Finance Property How to avoid making a dodgy property purchase
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How to avoid making a dodgy property purchase

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Here is the thing about buying the house of your dreams: it won’t be perfect.

That doesn’t mean the kitchen will need a refresh or the bathroom could do with a lick of paint, but the wear and tear that is invisible to the naked eye could be very, very costly – the rusty pipes, rotting stumps, poor insulation or even pest infestation.

Naturally, some houses are in much better condition than others, but chances are a couple of inspections before the auction won’t discern between those in need of a minor makeover and the ones hiding major structural problems.

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So how do you avoid buying a lemon?

termites

Bring in the experts

Real Estate Institute of Australia President, Peter Bushby, says it’s “critical” buyers do their homework and obtain a pest and building report before they buy.

While in Tasmania – where Mr Bushby is based – there are no termites, the same cannot be said for the warmer climates.

“They are a big problem in Queensland and they can really get into the wood in homes,” he says.

Termite damage can set an owner back tens of thousands of dollars, so a pest inspection is well worth the peace of mind, he adds.

Property advisor and Director of Metropole Property, Michael Yardney, agrees that expert pest and building inspections are essential before purchasing.

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“It is so important to get experts in because what you see with your naked eye can be misleading,” he says.

Damage control

In seaside areas of Australia – notably Elwood in Melbourne, and Bondi and Coogee in Sydney – some properties suffer from “concrete cancer”, where the concrete reinforcement has rusted away.

This is something a building inspector would pick up straight away, along with plumbing issues, problems with electrical wiring, rising damp, and in the case of older homes, the need for re-stumping.

“You may see a crack in the wall, but you won’t know – unless you are a tradesman – whether that is a structural defect or not,” says Mr Yardney.

New is not necessarily better, either. Mr Yardney cautions against buyers assuming they won’t need a building inspection with a new home because even if they are covered by a three-year warranty, “it can be very difficult to get the builder back out to the property if there are problems”.

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But it will cost you

A thorough building and pest inspection can cost anywhere between $400 and $800 per property, which can quickly become an expensive experience when trying to purchase a home in a hot auction market, such as Melbourne or Sydney.

Contracts are unconditional when houses or units are sold at auction, and many buyers find the cost of commissioning building and pest inspections every time they want to bid on a property at auction prohibitively high.

“There is no way around paying the costs of the inspections really,” My Bushby says. “Even if a seller provides their own condition report, most people are going to be sceptical about how independent that information is.”

But, as Mr Bushby points out, conditions are much more favourable for buyers in markets where private sales dominate, allowing buyers to make an offer on a property subject to the successful outcome of an inspection.

A bad report is not the end of the world

Mr Yardney says he would walk away from a property purchase if an inspection revealed major structural defects or an active pest infestation as they are too expensive and time-consuming to fix.

It is rare, however, for a house to achieve a perfect score card, and Mr Yardney says buyers should work out how much the defects will cost to fix, and use that information to negotiate on price.

“The likelihood is, especially with older properties, there are going to be some dints and scratches. The main thing is that you know what you are getting yourself in for,” he says.

“You want to make sure there aren’t any surprises.”