What reports might a vendor supply?
They comprise a number of important pre-purchase property inspection reports, including:
1. Building inspection report
2. Pest inspection report
3. Survey report
For more information check Fair Trading NSW website …
The usual protocol is for the potential Purchaser to commission these reports by independent inspectors prior to settlement, in fact even prior to making an offer on a property as the results of the reports may influence either the decision to purchase or the purchase price.
However, new changes to the real estate sector that came into effect in July 2016 require real estate agents to disclose all reports taken out by a vendor or potential buyer and this has lead to some agents and vendors supplying reports that have been found to be not accurately reported.
According to the Minister …
“Prospective homebuyers in NSW will soon have greater access to discounted pre-purchase inspection reports, with reforms announced today by Minister for Innovation and Better Regulation Victor Dominello.
Mr Dominello said amendments to the Property Stock and Business Agents Regulation 2014 would help to reduce duplication of inspection reports, promoting peer-to-peer services that offer discounts to consumers.
The changes will require real estate agents, when listing a property, to disclose all inspection reports taken out by a vendor or potential buyer. Agents will need to provide buyers who take out a sales contract with the names of companies which have recently completed inspections of the property.
The register will also need to indicate which firms enable peer-to-peer sharing discounts.”
Refer to the report …
LET THE BUYER BEWARE – CAVEAT EMPTOR …
No doubt due to the changes (as above) some agents are having pest and building reports carried out for the vendor and made available to a prospective purchaser at ‘discount prior to sale’ that are NOT accurate.
While these ‘discounted’ vendor supplied reports may be considered an advantage for the purchaser to reduce pre-purchase inspection report costs, it is a very dangerous practice to rely solely on them.
Of course not every agent or vendor may supply an inaccurate report but the reality is that unless the purchaser ensures the report is accurate through their own due diligence and using their own inspectors then they are leaving themselves open to a potential ‘can of worms’ AFTER settlement.
POTENTIAL PROBLEMS WITH A VENDOR SUPPLIED REPORT …
Agents may use inspectors who ‘go easy’ on properties and not report defects as critically as they should be reported.
If the inspector does not highlight an issue that deserves to be taken seriously and makes the inspection report look better than it should be then this type of report will favor the vendor and not the purchaser.
Recent stories have emerged from the industry about purchasers who initially opted to rely on discounted vendor supplied reports but then decided to have independent reports carried out being advised that the first reports did not list major defects as major but only minor and in fact some significant defects where not even reported.
Obviously these purchasers were spared after settlement problems, but how many other purchasers are opting to rely on discounted vendor supplied reports and are being caught?
PLEASE NOTE: Vendor (supplied) Reports are not the same as:
Garth Brown’s Comments
For most people purchasing a property is the largest capital investment they will make and it would be a mistake to rely solely on what the vendor or real estate agent provides with reports, it is up to the buyer to commission their own report through an independent inspector if they are seriously considering buying a property.
The potential for serious conflicts of interest is also present if the vendor and agent are relied upon to supply pre-inspection reports as it is obviously in both their interests to sell a property that may have a defect/s that hasn’t been revealed.
We will have to wait and see what develops in the industry as currently the 2016 changes are opening up opportunities for unscrupulous dealings and unless potential purchasers are aware of the danger many will get caught.
SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
PREFER TO SUBSCRIBE VIA EMAIL?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.