Final settlement inspections

[Brettus]

Hi All
Settlement on my first IP is in a few weeks so I will be called on for a final inspection before this happens.
Can some more experience investers give any tips as to what I need to be looking for or asking??
Do I have the right to make some noise and insist on repairs if I see anything that wasnt there when I purchased it?
Surely there is some tricks or strategies used to benefit the buyer??
If you dont want to let out your hard learned secrets I can bribe with beer.

 

[The Y-man]

Make it as close to settlement as possible.

Connect power and gas as applicable.

Take a camera.

Test EVERYTHING - lights, powerpoints, hot water, toliet, cooktop/stove, heating, fans, locks....

Note anything that doesn't work and take pictture.

The Y-man

 

[battler]

Can some more experience investers give any tips as to what I need to be looking for or asking??
Do I have the right to make some noise and insist on repairs if I see anything that wasnt there when I purchased it?

If this is a new building everything has to work.

If it is secondhand, and you put a clause in the contract after inspecting it at purchase, stating that everything must be working at settlement, then it has to be.

If however something wasn't working when you made your offer, then you have offered a price to purchase it in the condition that it is in, and the vendor only has to hand it over in the condition that it was in when you agreed on the price.

Brettus check your PM

 

[marg4000]

The final inspection is simply to ensure the property is in the same condition as it was when the contract was signed.

Just remember that it WILL look different because the previous person's possessions have been removed. If that shows things you missed first time around (maybe due to a strategically placed mat or carefully arranged furniture) then you have no comeback. Even a picture could have been hiding a hole in the wall.

It is not a second chance to go through with a fine tooth comb and look for any further faults you may not have noticed in the excitement of finding the ideal property.
Marg

 

[Dazz]

Do I have the right to make some noise and insist on repairs

Depends totally on what you wrote in the Sales Contract, and more importantly what the Vendor agreed to and signed off. If the contract is completely unconditional at this stage, well, it's unconditional.


Y-man has written a lot of good stuff there. If you do all of those things you'll be well ahead of most folks. I'd also suggest doing it as late as possible. Take a hair dryer (cos it's not heavy or awkward) for checking the powerpoints out.


Make sure your settlement agent or solicitor does a final title search JUST prior to settlement so as to avoid any nasty last minute caveats.


You didn't mention what sort of IP it was, or even if it was currently tenanted or vacant possession.....so that's about it without more info. I assumed a vacant house, but it could be a tenanted unit with installed little granny for all we know.

 

[Perp]

It is not a second chance to go through with a fine tooth comb and look for any further faults you may not have noticed in the excitement of finding the ideal property.

Marg, you took the words out of my mouth. I also suspected from the wording that this is what Brettus wants to do. Good try, but you can't, Brettus.

Take a hair dryer (cos it's not heavy or awkward) for checking the powerpoints out.

So let's say you find a broken power point, so what? If you have an unconditional contract, unless you'd tested that power point prior to purchase and it was working (which I'm assuming isn't the case), the vendor's not obliged to fix it anyway, are they?

Add to that the fact that the vendor has no obligation to leave electricity connected for you, so you may have no way of checking anyway, and I think it's rather pointless, but hey, maybe that's just me.

If there's goodwill, the vendor may want to fix it - or offer a rebate to cover the cost - to be nice and because they're concerned you'll try and delay settlement, but they're under no contractual obligation to fix it.

Make sure your settlement agent or solicitor does a final title search JUST prior to settlement so as to avoid any nasty last minute caveats.

Oh yes.

 

[Dazz]

You're exactly right ozperp, and that is why I said if the contract is already unconditonal, then it doesn't matter.

I've never "exchanged" contracts like you do in NSW and Vic, so don't fully understand what that means.

What we used to do here in WA when buying houses, is usually put a clause in the offer document that states "The Vendor warrants that all plumbing, electrical and lights, together with any reticulation equipment, is in good working order at settlement."

This clause obviously stays on until you swap the title deed for cash at settlement.

Absolutely pointless taking a ladder and hair dryer around to every single house you inspect before you get it on contract. Talk about shoot yourself in the foot prior to even opening negotiations !! You might save $ 150 whilst costing yourself 20K on the argy-bargy.

You rightly point out, that if it is vacant possession at settlement, most of the time the electricity and the gas has been turned off, and it takes a few days to re-connect, so most of the checks are pointless anyhoo.

....but then, if you are buying say a 630K property, and you negotiated well and got it for say 620K.....does it really matter that an $ 80.00 power point was missed, or even a $ 1,200 bore motor is stuffed ?? As with everything in this game we play, the big bikkies are up front in the initial chat about the dirt.

 

[The Y-man]

So let's say you find a broken power point, so what? If you have an unconditional contract, unless you'd tested that power point prior to purchase and it was working (which I'm assuming isn't the case), the vendor's not obliged to fix it anyway, are they?

The most issues I have found with power points have been brand new properties where the wiring hasn't been completed. We bought an apartment off the plan, and found on completion that half the apartment didn't have any power.... Once the power was connected, we discovered the blown halogen downlights....

Building inspections generally test powerpoints, so again a record exists of the "condition as at time of signing the contract".

I wish I had thought of the hair dryer - probably easier than the lampstand....

Things we have found broken at settlement:
1. hot water units (one blew up on powering up due to rusty connections, another wouldn't stay on)
2. oven door (looked ok, until you opened it)
3. windows
4. aforementioned electrical wiring

Cheers,

The Y-man

 

[Perp]

Building inspections generally test powerpoints, so again a record exists of the "condition as at time of signing the contract".

Fair point, thanks!

 

[Brettus]

I did put a clause in the contract referring to the building report but that only said I had the right to end the contract if a major structural defect is found.
I think if I find a defect like the toilet plumbing is completely blocked I would have a right to negotiate it being fixed as it says in the building report that the toilet system is in good working order.

Is it possible to put a clause in the contract saying you want the power to remain on?

I should add that its an old house which is owner occupied until settlement.
Maybe I can arrange for the power to stay on and simply transfer into my name as I want to get in there immediately for works to start....

 

[wylie]

Generally the power company does not turn the power off immediately, so you should have a few days' grace (sometimes a lot longer in our experience).

 

[Dazz]

I did put a clause in the contract referring to the building report but that only said I had the right to end the contract if a major structural defect is found.

That's the way most of those clauses are worded. It's either one of two things....you're happy and the clause gets deleted, or you're not happy and the contract is at an end. I've never read a clause, or seen a Vendor accept wording to the effect that if you find something wrong, the Buyer has the right to argy-bargy the agreed price downwards.

As usual, when push comes to shove, it always comes down to how badly each party to the contract "needs" the other to go ahead.

I think if I find a defect like the toilet plumbing is completely blocked I would have a right to negotiate it being fixed as it says in the building report that the toilet system is in good working order.

Unless the clause specifically gives you that right, you may find you do not have that right.

Is it possible to put a clause in the contract saying you want the power to remain on?

One can put as many clauses in the offer document as one likes. Whether the Vendor is silly enough to accept any and all such wording is up to them. You'd be surprised what most people will sign without fully reading and understanding what they are signing.

 

[Perp]

I think if I find a defect like the toilet plumbing is completely blocked I would have a right to negotiate it being fixed as it says in the building report that the toilet system is in good working order.

But the building report was commissioned by you; the vendor didn't warrant the accuracy of the building inspection report.

I think you'll find that once you have an unconditional contract to purchase, especially with that awful "structural defect" clause (which is nigh on useless - you obviously let the agent draft the clause, not a solicitor), you have very little right to get any price reductions or anything fixed.

If you're lucky and the vendor agrees that something has broken between contract and settlement, then you may have some success, but I wouldn't be surprised if the vendor just says "it wasn't working; the building inspector got it wrong".

 

[battler]

I've never "exchanged" contracts like you do in NSW and Vic, so don't fully understand what that means.

What we used to do here in WA when buying houses, is usually put a clause in the offer document that states "The Vendor warrants that all plumbing, electrical and lights, together with any reticulation equipment, is in good working order at settlement."

This clause obviously stays on until you swap the title deed for cash at settlement.

If it is secondhand, and you put a clause in the contract after inspecting it at purchase, stating that everything must be working at settlement, then it has to be.

TPFKAD, In your view, are these statements, to all intents and purposes the same. This clause in my case is put in the offer document.

Thanks.

 

[marg4000]

Is it possible to put a clause in the contract saying you want the power to remain on?

Once settlement goes through the house is yours. Why should the previous owner pay for your power usage?

Power companies require prior notice and often won't guarantee to cut the power off at a specific time, usually wanting a 2-3 day range.
Marg

 

[boods99]

From my experience re electricity accounts, the power does not actually get cut. However, once informed of the settlement date, the electricity company will adjust the billing details accordingly to represent the meter reading on settlement day onwards.

Boods

 

[Cashflow]

Apart from carrying out your final inspection - while you're there take photos of everything (and have the date on the photo). This can be kept on file with your ingoing inspection report (to verify the condition of the property). If you intend to carry out repairs/tidy up take the photos once they are completed.

Peter
www.cashflowcalculators.com.au
www.privaterealestate.net.au