What happens if a pre-purchase inspection unveils an issue I can't afford to fix?

Posted by Brad Porteus on 13 November 2014

Tags: , ,

  • Important tips for property buyers when writing an offer
  • The Sale Contract Building Inspection Clause

If you’re making an offer on a home and have yet to hire and professional to carry out your pre-purchase building inspection, what happens if the inspection report shows a huge defect that you can’t afford to fix? Is the contract still binding?

It’s extremely important to know about the ‘sale contract building inspection clause’. When writing up an offer to purchase a property and you intend to have a Building inspection performed on the property by a professional consultant, care needs to be taken when wording the clause for this inclusion.

The following information can help you through the process:

Placing your offer

Once you have found a property and you intend to write up an Offer to Purchase contract, follow these tips:

Slow down

This document does not need to be filled out within 5 minutes of notifying the Real Estate Agent!

Building inspection inclusion statement

Include a ‘building inspection inclusion statement’, which would look something like this:

“Subject to satisfactory Building inspection report. Satisfactory meaning, that there is no structural or significant defects found”.  A significant defect meaning a building maintenance item that requires extensive repair at considerable cost”.

Beware Annexure Document Language

It is not recommended to agree to Annexure documents that state “the Building Inspection clause is complete and the property has no structural defects”. This is risky unless the property has had a pre purchase building inspection done, and you are happy with the findings of the report, prior to the agreeing of the Annexure. These Annexures do not protect the Buyer and can leave you open to repairing costly defects from your own pocket.

Read Carefully

It is recommended that you carefully read the Offer to Purchase Contract and that you completely understand the document before releasing to the Real Estate Agent. Once this document is signed amendments to the document will usually not be possible.

Seek Legal Advice

It is recommended to seek Legal advice when purchasing a property, as your Lawyer can write up a more suitable sale contract or at least insure you are protected when completing the standard sale contract document.

Upon Receipt of your Pre Purchase Building Inspection report

If structural or significant defects are identified by the Building Consultant, and you have included the above clauses in your offer, then you have a couple of options:

Repair by seller

The first is requesting the seller repair the items. If they are happy to do so we would recommend that all building defects be repaired by Registered Builders and you obtain receipts for the repairs as your insurance policy that the repairs have been successfully completed.

Re-Negotiate a price

The second option, should the seller be unwilling to carry out the repairs before selling, is that you may be able to re-negotiate the sale price to cover the building repairs required.

We recommend obtaining cost estimates for the repairs from Registered Builders prior to re-negotiating a new sale price. This allows you to select a reputable Registered Builder to repair the defect rather than hoping the seller completes adequate repairs.