Buying a house?  Why you should include a Building Report condition

Congratulations!  You’ve finally found the right property and had your offer accepted!  Hopefully, you’ve made the offer conditional upon receiving a satisfactory building report.  That means that you will now have up to 15 working days to get the inspection done.  While this is an extra up-front cost, we recommend our clients do this as it could save time and money later down the track.

A building inspection needs to be undertaken by a licenced building professional and include a detailed written report, if you wish to rely on it.  While DIY is in our DNA and we all have a knowledgeable tradie mate, this is the time to call in an accredited property inspector with appropriate indemnity insurance.  They will undertake a thorough inspection and supply you with a written report.  The report will identify any issues that need remedy, risks, or upcoming maintenance required.  Sometimes the real estate agent might supply you with a property inspection report which is great, but if that report fails to identify something that later costs you money to fix, you can’t hold them accountable. 

What happens if the reports identifies issues?  Don’t worry, you have options:- 

Option 1:  You can use the building report to try and negotiate a reduction in price to cover these issues, you can then attend to them following settlement yourself.  This is useful if you have a tight turn-around for settlement or you are wanting to make changes to the property anyway.  You just need to consider if the change in price will impact your finance and disclose any issues to your lender.

Option 2:  If you don’t want to do the work, you can also negotiate that as a condition of settlement the vendor fixes the issues.  This is where we step in and negotiate on your behalf with the Vendor’s Solicitor.  In this case the purchase price will remain the same.

Option 3:  Cancel the Agreement – if the issues are extensive enough that you decide you don’t want to go through with the purchase, or you can’t get finance due to them, then you can cancel the Agreement and any deposit paid will be returned to you.

Before the Vendor will negotiate or agree to cancel the Agreement, they will want to see the written building inspection report to verify your claim. 

The good news is that, in our experience most Vendors are happy to negotiate, as once they are aware of issues, they are obliged to disclose these to other potential buyers.  It’s a buyer’s market right now and Vendors don’t usually want to risk losing a sale.

We are always very happy to provide advice before you sign an Agreement for Sale and Purchase

Elyse Crowther is a Registered Legal Executive for ClearStone Legal.

p: 09 972 1920

e: elyse@cslegal.co.nz