You’ve done your research, found the perfect property, exchanged contracts, and waited patiently throughout the settlement period.
Now there is just one last hurdle: the pre-settlement inspection.
Note: The settlement period on a property in Australia is anywhere between 30 and 90 days, and that’s a long time.
So you shouldn’t assume that the property is in the same condition in the week leading up to settlement as when you exchanged contracts; you need to inspect it again.
What is a pre-settlement inspection and why is it so important?
A pre-settlement inspection, sometimes also called a final inspection, gives you the opportunity to check that everything listed in the sales contract is still there and that the property is in the same condition as when you signed the contract.
This can be as simple as checking that the owner, or tenant, hasn’t vacated the property and taken something like the oven or the carpets with them.
Or that the lawn hasn’t died or the pool turned green.
It’s also helpful when obligations arise from special conditions contained in the contract.
For example, the seller has agreed to fix a leak in the roof, in which case you’re entitled to check that it has been done before the settlement date.
If the property is not in the same state as when you signed the contract then you’re entitled to ask the vendor to make repairs before property settlement.
When do I need to do a pre-settlement inspection?
Each state has different laws regarding pre-settlement inspections.
Some, like Victoria, stipulate that buyers are entitled to inspect the property at any reasonable time during the week before settlement; others, like South Australia, stipulate that buyers are only entitled to one if they specifically stated in the contract that the sale was subject to one.
However, whichever state you live in, you’ll be expected to carry out this inspection at a “reasonable time” during the week before settlement.
It’s best to do a pre-settlement inspection in the week leading up to settlement day - in fact in most circumstances, the inspection will occur within 3 days prior to settlement.
This way if anything needs to be fixed - or a new deal needs to be negotiated - there may be still time to do so before settlement.
Doing the inspection too late (in the hours leading up to settlement) leaves no room for repayment or renegotiation if needed.
When the pre-settlement inspection is taking place, it’s a good idea to have the contract of sale so everyone can make sure the inclusions are all still in the property and the exclusions have all been taken away.
It also means you can check that any special conditions have been met if there were any included in the contract.
6 key things to inspect at a pre-settlement inspection?
So it’s time for your pre-settlement inspection but you’re not exactly sure what you’re supposed to be checking.
Here are 6 things to keep an eye out for.
1. Agreed repairs
You should have already done a comprehensive inspection to make sure things like fixtures, taps, door handles, locks, appliances, etc., all work.
For anything that doesn’t work, you can ask for it to be repaired as a condition of your contract.
Put simply, at the pre-settlement inspection you need to check and make sure that any repairs you’ve agreed on with the seller have been made.
2. Electricals and Plumbing
This is a good time to check (or double-check) that all the electricals in the house still work.
The switchboard, doorbell, ceiling fans, light fittings, dishwashers, ovens, stoves and other kitchen appliances, air conditioning, heating units, and exhaust fans for example.
Also, not to mention ensuring that any automated garage door and external gates that need to be buzzed open are also in working order.
Tips: Don’t forget to look for leaking taps, to ensure the sink is draining well and that the toilets are flushing correctly.
3. Rubbish
Any rubbish, junk, or even furniture left behind becomes your responsibility once settlement day has passed.
So you’ll want to use your pre-settlement inspection to ensure that the vendor has removed everything they need from the property when they moved out.
You’ll also want to ensure that the rubbish bins are actually present and in good condition.
4. Fixtures and fittings
The buyer and vendor will have agreed on which parts of the house are and aren’t included in the sale.
For example, the oven might be staying, but the fridge isn’t.
Or the ceiling fans are included, but the seller is taking the curtains with them.
So you’ll need to check that all the agreed items are either present or removed as you’ve agreed.
5. Landscaping
Use this time to make sure the garden, garden beds, courtyards, terraces, and anything else around the home have been maintained properly.
This also includes the swimming pool, if applicable.
Tips: Don’t forget external taps and lights as well.
6. New damage
It’s possible that the property has had new damage since the previous inspection.
When the seller was moving out of the house, they may have scuffed floorboards or dented walls, or accidentally broken a window or door.
It’s also possible that something else altogether has happened, like a burst water pipe that has been flooding the house while no one has lived there or extreme rainfall has created a new leak in the roof.
Note: If you don’t identify this new damage in your pre-settlement inspection, then after settlement it will likely be your responsibility.
What happens if I find a problem at my pre-settlement inspection?
So you’ve done your pre-settlement inspection and you’ve encountered a problem - now what?
If you find something is broken or in a worse condition than when you signed the contract then it needs to be raised with your conveyancer or solicitor immediately.
They will then try to negotiate it as a special condition on the contract, which means the vendor must fix it before settlement.
Alternatively, if it cannot be patched up in time for settlement, the sale price can be renegotiated and reduced to cover the cost of repairs.
What is a building inspection?
Just to be clear, another inspection that we usually recommend as an element of the transaction process for homes is a building inspection which can be completed before or after the contract is signed depending on which state or territory you are buying the property.
In other words, this occurs early in the process, not at the end lie the presettlement inspection
The caveat to the timing of a building inspection is when a property is sold at auction, which necessitates all building and pest inspections to have been completed beforehand.
Sometimes referred to as a standard property report or building inspection, a pre-purchase building inspection report is a written account of the condition of a property.
It will outline any significant building defects or problems such as rising dampness, movement in the walls (cracking), safety hazards, or a faulty roof to name a few.
It is usually carried out before you exchange sale contracts so you can identify any problems with the property which, if left unchecked, could prove costly to repair.
However, in Queensland, for example, a Contract of Sale usually allows seven days after signing for these inspections to be completed and for the results to be satisfactory to the buyer.
If not, the buyer can negotiate a new price or repairs with the seller or can potentially walk away from the deal.
Given the expertise required to complete a thorough building inspection, buyers should always use a professional.
Of course, there is a cost involved – in the vicinity of $500 to $600 – but when you consider the alternative, which may be buying a property riddled with structural problems, it's a small price to pay to prevent you from buying a lemon.
Note: The pre-settlement inspection is a very important part of the process of buying a house.
Without it, you’ll not have seen the property for several weeks… which means you could be subject to a nasty surprise come moving day.
From rubbish removal, repairs, and any new damage, and checking everything in your agreement has been done, included, or removed - a pre-settlement inspection is your right.
And if you don't exercise it, and you find the property in bad shape or missing fixtures or fittings after settlement, it is usually too late to do anything about it and no one wants to be in that predicament.
