What to look out for when buying or building a home

If you are considering purchasing an existing property or building new what do you need to know?

Buying an existing property for investment purposes or one to live in raises some issues you may wish to consider. Big bucks, big commitment and buying the imperfections that come with the property if any. “If any”, I have never come away from any building inspection without some defect list, never in the 17 years of inspecting a building. This includes properties less than six years old.

A while ago, I did an inspection for a prospective purchaser of a property where the owner wanted $5million for it (passed in at $3 million). The owner did not want me to use any electronic devices like thermal imaging or moisture meters as it may upset the electronic system in the residence. The owner stated the builder had built the house close to perfect. When I completed the inspection, I had a 1½ page list of defects. Using the electronic devices added several non-visible defects to the list. Price does not matter when purchasing an existing property.

Some tips to consider when buying a property:
• Why are you going to buy this property, will it provide the necessary functions you want it to achieve, is this a good location? Is making the purchase likely to appreciate, schools and amenities, write out the list to tick off.

• Read the offer and acceptance before signing it. Understand it, know what you are signing. Is there something you want to change in the document as you may have some concerns with one aspect of the property or your immediate sale of the existing property has not happened as quickly as you expected? Your partner loves the house, keep the emotions in check, if it is better than the present abode, of course, they are going to love it!

• Most offer/acceptance documents in WA state only when having a building inspection a structural inspection only. “Tanking” in a shower recess causing rising damp to the surrounding walls is not deemed structural. Bathroom or Ensuite refurbishment is expensive. Why not cross out the structural inspection and put down “the outcome of a general building inspection”. Watch the real estate agent shift in their chair on that one. They may say cannot do that or just no, but legally I believe they cannot stop you. The real estate agent is obliged to take to the vendor any offer; it is then up to the vendor to accept or not. You can change the conditions of the offer/acceptance contract in accordance with the Act.

• Look beyond the presentation as this is likely the best it may have looked if it has been all patched up and repainted. If I walk into an older styled house and it looks like new the alarm bells go off straight away. And I may say it normally is with good reason. The smell of a house is a great indicator.

• Do I know what I am looking at or looking for with the condition of the house?

• Big bucks, big investment, what risk, do I require a building inspector?

• If I source a building inspector, I need to ask if Professional Indemnity is one of the insurances they carry. How long has the inspector been inspecting, knowledge and skills, what gets inspected, when do I receive a report? Share any concerns you may have as you have likely inspected the property already. They haven’t.

• Negotiate the best deal you can if it’s the property you want. I have certainly used the real estate agents services, and some have earnt every bit of their commission. At one stage it came down to the dishwasher on one property. I did not back down, and we still live in the property to day. The dishwasher has been upgraded to a better model. Just know you’re limits. There is plenty of real estate out there.

• Know when the property was built. Is it still in the six years statutory warrantee period, if it is there is less risk in the purchase as the builder still has obligation under the Building Act. The builder may say only structural, but this is not right. Gain a copy of the building agreement with the drawings if possible through the agent from the present owner. Everything should be listed of what was provided by the builder.

Some of the issues you may want to consider when building:
• If you are going to build with a project builder or sit down with an Architect to design your home devote the level of time at the front end of the process to get it right. There is ample computer software out there now to make the house virtual reality. Work through every room, have a sense of size, how is the room going to function, the type of furniture and location. Look at the design to see how the whole home is going to function.

• What can you afford and what is included in the total cost of the build. Then what cost are the extras to move in and for landscaping or whatever. The budget for a percentage of the cost of the build for unforeseen extras.

• If you have a pre-start and this is critical as this is where it can all go pear shaped if something is included it has to be written down in the building contract. The person states it is included stop and ask where ensure it is documented. When you receive a draft of the contract ensure what was discussed at the meeting has been included. If it goes back for further changes, take the time and go through the whole document to ensure no other part of the document has been changed. I recently sat down with a client to review the contract. The builder had made a big song and dance that they had given them an extra $10,000 worth of freebies, when we worked it through the builder had only given them $2,500 as they had removed $7,500 in other areas.

• Minimise variations. Variations for additional works during construction are significantly more expensive after the contract has been signed than getting it right before signing.

• Whenever you communicate to the builder or any of their representatives even if it is a call from the builder ensure you follow up in writing and setup any emails to provide confirmation it has been read. If it is not written, it is hearsay. Hard to verify in court. Even run a diary making notes if you can, time and date. I have a camera that is date and time stamped.

• The builder is only likely to provide Architectural drawings with the building contract documents. If the Architectural drawings have limited engineering design, there will also be Engineering drawings. Ask for a copy of them also as you have paid for them and they are part of the building contract documents submitted to achieve the building permit.

• If engaging the services of an independent building inspector, it is mandatory to advise the builder. Under the Building Act, a building inspector has right of entry.

• Inspection during the construction period instead of one at Practical Completion stage is the best option. It is easier to identify issues during each stage of the construction than one at the end. Brick plate height, roof structure and then PC at the end should be the minimum number of inspections for a single level build. More inspections should be considered if more than one level.

• The relationship with your builder should be approached in a businesslike manner. The building industry can be either in a boom or bust situation. The last boom I worked through produced a long period of poor quality workmanship as there was a lack of trades. Today it is a very competitive market, and builders are buying your business. When making a progress payment ensure the works have either been completed or are just about to be completed. Building indemnity insurance only covers first $100,000.

• Do not hold up payment if there is a dispute as this can attract interest penalties against you. A building contract has a construction phase, and during the construction, you have a financial process, and any disputes have a disputes process. The construction and financial process run together and any disputes are general run as a separate process. If you hold up the financial payment process due to dispute, you can be in breach of the contract.

Work with your builder as the relationship requires surviving several years. If you require technical support act quickly as it can spiral out of control just as quick. The majority of builders want to do the right thing if you are not happy to discuss it in an amicable businesslike manner. The construction of your new home is built to tolerances; the building industry tends to build to the minimum standards with the greatest allowable tolerances unless specified differently in the contract.

For professional advice you can trust, please feel free to contact Craig Meyn from All Set Services
Contact details: 0417 960 906 or scm@allsetservices.com