Pre-settlement Inspection

[oneguy]

Settlement is due on an IP at end of this month and tenants are on lease till early next year.

Under that circumstance, just after your thoughts whether you would conduct a inspection just before settling? Its near by so not a big issue but does anyone NOT do these inspections if it's remotely located?

Also, what are some of the things you check at the time?

Condition are the same as the last time you were there,
Agents has all the keys,
I might take some quick measurements while there for future reference for things like stove size etc
Anything else?

 

[Terry_w]

Yes you should.

What if the vendor removed the dishwasher that is supposed to be included for example. You wouldn't know without an inspection.

 

[jim1964]

Settlement is due on an IP at end of this month and tenants are on lease till early next year.

Under that circumstance, just after your thoughts whether you would conduct a inspection just before settling? Its near by so not a big issue but does anyone NOT do these inspections if it's remotely located?

Also, what are some of the things you check at the time?

Condition are the same as the last time you were there,
Agents has all the keys,
I might take some quick measurements while there for future reference for things like stove size etc
Anything else?

In my past life i worked as a removalist.Believe me............do a pre settlement.
The worst one i saw was dishwasher,stove,all the freestanding appliances,speakers attached on the walls in the home removed,carpet removed,The new owner had a turn on entering the home,resulting in me having to call 000.He survived,but it was e real eye opener.

 

[Jamie M]

Would you inspect a $10k car before handing over the cash?

I'd assume so.

Like Terry said, it might not be in the same condition.

If it's an interstate IP, you could get ask the PM that you're going to use to inspect on your behalf.

Cheers

Jamie

 

[chilliblue]

Do the inspection but advise the vendors agents that you require:

- copy of the tenants ingoing inspection report and the last inspection undertaken
this is to clarify what will be yours and what condition it should be in barring
fair wear and tear

- photocopy of all keys held by the the agent and the tenant
use these to mark off during the inspection so that you can confirm that you
will hold all keys to all locks and the number of keys held


Further, take copies of the photographs/notes that you had when you last viewed the property.

 

[oneguy]

Thanks Terry and Jamie.

Was just thinking that seeing as the tenant is remaining at the property the answer might have been different but I see now its not.

I guess there's still an element of risk if you do an inspection the day, or the morning of the settlement because they could strip the place after you've done the inspection I guess.

Jim!!! A triple 000 call certainly wouldn't be an everyday occurrence when doing removals I'd imagine. Wow.

Great tips there chilli blue thanks.

 

[Jtkumnick]

definately do it.

 

[Jake Milne]

A lot of investor's I know fall into the trap of either not doing a Final Inspection or doing one on the day of settlement. Please do not make these mistakes too.

Final Inspection needs to be done AT LEAST 5 WORKING DAYS PRIOR to settlement.

The reason is if anything doesn't work (and it did when you bought the property) you need enough time to raise the issue through your conveyancer and the vendor needs enough time to correct the issue.

For example:
"I recently bought a 2 bedroom unit in Armadale on behalf of a client. Upon final inspection (one week prior to settlement) I noted that the Electric oven and cook-top was not operational.

We had to fight with the vendor through our legal channel which took 3 days. The end result was that the oven was replaced, saving our client $1000 and the headache of purchasing and installing the item; not to mention issues a faulty oven could have caused with letting the property out."


Tips for purchasing & final inspections:

• When signing a contract add two non-restrictive special conditions:

a) That the agent/vendor must give you access 21 days prior and until settlement.

b) That all goods, chattels and inclusions must be in good working order as inspected at the time of purchase.​

• Inspect a week before settlement
  
• Take a check list, write down everything included in each room, inspect them thoroughly and write down any problems.
  
• Seek advice as to what the vendor is responsible for fixing.
  
• If it's a new building make sure that the product complies with building regulations.

 

[eyespy]

hi JACK,
i see your point in doing your pre=inspection 5 days prior for the reasons that you mentioned. But what if the house burns down the day before settlement, so is there any logic in the inspection being on the day ?

also if i have purchased insurance as on settlement date, would i be covered lets say the house burnt down 2 days prior ?

 

[womble66]

hi JACK,
i see your point in doing your pre=inspection 5 days prior for the reasons that you mentioned. But what if the house burns down the day before settlement, so is there any logic in the inspection being on the day ?

also if i have purchased insurance as on settlement date, would i be covered lets say the house burnt down 2 days prior ?

If it burns down after you inspect then you would not settle but to ensure you are not exposed to financial lose I think you will find most solicitors would advise you to insure from exchange date not settlement date to cover all possibilities as once you exchange you have a financial interest in the property.

For less than a few $100 in most cases covering the pre settlement period its well worth not exposing yourself to that risk.

 

[Kylz69]

Inspecting early seems to be a common thing here, we inspected over a week prior to settlement, which meant the vendors were still living there.
What I did learn from this, is that you have to request everything you need fixed/done, at this inspection. It didnt occur to me that I would have to request they clean the oven or bathrooms, they were still living there, I assumed they would clean them when vacating.
Because I didnt specifically request they did so, I sucked it.
We were handed a dirty place, and apparently should have made it a condition they cleaned it.
Experience for next time I guess.

In NZ you inspect the day of settlement, I was advised to inspect days before by both settlement agent and REA

 

[lamp]

• When signing a contract add two non-restrictive special conditions:

a) That the agent/vendor must give you access 21 days prior and until settlement.

Sorry for hijacking the thread, I have simliar situation. However, what if during signing of the contract, nothing is added to request for final inspection. Can the buyer still put in such request later?

 

[gottabespotless]

If it burns down after you inspect then you would not settle but to ensure you are not exposed to financial lose I think you will find most solicitors would advise you to insure from exchange date not settlement date to cover all possibilities as once you exchange you have a financial interest in the property.

For less than a few $100 in most cases covering the pre settlement period its well worth not exposing yourself to that risk.

I always thought this was the case too and insured our properties from the day of exchange, however, on our most recent property purchase (in NSW) we were advised by our conveyancer that us insuring the property between exchange and settlement was not necessary. The reason given was that until the moment that settlement takes place the property is 100% the responsibility of the vendor. ie. even if the house burns down a day before settlement (even if a pre-settlement inspection has been done by the purchasers) the vendor/their house insurance has to cover any damage. Our conveyancer then had a little chuckle about how the insurance companies must love it when all those 'under contract' properties are insured twice by different parties (even if only for a few weeks) .

 

[Terry_w]

I always thought this was the case too and insured our properties from the day of exchange, however, on our most recent property purchase (in NSW) we were advised by our conveyancer that us insuring the property between exchange and settlement was not necessary. The reason given was that until the moment that settlement takes place the property is 100% the responsibility of the vendor. ie. even if the house burns down a day before settlement (even if a pre-settlement inspection has been done by the purchasers) the vendor/their house insurance has to cover any damage. Our conveyancer then had a little chuckle about how the insurance companies must love it when all those 'under contract' properties are insured twice by different parties (even if only for a few weeks) .

lawyers have a little chuckle when conveyancers give advice like this.

 

[lamp]

I always thought this was the case too and insured our properties from the day of exchange, however, on our most recent property purchase (in NSW) we were advised by our conveyancer that us insuring the property between exchange and settlement was not necessary. The reason given was that until the moment that settlement takes place the property is 100% the responsibility of the vendor. ie. even if the house burns down a day before settlement (even if a pre-settlement inspection has been done by the purchasers) the vendor/their house insurance has to cover any damage. Our conveyancer then had a little chuckle about how the insurance companies must love it when all those 'under contract' properties are insured twice by different parties (even if only for a few weeks) .

I got the same advise from my lawyer too.

 

[womble66]

lawyers have a little chuckle when conveyancers give advice like this.

+1

Both my solicitor and bank suggested this on my first property and since then have followed this mantra everytime even if other have since advised not to worry about it.

The question I ask myself is why and Insurance companiesl issue a policy for against a property that is not in your name if you cannot claim against an insurable event against that would covered by by that policy?

insurance companies must love it when all those 'under contract' properties are insured twice by different parties (even if only for a few weeks) .

But what happens if its not insured and the sales agent still claim their commission from you depoist they are holding as they sold the house and you are left to deal with the aftermath once its in a pile of ashes.

I dont think insurance companies are out there rubbing there hands together thinking of all the extra profits they are making but thats just my opinion and each to their own.

 

[Peterw]

From my understanding, apart from the act that agents operate under, in each state there is and another act, that governs property in that state. In QLD, it is the Property Law Act. I think there is another one, called the Real Property Act. I believe our Acts states, that while the property is at the risk of the seller, they do not have to warrant the adequacy or otherwise, of their Insurance cover. As we know, when we purchase property, the land is well described, and that’s about it. Its nearly like, we buy the land, and whatever is on it.

Now the Act further states something along the lines, that if you can only terminate the contract, if the property is damaged, so as to no longer be habitable. So if the damage is not sufficient enough to make it no longer habitable, you must settle.

Here is a recent case:-

http://www.propertyobserver.com.au/...ncelled-tennyson-reach-contract/2012021353351

So if habitable, then usually the seller would call on their insurance to cover, however if in this case the seller did not have flood cover, then hopefully the buyers cover did.

Not sure what is the situation in other states, however in QLD, probably not wise to save on say a month’s cover, as the risk could be high.

 

[gottabespotless]

lawyers have a little chuckle when conveyancers give advice like this.

Although I used the word 'conveyancer', he is actually a lawyer who was doing our conveyancing for us while the lady from his office who normally does the conveyancing work was on holidays. Perhaps he is wrong? Perhaps not? But it did make me wonder - if we insured it on exchange, would our insurers really pay us any money for a property that burnt down when that property was not yet actually ours? I was also told that if the house burnt down before settlement that it was, obviously, now 'uninhabitable' thus making it possible for me to pull out of the purchase. Vendor's problem, not mine. No?

 

[Peterw]

I think the word habitable, is a fairly broad one, so the problem may arise, when it comes to say, fire damaged. Where is the line between damaged and uninhabital. Yes, your insurer will cover you, for a risk you have ensured, and as the contractual owner of the property, you are deemed to have an insurable risk up until settlement. Just my thoughts.

 

[Terry_w]

Once contracts are exchanged the purchaser has an equitable interest in the property. This is an insurable interest. So a purchaser could insure the property for full replacement value.

If the property burned down after exchange and before settlement the purchaser may be able to pull out depending on the contract but they may also be able to recover the full insured value, even if this is more than they may be paying for the land.

If the purchaser didn't have insurance but the vendor did then the vendor would be paid out. There are circumstances when a purchaser could still be required to complete the purchase even though the house had burned down and the vendor had been paid out.

For the sake of about $40 I would be insuring the property sooner rather than later.