The Impact of a Poor Pre-Purchase Building Inspection on Property Value

An inspection report can help show the real value of a property for sale.     

A pre-purchase building inspection is a crucial item to tick off your list when purchasing a property. In fact, the NSW Government Fair Trading Department has published a thorough guide about it to highlight its importance.

This report is key in determining the property value because it contains results from the inspection of the following areas:

  • The interior of the property
  • The exterior of the property
  • Roof space
  • The quality of the roof exterior
  • The condition of the sub-floor space
  • Surrounding properties within 30 metres of the building

The results from the inspection will help you decide if the purchase will go through or not. So how exactly does a poor pre-purchase building inspection affect the property value?

What is a poor pre-purchase building inspection report

What is a poor pre-purchase building inspection report?

You should keep in mind that a poor inspection will show severe damage to a building. Yes, you may often hear of minor imperfections during building inspections, but it is also vital to take note of deal-breakers.

Minor imperfections can be overlooked and may not have too grave an impact on the property value. However, when a building turns out to have serious problems, you should be wary of pushing through with the purchase. This is especially true if the situation poses a risk to the health and well-being of future tenants.

Nevertheless, you do not need to automatically back out from the purchase just because the property received a poor score in the inspection report. Instead, you can use this as a leverage to ask for a better price, discounts, or assistance from the seller in addressing such issues.

What types of defects are included in the report

What types of defects are included in the report?

Consider the following red flags when reviewing the report.

Structural defects

You must pay close attention to floor levels throughout the property. Ideally, there should not be any sloping floors, jamming doors and windows, nor major cracks inside the property.

Structural damages, depending on the gravity, are often patched up before the sale. So, as a buyer, you must keep an eye out for structural defects. Sometimes these defects can be overlooked and may become a safety hazard later.

Roof quality

It goes without saying that a well-maintained roof will keep the building occupants safe and protected. This is why a pre-purchase building report must include an inspection of the roof space and roof exterior.

Watch out for any cracks and corrosion, as well as missing tiles, broken gutters, and damaged downpipes. You should also check if the inspection mentions any leaks or water damage.

Presence of harmful substances

Keep an eye out for any presence of asbestos, especially if you are purchasing an older house. Asbestos was widely used in construction materials before Australia started to phase it out in the 80s.

Lead is another harmful substance that is commonly present in paints and plumbing materials. If lead is not properly treated, it can cause serious harm to the people living on the property.

How does a poor pre-purchase building inspection report affect the property value?

Getting a poor inspection report does not necessarily result in a sale cancellation. It all boils down to an agreement between the buyer and the seller in terms of the next steps.

Offhand, the property value may decrease depending on the gravity of the damages. Property value may also be affected depending on the repairs needed and if it will be done by the buyer or the seller.

Here are a few scenarios and steps to consider after getting a poor pre-purchase building report.

The buyer might ask to have the property repaired.

If the report includes severe damages that pose a risk to the buyer’s safety, they may request for repairs before the sale can proceed.

If this happens, the parties should amend the contract to include a detailed account of the repairs that will be done to the property. This should then be signed by both the seller and the buyer.

If you are the buyer, you may ask for the following repairs:

  • Removal of lead paint on walls
  • Removal of insufficient heating or cooling
  • Repair of damaged roof support structure
  • Repair of sagging structural components
  • Removal of moisture in walls and subfloors

Non-functioning fixtures need not be replaced. Fixtures that have reached their end date are likewise not required to be replaced by the seller.

Seller could agree to do the repairs.

To proceed with the sale, most sellers will agree to cover the repair of the defects identified in the report. This is why you should always get a pre-purchase building inspection – to cover all your bases.

Some sellers will most likely follow the recommendation of the building inspector. This way, they can quickly order the repairs and proceed with the sale.

Both parties can negotiate the needed repairs.

If you find yourself in this scenario, your seller may agree to some repairs but not all. If this happens, they may ask for a quotation of the cost of repair and subtract it from their asking price. This will then affect the property value.

On the other hand, if the seller refuses to shoulder the needed repairs, you will need to check with your mortgage institution. You must note that some institutions will not release the requested funds for the purchase unless the property’s defects are repaired.

Cancellation of purchase or refusal to repair

Some sellers may altogether refuse to do the repairs or negotiate the property value to take into consideration the repair cost. If this happens, the buyer can have the option to exit the negotiation and cancel the purchase.

Cancellations should be made by the end of the 5-day cooling-off period. At the end of the day, it is up to you to decide if you will proceed with the purchase or not.

Consider Exceptional Building Inspections for your pre-purchase building inspection needs

Consider Exceptional Building Inspections for your pre-purchase building inspection needs.

A pre-purchase building inspection significantly impacts property value. This is why it is crucial to get only a reliable inspector to do it.

At Exceptional Building Inspections, we ensure that the inspection is done thoroughly to help you negotiate the final property value. Call us at 4950 4197 or 0412 188 199 to learn more about our services.