Is it important to obtain a pest and building report before purchasing property?

Gambling, not buying

byJohn McGrath,

Every now and then I hear about people buying a property they saw for the first time on the day of the auction.

Usually, the story goes that they turned up 20 minutes before the auction, had a look through, registered to bid and bought the property.

These people are taking an awfully big risk. Without doing a pest and building report, you’re gambling, not buying.

Properties can look fine on the outside and still have major structural defects and costly problems like rising damp and termites. A good look around at an open inspection is not going to give you the information you need – you’ve got to hire a professional to check things out.

I’ve heard the argument that some buyers have spent hundreds (if not thousands) on several pest and building reports and they still don’t have a new home to show for it. I understand that it feels like money wasted when you do the report then miss out on the property at auction, especially if it happens again and again.

I’ve also heard the argument that if five other people have registered to bid then it must mean the property is okay, because surely one of them has done a pest and building report.

This is a gamble not worth taking.

When you’re looking at spending hundreds of thousands of dollars, if not millions, on a new home or investment, you’ve got to factor in costs such as pest and building reports on one or more properties. It’s just too important to skimp on.

New Archicentre statistics for 2010 reveal 35 per cent of all homes have some sort of fault. Now, these faults are not necessarily big and expensive faults, but the point is almost four in 10 properties you inspect this weekend will have some sort of problem.

In my experience, water is the major enemy, whether it’s natural water penetration, rising damp or a leaking roof. Rising damp can be an issue particularly for Victorian-era terraces. Termites are also attracted to damp areas, such as underneath a laundry with a leaking washing machine. A termite infestation could potentially cost you tens of thousands of dollars, which makes the cost of a pest and building report pale in comparison.

Now, when problems are identified in a pest and building report, you don’t necessarily have to walk away. If you really love the home and you think you can get it for a good price, perhaps you’ll be able to wear the cost of getting major things fixed. (And maybe that’s what those five other bidders at the auction have done, which is why you can’t rely on other registered bidders as an indication that the property about to be auctioned must be okay.)

One more point. If you’re looking at buying a renovated property, it is a legal requirement that the seller provide you with their Home Warranty Insurance if the property is being sold within six years of the renovation. This pertains only to renovations above $ 12,000 in NSW – it can vary in other states so check with your Fair Trading Department.

Published: Wednesday, June 01, 2011, switzerbroker