January 20 2022
"Not the most exciting part of the home buying process, but an essential one!" - Marco Zande, Strategy Executive.
We’ve all been there – you buy something that you thought was a steal but ended up being too good to be true, and what’s worse is that it even came with hidden problems.
It can be some fruits that looked good on the stand but were rotten on the inside or a new gadget you saw on TV that seemed amazing on the screen but failed to live up to the hype in real life.
This can also happen when you’re buying an investment property. However, when it comes to real estate, the stakes are not the same as buying a non-functioning gizmo.
For most Aussies, buying a property is a significant (and life-changing) financial decision, as it entails a considerable amount of financial investment. Purchasing real estate that is riddled with hidden issues is a costly mistake that can set investors back by thousands of dollars.
Therefore, if you plan to buy a home or an investment property, you need to protect your investment by all means necessary. One of the most important precautions you can take to secure your soon-to-be property is to do a pest and building inspection.
Building and pest inspections will let you know the condition of the property so you can ensure that it’s safe and ready for occupancy. These inspections can also help save property buyers against investing in fault-ridden properties, as the reports reveal any hidden issues that a property may have.
The results can give investors peace of mind, with the knowledge that what they’re buying isn’t going to collapse around them.
To make sure you’re not in for a not-so-welcome surprise in your next real estate purchase, we answer all your questions about building and pest inspections.
What are building and pest inspections?
Building and pest inspections are thorough and in-depth investigations of a property or a building, usually done before a property purchase.
The inspections involve a licensed building and pest inspector examining all parts of the property through an ocular inspection, as well as by using several types of technical equipment, including thermal imaging, moisture metres and colour digital photography.
During the inspection, the property’s structural condition is noted, and evidence of pests is identified and reported so that the buyer will know exactly what to expect when (and if) they purchase the property.
These inspections are done to provide a comprehensive and detailed report that will reveal the current and true condition of a property. It is designed to protect a buyer during the purchasing process by arming them with information about potential issues before they decide to invest valuable time and money into a property.
Why are building and pest inspections important?
Here are some of the reasons why building and pest inspections should be on a buyer’s to-do list:
You will be informed about the true condition of a property
While you may pride yourself on being detail-oriented, there are nasty surprises that a property can hide from the untrained eye.
When you do an ocular inspection of a property, oftentimes, you are only looking at the surface and you are unable to see the hidden defects. Another common knowledge in the industry is that more often than not, sellers will take steps to hide minor and major structural issues to make the property presentable and attractive to potential buyers.
This means that unless you’re a tradesman or a real estate industry expert, you won’t be able to know if there are roof leaks, ceiling problems, water damages, problematic walls and pest infestation.
With a building and pest report, you won’t be caught out by any nasty, unexpected surprises. Because you will get a detailed building and pest inspection report – which includes both the good and the bad about the condition of the property – it can help you make an informed decision moving forward. As a buyer, this means you can haggle the price or demand to have the defects patched up before you finalise your purchase.
It can save you money
One of the top reasons why people forego building and pest inspections is because they see it as an added expense.
Conversely, spending on building and pest inspection is going to save you money. Being aware of the current state of the building will help you prepare for your next move. People who spend on building and pest inspections have done the needed repairs and pest control to refurbish the building.
Pinpointing defects early will give the buyer a head start in repairing them before the problem becomes more serious. If you wait a little while longer, the condition of the property could worsen and could mean more costly repairs in order to fix the damage.
The resale value will increase
A property’s value is largely influenced by its structural integrity and condition. On this note, a dilapidated property will cost less than one that is well maintained.
When you do a building and pest inspection, you can increase the resale value of a property. By doing the necessary repairs, you will also be able to maintain the structure of the property and increase its value.
Without a building and pest inspection, a property owner will not be able to do the needed repairs, and in turn, the value of your home will depreciate.
Why do I need both a building and a pest inspection?
It’s advised to commission a combined building and pest inspection because it will provide you with a complete evaluation of the current state of the property.
A building inspection’s scope is only on structural defects and hazards. What will determine the presence of any termite or pest infestations around and inside the building will be a pest inspection itself.
What will the property inspector check and examine?
A building and pest inspector should examine all the accessible areas of the property, which includes the exterior and interior of the real estate. This also covers all the roof space, the underfloor space, the roof exterior of the property. The actual site of the property should also be inspected.
Aside from checking the physical condition, the property inspection will also check if termites and pests are also present.
Your building inspector will also check the condition of the following parts of the building:
- Fencing
- Retaining walls
- Garage
- Steps
- Toilet
- Garden shed
- Driveways
- Laundry
- Walls
- Paths
- Surface water drainage
How long will an inspection take?
Generally, inspections take between one to two hours to carry out, but this can greatly vary depending on the size of the property.
What should be included in a report?
Based on the findings of a building and pest inspection, a building and pest report is written up. Generally, a pest and building inspection report should contain the following information:
- Name
- Property address
- Purpose of the inspection
- Date of the inspection
- The extent of the inspection done on the property
- Lists of places and items that were not inspected, along with the reason why it was not included in the inspection and a recommendation for further investigation if necessary
- A summary of the general condition of the property, including minor and major defects
- A detailed list of all the problems that require repairs
- A recommendation for another inspection if needed
The inspection report will make a full account of all visual aspects of the building. Your report will include photo evidence and a professional condition report. Issues that could appear on a building and pest report include:
- Structural issues with the building
- Evidence of termite infestations/other pest infestations
- Holes or cracks in the roof or walls not visible on the surface
- Any mould, rust, stains, dampness, rotting timber, or any other kind of defect to the property
- Doors, windows, or any other feature of the home that are not functioning correctly
- Potential electrical, gas, or water issues
- Any other issue with the property identified by the inspector
Do you need a building and pest inspection before you buy?
Legally, a buyer is under no obligation to have building and pest inspections done before purchasing a property. These inspections are meant to be for the benefit of the buyer, not the seller – so you’re more than allowed to not get one done.
However, it is highly recommended by experts to have a building and pest inspection report drawn up prior to buying a home or a property, citing the reasons that have been mentioned earlier.
So, is it ever acceptable to skip a building and pest inspection? There are a few exemptions. Buyers can choose to not have these inspections done, particularly if it’s a new build or a development property. However, this is still entirely up to potential buyers and the advice they receive from their real estate agents.
Are building and pest inspections considered tax-deductible?
Building and pest inspections are not considered as tax-deductible expenses by the Australian Taxation Office.
If you buy an income-generating investment property, the related expenses with the purchase are categorised and treated differently for later repairs, ongoing maintenance, and management costs.
Most of the upfront costs are considered “capital costs”, including conveyancing costs, building plus pest inspections, and stamp duty. You cannot claim these costs as tax deductions in the year they were incurred. But what happens is that they just get included in your cost base and reduce your capital gain if and when you choose to sell the property.
When should I book a building and pest inspection?
An independent building and pest inspection should be conducted before entering into a contract.
Getting a building inspection before you sign a contract may seem early, but it’s a really good idea to get the facts straight about the property before you begin committing to the process to buy it.
Having the inspection done before signing a contract also means you as a buyer will not be doing extra work during the settlement period or worrying about running out of time during the cooling-off period. Plus, if you do discover something that makes you want to abort the sale, you won’t be in any danger of losing your deposit.
But there are some instances when an inspection is not possible pre-purchasing the building. For example, if the property is in high demand and the vendor is looking for a fast sale, there may be a slim to none window of time to conduct an inspection.
In this scenario, it is essential to protect yourself by having the building and pest inspection listed as a condition of the contract (“subject to a satisfactory building and pest inspection”). Make sure that a solicitor can check the wording of the clause to ensure you are covered.
If the property is going to auction, it’s vital to get a building and pest inspection report ahead of auction day, as buyers who are successful under the hammer are making a non-negotiable commitment to purchase the property – there is no cooling-off period.
If you neglect to conduct an inspection before auction, you could find yourself in a difficult position, as the property faults could be substantial, and buyers cannot negotiate the price down post-auction.
Remember that a property vendor is under no legal obligation to disclose building faults. That means that if you do not conduct an independent building and pest inspection prior to success at auction, you are automatically accepting any undisclosed building faults.
It’s best to talk to your real estate agent to determine when you can arrange an appropriate time and date for your building inspection. When you have your contract in place, your inspection needs to tie in with your settlement requirements.
How do I choose a building and pest inspector?
Oftentimes, sellers provide prospective buyers with a building and pest inspection report that they have conducted on the property themselves.
While it can be tempting to save some money and accept a pre-existing inspection report, it should be non-negotiable to get your own independent inspection for each property you plan to make an offer on.
Independent inspections are conducted by an impartial party, which means full disclosure and no bias on reports. It also removes the emotional aspect of the task.
A couple of hundred dollars spent on an independent inspection is a small price to pay for the peace of mind that all parts of the property have been inspected and could potentially save you thousands of dollars in unexpected repairs in the long term.
Make sure the building and pest inspector you choose is someone who is qualified. A surveyor, licensed builder, or architect will have an appropriate qualification to conduct a building inspection.
An inspector who is a certified professional will make sure that the report is prepared in accordance with Australian Standards.
The Australian Standard specifies what should be included, at a minimum, in an inspection report, but different inspectors use different styles of reports, depending on how much you pay.
If you find interpreting reports a tedious task, it’s recommended to request sample reports from potential building inspectors, so you can view their reporting style and ask questions upfront.
A good inspector will also happily discuss the results with the client and talk you through the inspection in layman’s terms before supplying a typically very technical report.
How much should I pay for these inspections?
The answer to this would depend on the company you book, the property’s location, the size of the property, and the type of package you choose. These factors can come into play and influence how much you are ultimately charged.
It’s important to remember that a building inspection isn’t really an expense. Think of it as insurance since it protects your finances from future expenses intended for repairs.
Buying a property, whether it’s a house or a building, involves thousands to millions of dollars. Don’t make the mistake of investing in a damaged property just because you failed to do the necessary checks.
When should I cancel a property purchase?
What are the deal breakers in a building and inspection report that investors should look out for?
For some experts, backing out of a contract can be a more viable option if the building and pest report shows a bunch of issues that would cost you a considerable amount of money to fix.
Serious issues such as unhealthy mould, poor electrical wiring, structural movement, severe termite infestation, or rusting that causes structural integrity to be compromised are considered serious faults that investors should look out for.
If there’s a major structural defect or pest infestation identified on the report, it’s really important that you ascertain exactly what the costs associated with it are so that you can negotiate this cost of the final selling price. However, if the seller is not open to concessions and won’t play ball, you can choose to move forward regardless or to walk away.
In the end, remember that neither your real estate agent nor your building inspector can tell you what to do. Nonetheless, a building and pest inspection report will help you make an informed decision on your purchase.
Source: Smart Property Investment