-out of the final sale even for reasons other than structural defects.

A few years ago I would have said it’s better to wait. It can take as little as 48 hours to get a check completed and you have peace of mind ready to go. As long as you’ve communicated with the real estate agent about your intentions and willingness to purchase, no one will really have time to steal it out from under your nose. 

That is not always the case in the current buying frenzy. Homes are on the market for lightening quick times before being snapped up, putting pressure on buyers to get in quick. If this is the case and you are panicked into buying quickly, please make sure you have already done your due diligence everywhere else in terms of buying the right property for your needs, within your budget and in a good location before going ahead.

Do I need a pre-purchase building inspection for a newly built home?

Although we often talk about the importance of uncovering problems in established homes, it’s not the only time you need to factor building inspection into your budget.

Independent condition reports are important even when buying a newly built home.

The good news here is that it doesn't need to be as detailed and therefore will usually be cheaper. Even just a certificate of occupancy from the builder may be enough although it is recommended that you carry out an independent builder check to get an overview of the property condition.

If you find any problems in a newly built home before purchase you have time to challenge building defects with the contractor.

There can be time limits in place for how long a buyer has to report faults after a purchase. When you get the certificate completed ahead of a purchase you are well ahead in the reporting process and it allows you to address any issues quickly, as well as give you legal standing if further action needs to be taken.

How do I find a good building inspector?

Look for qualified building inspectors and qualified building certifiers, although a wide range of appropriately qualified people can perform different types of checks.

Be sure to ask about their background and years of service. Most building certifiers and inspectors were either builders themselves previously or had some other training and experience within the industry, giving them insider knowledge and skill when it comes to identifying issues.

Australian states and territories also have Building Authorities with proven suppliers you can choose from and places where you can certification verified and you can also look to work with those that are members of a building association, like Master Builders Australia.

As well as helping you verify their authority to conduct their checks, being a member of an association means they must comply with certain codes, and it gives you someone to address issues with and help resolve problems if you do have a negative experience.

Lastly, it is good to look for locals. This is especially true if you aren’t from the local area yourself. They will have a knowledge of the environmental challenges in the area as well as a better knowledge of local costs when making estimations on fixes.

Are there any benefits to getting a building inspection done before you buy?

A building inspection will help you understand what additional costs the property may hold before you commit to a purchase. If there are no problems you can feel secure in your purchase going forward. If there are problems you can work these costs into your budget, ask for a lower sales price or leave the property to someone else.

There is another reason you’ll need to look into third-party inspections before your purchase and that's to help out with insurance. If you don’t address problems within your new home quickly it can lead to increased insurance premiums and difficulties getting claims processed down the track.

Finally, a building inspection will help you understand your loan conditions. If you are getting a loan provided from a bank or lender they will send out their own inspection team to give the property a once-over and make sure it’s worth what you are asking of the loan. Knowing any faults ahead of time will give you time to talk to the bank or at least know they may need the price to be reduced before they are willing to cover the loan. That gives you some more time up your sleeve to negotiate, rather than having the bank withdraw at the last minute.

Summing it up

There are so many reasons why you need to get a building inspection before your purchase that really, it makes no sense to ignore it. If you are determined to go for broke, that additional extra expense of getting a building certificate will be required to know exactly how far broke is going to take you. If all goes well on your inspection (and we hope it does) then you can rest easy knowing there are no nasty surprises waiting for you when you move in. If you do find problems with your desired property ahead of a purchase, be sure to talk to your conveyancer about what you can do to limit the damage with inclusions and conditions on your contract and see what responsibility the owner is willing to take to make good on the deal.

If you need more information or you're looking for a conveyancer in NSW, contact us today.

Who is Peta Stewart?

Award-winning conveyancer. Entrepreneur. Business mentor. Women’s cycling advocate. These are just some of the ways Peta Stewart is introduced. What ties them together is a steely determination to help people achieve their life goals and have fun in the process.

In 2004, Peta became the first licensed conveyancer in the Albury Wodonga greater region. Five years later, she launched her own business and started shaking up the industry with a good dose of personality, integrity and humanity.

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