The process of exchanging contracts is formalising the sale agreement between purchaser and vendor. Before you exchange contracts, your purchase of the property is not guaranteed, and the vendor may sell the property to any willing buyer (regardless of whether or not you’ve paid a holding deposit).
For more information regarding the process of exchange, see: Exchanging contracts for purchase of a property.
With the possibility of having another buyer beat you to exchange contracts with the vendor, many purchasers race to exchange without doing the appropriate due diligence. Purchasing property is a big financial decision, so it is important to make initial inquiries before you are bound to the purchase (which may save you nasty surprises down the line). With various different inquiries that may be undertaken depending upon nature of the property it is important to discuss your options with your solicitor or conveyancer before exchange, however we explain three main inquiries that a purchaser may wish to undertake:
- A survey report;
- A building and pest report; and
- A building certificate.
A survey report
A survey report is a document prepared by a registered surveyor who physically surveys the land to confirm the lot size and boundaries of the property. This report also details the improvements (structures) on the land, shows the position of the fences on the property in relation to the boundaries, and observes whether there are any encroachments on the property.
Note: an encroachment is when a neighbouring structure is on or overhangs your property.
It should not be presumed that the boundary fence was erected on the boundary line. An appropriate determination of your boundary line will mitigate potential disputes with neighbours, but also assist in the future building of driveways or structures.
A survey report can also determine whether the position or size of the structures on the land are compliant with Council consents and requirements. Should a structure or structures on the property fail to comply, the Council may issue a work order or demolition order in the future.
A building report
A building report is a physical inspection of the property’s condition for the purpose of identifying defects, including both the interior and exterior. A building report should review all spaces including the roof void and subfloor, and detail matters such as structural movement or cracks, water penetration, and significant deterioration in the building elements.
The presentation of any unknown defects could allow the purchaser to negotiate a lower purchase price, a condition for repair, or alternatively if the repair is too arduous or costly, allow the purchaser to walk away from the property without being bound by to the defects.
Purchasers may also wish to obtain an additional pest report, which inspects the property for current or former infestations of pests such as terminates. The presence of infestations can compromise the structural integrity of a property or pose the risk to the health of the occupants.
A building certificate
A building certificate is a certificate issued by the Local Council, who attends the property to inspect whether any structures on the property require a work order or a demolition order. If a building certificate is obtained, the Council is therefore confirming that all structures on the property are satisfactory to the Council and that the Council will not take any action against the existing structures for a period of 7 years. Please note, however, that this does not guarantee that the structures are Council approved.
The benefit of the certificate is assurance that the structures comply with the relevant legislation and standards.
Pre-purchase inspection reports come at an additional cost, however can save you unexpected payments in the future. When you find a property you’re wishing to purchase, it’s never too early to speak to your solicitor or conveyancer about the appropriate due diligence.