Of course, property should be inspected if you are making an offer to purchase a new home. But really anyone who owns property should use the services of a building inspector from time to time. So whether you are buying, selling, leasing your property or living in it, you will greatly benefit from knowing the condition of the building and how best to deal with any issues found. A seller should get a building and pest inspection report done prior to listing to assist the sale process. A property investor should have regular inspections done on the tenanted property for maintenance and safety reasons. A person living in the building and planning to renovate should talk to a professional building inspector. Anyone living in their building should have ongoing property inspections during the time they own it.
Let’s look at all these scenarios.
WHEN YOU ARE BUYING YOUR HOME
How exciting, you’ve found a home and you just love it. Emotionally, you’ve moved in already! But wait, don’t forget that all-important inspection report. You will be living in your new home for several years, maybe decades, so make sure you know what you are buying.
Most people nowadays see the value in having the required property inspections carried out on their behalf when buying a property, but I still hear of people who don’t bother and end up buying a dud. Excuses for not getting an inspection include: the property was only two years old; it was a bargain; we ran out of time; we are going to renovate anyway; my brother-in-law had a look at it for me and he is a carpenter.
Not getting an inspection is taking a risk with a huge financial investment. Get it right and you can save thousands of dollars. Get it wrong and it can cost you thousands, maybe tens of thousands. Not only is there the cost of repairs to consider but the time and stress involved with fixing the problems and the opportunity cost of lost capital gains.
I’ve heard horror stories about years of stress and financial hardship they endured because they bought a property without any property inspections. Learn from their mistakes!
Some people are prepared and have done their homework when they are buying a property. They have assessed the property themselves (or used a buyer’s agent). They have visited the property a few times at different times of the day. They have checked with the local council for flood risk. They have asked the selling agent about the sinking fund on a strata property. They have checked that their car fits in the garage, They have asked the agent to see the inndox on the property etc. Even so, they are not professional building inspectors and therefore they need to engage someone who is experienced and suitably qualified to prepare an inspection report for them.
MAINTAINING YOUR HOME
So you go to the dentist once or twice a year to get the pearly whites checked and you have the car serviced regularly too. But the house… “Nah. It can wait, sure it’s my biggest asset but I know what I’m doing”. Wake up people, over the years your property is deteriorating and it needs to be maintained. Sticking your head in the sand does not keep your property in peak condition. Periodic professional building inspections are a good way to keep informed about maintenance needed on the property.
Some homeowners understand they have some maintenance issues so they get some quotes from tradespeople. It becomes confusing when the tradespeople recommended different solutions with widely varying costs. This has left them confused about what to do next. They appreciate getting independent expert advice so they can confidently make the necessary investment with the appropriate scope of work to properly address the issues. Inspectors will usually find other issues that the owner was unaware of that also need attention.
WHEN YOU ARE BUYING INVESTMENT PROPERTY
Most property investors will lease their properties to gain rental income. If a rental property is not maintained in a safe condition, then the owner will be in breach of common law, the landlord’s insurance and building insurance conditions. Most tenancy agreements and insurance policies require an owner to maintain the property in a safe condition at all times. Its worth sharing the inndox with the tenant so they know have access to information like operation manuals and Community rules.
The next scenario illustrating when it’s essential to engage a property inspector involves when you are buying an investment property. It will not only save you money when you buy, and potentially increase your return on the property, but it may also save you from defending yourself in court.
Liability you have as a homeowner to your tenant
In the case of Graton v Gillan Investments Pty Ltd, the owner was held to be liable for failing to keep the rental property in a safe condition. The owner was held to have had an obligation at the start of the tenancy to have the property inspected and assessed by a qualified person.
This case has extended the requirements of owners to have regular inspections done by qualified professionals. It is not enough to have property managers doing these inspections. Owners now face increased liability for defects which may have previously not been detected. In this case, the tenant was awarded damages of $100,000 for her injury.
Property investors need not only obtain a pre-purchase inspection at the time of purchase but also need to have ongoing inspection services including: Building maintenance inspections and Termite inspections.
By utilising a building inspector, you can meet your responsibilities and aid in protecting yourself from litigation and penalties, while also ensuring that the rental property is in a safe and sound condition for the tenants to enjoy.
Can a property manager inspect my property?
You should make it a practice that at the commencement of each tenancy, and at least every year, a qualified building inspector is engaged to examine the repair and safety of the rental property. A property manager is not qualified to do this. The building inspector’s report should be sent to you (the owner) and the property manager. The report will enable you to instruct the property manager to arrange any necessary repairs.
Inspecting buildings for structural defects and safety hazards is a job for a licensed and insured building inspector with suitable experience and training.
The law courts have recently held that a property manager is not considered to be a fit and proper person to inspect a rental property to ensure that the property is in a safe and well maintained condition. Deaths and serious injuries from the collapse of decks, balconies, stairs and floorboards are becoming all too frequent. The landlord (and the property manager as agent of the landlord) may be liable if an accident occurs on an investment property that you own or manage.
If someone is injured or dies while they are at the rental property and this is found to be due to a lack of maintenance that should have been detected by undergoing a regular professional inspection, then the property manager and owner may well be liable.
As I said earlier, by utilising a building inspector, a property manager can meet their responsibility and aid in protecting them- selves (as agent of the landlord) from litigation and penalties while ensuring that the rental property is in a safe condition for the tenants.
Unsafe balcony causes tenant to move out
A property manager knew that the balcony on a small block of flats was in a poor state of repair and had asked the owner to get it rectified. The owner thought it was a body corporate responsibility and so did not take any action. When the tenant moved in, the property manager told her to watch out for the handrails on the front stairs as they were a “bit wobbly”.
The tenant arranged for removalists to move her furniture into the property. When the removalist arrived at the property they advised the tenant that they could not safely carry the furniture up the stairs as there were badly decaying stair treads. The tenant found a piece of timber to place onto the stairs to enable the removalists to get up the stairs. When the removalists got to the top of the stairs the balcony floor gave way under foot. The removalists stopped work and took the furniture away stating that it was too unsafe for them to unload the furniture. The tenant was very upset as she had paid a month’s rent and bond in advance and could not occupy the property as she could not get her furniture moved into it.
She approached the property manager about the situation and was offered some temporary accommodation in another property. When the situation did not get resolved after a few weeks, the tenant approached ‘A Current Affair’ and asked them to investigate and report on the matter.
I was then asked to appear on the program and inspect the balcony and access stairs. I found these to be structurally unsound and unsafe. I recommended that the entire balcony and two sets of stairs be replaced.
The licensee of the real estate office admitted that they had sent a young, inexperienced property manager to inspect the balcony and stairs. The young property manager noted on her entry condition report that the handrail was a “bit wobbly” and there was some “flaky paint”. Clearly the property manager lacked the necessary training and expertise to identify structural defects and safety issues. This put the tenant and removalist at serious risk of life and limb.
The program highlighted the unprofessional conduct of the real estate licensee and the lack of care shown by the owner.
The video of this story featuring Andrew Mackie-Smith from inndox can be viewed at www.buildingpro.com.au/media
WHEN SELLING PROPERTY
When selling, it is important that your property presents well to potential buyers and that you remove any barriers to a sale. If you can provide pre-sale building and pest reports to potential buyers, you can greatly assist the sale process.
The last thing you want is for the Contract of Sale of your property to fall through because the buyer obtains reports (from an inspector working for the buyer) revealing significant structural damage, safety issues or severe termite infestation that you were unaware of.
Advantages of pre-sale inspection reports include:
The seller knows of any major defects or significant timber pest issues in advance, giving them the opportunity to get these sorted out. I can think of many times when the seller has said “the agent recommended that we get you to do the inspection for us although I don’t know why as you won’t find anything wrong, but knock yourself out mate”. Many times I have found major structural damage or a termite infestation and the seller quickly changes their cavalier attitude and wants to know how they can quickly get the issues rectified.
Disclosing defects and fixing problems is worth the effort and expense to help them sell their property.and having the opportunity to fix the problems than hearing about it from a buyer’s solicitor after the contract has been cancelled.
Buyers are more likely to make an unconditional offer as they can rely upon the report provided. This saves them the expense and gets the deal done with less delay.
If the property is going to auction, then buyers are more confident to make a bid. I often get people calling our office desperate for a building and pest inspection to be done on a property that is going to auction within a matter of days.
Sometimes inspectors are fully booked and cannot get the report done before the auction. If the buyers cannot arrange for an inspection to be carried out in time, they may decide not to bid at the auction.
Buyers are less likely to renegotiate a reduced price after the contract has been signed because if there are any building or pest issues with the property, they already read about them in the pre-sale report when they entered into the contract. This doesn’t mean that some won’t try, but hey, they knew what they were getting themselves into so it severely limits their bargaining power.
The inspector can discuss the report findings with potential buyers and answer any questions they may have.
Of course setting up an inndox and sharing this with your Real estate sales agent allows them the ability to share the inspection reports with prospective buyers and to eventually transfer the inndox to the new owner.
Some inspectors have a reputation for being overly pedantic. Others are just inexperienced and their reports are not balanced or well written. This can leave the buyer feeling uncertain about whether to proceed with the property purchase or not. A good property report should give confidence to proceed, negotiate a reduction in price or pull out. If the buyer is uncertain, then a cancelled contract will be the likely result. Make sure if you share any property reports through inndox that the buyer can speak with the consultant who prepared the report to clarify any concerns as its easy to mis-interpet some reports.
Some inspectors will put the pre-sale reports into the name of the eventual purchaser at no extra cost or for a reduced fee. Usually the purchaser will need to agree to the inspector’s standard inspection agreement first. I hope to see our law change so that it becomes mandatory for sellers to provide pre-sale inspection reports to all potential buyers through a digital platform like inndox.
BEFORE YOU RENOVATE
Are you planning the big reno? Perhaps you’ve been inspired by the scripted ‘reality’ renovation TV shows? Renovations can be horrendously expensive. I am not a fan of large-scale renovations. They are usually very costly, time-consuming and stressful. Budgets are stretched or many compromises are made. Mistakes happen and lessons are learned.
Rather than renovate, I suggest that clients simply buy a better property instead where the hard work has been done for them. If you are clear about what you want and take the time to look, you can often buy the property that meets your needs without having to renovate. Its easy to store all of your renovation plans, approvals, certificates and more on inndox.
Add the cost of renovating to the cost of the purchase. Then compare that figure to the cost of renovated properties in the area.
For example, if you are comparing properties and one is a basic house with a “blank canvas yard” and the other property being considered is fully renovated with an extra bedroom and an in-ground concrete swimming pool and costs only $40,000 more, then does it makes sense to buy the unimproved property and spend $120,000 and 12 months of your spare time adding these features? I would always choose to buy a well renovated or newer property that suits your needs if you can afford it. Use inndox and a Council search to look at the history of approvals on the property.
If you really need to renovate or just want to give it a go for the life experience then I strongly recommend that you get an architect or building designer to prepare the plans and specifications (with necessary approvals), so that the work can be competitively tendered for fixed price quotes from at least three licensed builders. This means the builders are all quoting on the same scope of work and you can get the best advantage from the competitive quote environment. Store the quotes in inndox for your records.