Bad building and pest inspection report

[monty python]

I'm venting my disappointment here - we have exchanged contracts on IP3, the building and pest inspection reports have come back very negative, potential structural problems with the house slab, high level of termite activity in the garden and possibly the house, generally a poorly built and poorly maintainted house. We could see the house was poorly maintained and factored that in to the price we offered to allow for a bit of a reno, however these structural issues are a deal breaker, could potentially cost a packet to put right.
So far has cost us over $1500 in lost deposit, inspections and legals.

I know we've dodged a bullet, it's just disappointing - I'm sure most property investors go through this from time to time, and thank goodness we got the inspections done.

So, please feel free to share your similar stories, and help me feel better about it!
Cheers.

 

[marg4000]

You should be shouting your joy from the rooftops.

What is $1500 compared to a nightmare experience with a faulty building?

Sounds like money well spent for me.

And surely you put the building report as a condition of the contract? You will get your deposit refunded which reduce the "loss".
Marg

 

[monty python]

Yes, I agree with you Marg. We are happy we found out the problems, but this is the 3rd house that's fallen through for us, and it is difficult to find time to inspect houses, not to mention un-fun with two kids tagging along.
So to clarify, disappointed that the house is in such a predicament, but happy that we found out in time to pull out of the purchase.
We have to go back, yet again, to our conveyancer and finance broker to tell them that third time wan't lucky for us after all!

Not sure where we stand on getting the deposit back, we signed contracts subject to cooling off, the price was agreed subject to building, pest inspections and finance. Will have to check that, thanks.

 

[wylie]

....building and pest inspection reports have come back very negative, potential structural problems with the house slab, high level of termite activity in the garden and possibly the house, generally a poorly built and poorly maintainted house. We could see the house was poorly maintained and factored that in to the price we offered to allow for a bit of a reno, however these structural issues are a deal breaker, could potentially cost a packet to put right.

If the price you offered allowed for a "bit of a reno" and the structural issues mean the price is now too high, then you have indeed dodged a bullet.

As for the bit I underlined "possibly the house", this just makes my blood boil. Finding active termites in the garden does not mean they are "possibly in the house". They either are active in the house, or they aren't. What a cop out and, yes, we have had this one tried on us by building/pest inspectors before.

Not sure where we stand on getting the deposit back, we signed contracts subject to cooling off, the price was agreed subject to building, pest inspections and finance. Will have to check that, thanks.

If your contract is subject to building and pest inspections you should have no problems getting your deposit back.

 

[RickF]

My wife and I found out about a termite problem when looking for our PPOR. We spoke to the agent about it and for a guy who up until that point portrayed himself as being very smart and up to date he very quickly played dumb on the termite issue.
Was ours the first inspection on the property? I doubt it as there were many interested parties.
We didn't put an offer in due to the way the agent was dealing with it and us. The property did sell a few months later for the asking price and I suspect the agent played dumb all along.
Just shows if you don't do your inspections you are asking for trouble.

 

[Luv2Travel]

The property did sell a few months later for the asking price and I suspect the agent played dumb all along.
Just shows if you don't do your inspections you are asking for trouble.

If you were the vendor, would you want the REA disclosing termites in the property? I have no problem with them not revealing that sort of information, if a buyer is too stingy to get reports done, then serves them right.

 

[wylie]

My understanding is that once an agent knows about something like this, they have a duty to disclose it to any future parties. Doesn't mean they all do the right thing though, and I'm not sure what penalties would apply if they were found out, or dobbed in.

I cannot imagine how a purchase would ever find out that the agent knew this anyway. It's not like the vendor would let slip.

 

[Hardy]

I just went through a similar situation and understand your frustration and disappointment but seriously, the $1500 is money well spent compared to what you'd need to pay in the future.

If your contract has that subject to building inspection clause, you should get your deposit back. Thanks to the very wise people here, I even put in "buyer's satisfaction" in that clause under the special conditions section. Got that tip from reading past threads in this forum (thanks guys!).

In our case, we had a very thorough inspection done. The guy even gave his opinion on what needed immediate attention versus future maintenance issues. We concluded it was too high a cost. So nix the deal.

What happened after that was more interesting. Deposit return was delayed because REA wanted to see if a price renegotiation was possible. No go for us. Refund cheque reluctantly sent to us then. I don't think the REA knew about the problem.

Anyway, we just found another property and the process has started again..and yes inspection organised for next week. Fingers crossed. This is going to be an IP and it is weatherboard house. I am not expecting palatial condition. if I don't hear "mate....I wouldn't live there" before listing out list of structural problems this time, I'll be in front

Good luck, MP.

 

[Amadio]

Full disclosure

At the risk of coming off as a serial bleater, can I just mention, again, that the system in some states of America that has the vendor being responsible for comprehensive, current, independent reports on pests and building is really good for everyone - vendors, buyers and rea.

 

[Propertunity]

At the risk of coming off as a serial bleater, can I just mention, again, that the system in some states of America that has the vendor being responsible for comprehensive, current, independent reports on pests and building is really good for everyone - vendors, buyers and rea.

They are moving in NSW to do the same thing, if it is any consolation.

 

[Jacque]

They are moving in NSW to do the same thing, if it is any consolation.

I'm afraid not- REINSW have been lobbying against this original recommendation by MP Matt Brown last year to pass the cost of b/p reports onto vendors, and though it presents its own challenges in terms of regulation, I still think it's very disappointing and a blow for buyers:

"The case for reform has been made more compelling by revelations the State Government has abandoned a plan to shift responsibility for property reports to vendors.
In January the Government vowed the change would be made "early this year".
However, this timetable has been junked and a new review has been commissioned - after effective lobbying by real estate agents.
The review won't be completed until December, which means nothing will change before the March 2011 election..." Full article: http://www.dailytelegraph.com.au/news/hopeful-buyers-sold-a-lie/story-e6freuy9-1225887273500

 

[Jacque]

I'm venting my disappointment here - we have exchanged contracts on IP3, the building and pest inspection reports have come back very negative, potential structural problems with the house slab, high level of termite activity in the garden and possibly the house, generally a poorly built and poorly maintainted house. We could see the house was poorly maintained and factored that in to the price we offered to allow for a bit of a reno, however these structural issues are a deal breaker, could potentially cost a packet to put right.
So far has cost us over $1500 in lost deposit, inspections and legals.

I know we've dodged a bullet, it's just disappointing - I'm sure most property investors go through this from time to time, and thank goodness we got the inspections done.

So, please feel free to share your similar stories, and help me feel better about it!
Cheers.

Hi Monty

You have my sympathies, especially when you've already been through the process and lost three 0.25% deposits to date. My recommendation for next time is to attempt to get the b/p's done asap after offer acceptance and delay the contract exchange if possible. Always harder to do this in a sellers market, but not impossible or implausible. There is the risk of being gazumped but if you have a good relationship with the agent and can be quick to organise a b/p the following day it's definitely to your advantage.

Re: disclosure. By law, and pertaining to what's known as "material fact" in the RE industry, selling agents have a duty to disclose anything relevant about the property to you that is known to them or disclosed by the vendors. Try asking questions such as the following:
1. Are there any issues with the property that we need to be aware of?
2. Is there any history of termite damage with this property?
3. When was the last pest inspection carried out? Can I please see a copy?
4. Is there anything else we need to know about the property that you haven't already told us?

If the responses are as follows (common) then continue with the questions:
1. NO. "Ok can you please ask the vendor and get back to me?"
2. NOT THAT I'M AWARE OF. "Ok can you please ask the vendor and get back to me?"

Ditto 3 and 4... I'm sure you get the picture
Asking the same question but phrased differently can also put some agents and/or vendors off guard, especially if they're got something to hide. Often, however, and in defence of selling agents, its the vendors who are attempting to hide and let's face it- for those here who've sold their house I'm sure you've covered up at one time or another and tried to minimize the not-so-obvious faults of your property by clever re-arranging of rugs, pictures, repaint and quick renos etc. However, only the agent can be prosecuted or fined for disclosure here (and it's very very difficult to prove) so it really can be a case of caveat emptor.

Always find out as much as possible about the property, ask the right questions, don't be afraid to have a good poke around (stick your head up into the manhole and look under the place if you wish) before making your offer and use the b/p results to your advantage if the problems are unexpected. Renegotiating during cool off can often result in a satisfactory outcome for all parties, and may involve either the vendor paying for the problems to be rectified or a compensation refund in the original agreed price. Above all, stay focussed and good luck with your search- there will be another property out there for you

 

[Jen_PFR]

Interesting how different people have different ideas. I've always thought that doing adequate pest and structural inspections is simply a part of the buyer's due diligence process. After all if something is found, it then is up to the buyer as to whether they want to rescind the contract and either move on, or negotiate for a lower price, taking the additional works required into account.

I should note that if a building inspection identifies problems with the slab, I personally wouldn't touch the property with a barge pole, but that's just me

 

[Jacque]

If you were the vendor, would you want the REA disclosing termites in the property? I have no problem with them not revealing that sort of information, if a buyer is too stingy to get reports done, then serves them right.

It's not about being too stingy, Biggles- it's more about smart selling by the vendor and their agent. The large majority of buyers are going to get reports done regardless so it's actually in the best interests of everyone to disclose such damage IF KNOWN to all buyers. Results in better outcomes all round, including a faster sale rather than having contracts come crashing down upon discovery (something that agents dislike intensely). Termite activity isn't the end of the world either and a good pest inspector can provide a quote for installing the correct barriers and deleting the current critters from their home

 

[brrmm]

This just happend to us as well. B&p done by a recommendation from this very forum. He advised house is sinking and that's a deal breaker. However he recommended we get advice from a structural engineer (he even knew a really great one!). We decided not to proceed with sale and advised agent/buyer. Buyer was stunned and hired a structural engineer himself. We held off cancelling contract, to see what arose from his inspection. Engineer came up with "WTF" is b/p inspector talking about. Us - wary, afterall it was buyers engineer. Hubby spoke to this engineer by phone and ended up happy with his impartiality and report.

Turns out that b/p inspectors are ***** scared of repercussions from their reports, so put escape clauses in, in the form of such negativities and suggest further investigation from structural engineers !!!

IMHO, I've never been a fan of b/p inspectors or their nonsense reports. Hubby and I are far more capable of finding faults than they are, unfortunately of course, the sale contracts state (in Qld anyway) that you can only cancel if the inspector is a member of the QMBSA. Inspectors won't/can't even get into the ceiling for goodness sake.

Fortunately the structural engineer gave the building an all clear and we went ahead with the sale.

Monty, do you think after 3 b/p falling over that something like this could be happening to you ?

 

[monty python]

Thanks for all the replies, some excellent advice in there for sure, and thanks to others who have shared their similar experience.

We have missed out on 3 properties, the second we did decide to get the inspections done before exchanging contracts, but were gazumped after agreeing the price and before inspections, so only $220 out of pocket for conveyancing costs. The REA did the right thing and gave us the opportunity to match the other offer, but ultimately we were outbid. We've left our original agreed lower price on the table in case the other buyer's finance falls over.

This most recent property we were keen to not be gazumped, so we exchanged contracts then proceeded to carry on with the inspections. $1500 out of pocket. I notice that those who said we should get our deposit back are from outside-NSW, it may be different in other states, but it looks like our deposit is forfeited (0.25%).

In future, we will proceed as Jacque has said in her post above - obviously no guarantees that significant problems won't be found during the inspections, but certainly a few steps better than we have been doing thus far.
We will also get inspections done before exchanging, these can be done next day (we used nsw pre-purchase inspections, after reading other's recommendations on this forum, highly recommend).

It is less costly in $$ terms to be gazumped, but more costly in time terms - this is where we struggle, attending inspections and the headache of dealing with agents - we are looking to buy interstate as well and we are so looking forward to using a buyers agent for this reason.

 

[monty python]

Brrrm, thanks for your reply, certainly some more food for thought.

This is the first time we've missed out due to building and pest report, others were for different reasons.
We spoke to the inspector, he said he wouldn't buy the house, the problems he saw, including major cracking of the brickwork in several places, should not be seen on a house approx 15 years old built on a concrete slab. He said he wouldn't be buying the house.

The vendor is not interested in reducing the price, fixing any problems, or supplying us with past pest control reports. We've now asked if they would get a structural engineer's report, not holding out any hope on that one either!

We don't want to throw any more money away on this house, there's always another one to be found, it's not like it's going to be our family home so we're okay with it, but it has informed our future dealings and made it clear we need a bit of a break from house-hunting for a few weeks.

 

[Luv2Travel]

It's not about being too stingy, Biggles- it's more about smart selling by the vendor and their agent. The large majority of buyers are going to get reports done regardless so it's actually in the best interests of everyone to disclose such damage IF KNOWN to all buyers.

Fair enough, I can see your point, but still don't get why it should be compulsory. The person who bought my home didn't do any inspections, so I feel if there was something wrong with it (there wasn't as far as I was aware), it is their own fault. And who decides who does the inspection, the vendor? As a buyer, would you trust the reports given to you buy the vendor, or would you still get your own done? I don't know the details of what this law involves so maybe there are reasons behind it and laws would be in place to make sure the information is reliable.

 

[brrmm]

Monty, your words are like deja vu to me !! Almost word for word from our b/p inspector. "Dealbreaker", "these sorts of cracks shouldn't be seen in house this age on a slab" "he wouldn't buy the place".........Turns out he was just covering his a*se.

 

[RickF]

If you were the vendor, would you want the REA disclosing termites in the property? I have no problem with them not revealing that sort of information, if a buyer is too stingy to get reports done, then serves them right.

I have no issue with the agent working for the vendor. They have a responsibility to get the best possible price but the way in which the agent handled this issue made it look as if they were well aware that the property has some issues that possibly can be rectified but the agent isn't looking for a win/win situation. It looked more like the agent ,who may have been under instructions from the vendor, was not going to entertain lower offers due to problems needing costly action but rather is waiting for the naive buyer who falls in love with the property and doesn't do due diligence. My wife fell in love with this house, it was very nice and cosy with a great feel about it but the issues and handling by the agent put me off.
Since then I have had agents be upfront and open with me regarding issues some properties have and that has enabled me to weigh up the costs versus the return/investment and make a decision. Maybe this is because I am now buying as an investor so the return business prospect is in the back of the agents mind and when looking for our PPOR the agent regarded us as one time only buyers.
A bit more openness and a little less deceptiveness and more buyers, less negative opinions may be possible.
I totally agree on inspections. If you don't do them you are asking for trouble. I never looked upon that inspection as costing me a few hundred but rather saving me a few thousand and a lot of stress. Therapy would cost more i'm sure!