When you are considering purchasing a residential property, it is important to ensure you know the property and that you can fund your purchase before exchanging contracts.

Things to consider before exchanging contracts

Things you should consider before exchanging contracts unconditionally include:

1. Know how you are going to fund the purchase, including having your finance in order if you are obtaining a mortgage for the purchase;
2. Obtain your pre-purchase inspections (a pest and building inspection if you are buying a house and a strata inspection report if you are buying a strata unit); and
3. Have a lawyer review the contract.

Entering into a contract for sale with no cooling-off period severely constricts your ability to have the contract changed or to pull out without risking losing your deposit and being exposed to claims by the vendor.

What pre-purchase inspections do I need?

Where there is a rush to exchange, or a vendor is unwilling to provide unrestricted access to their property, you must decide how far you are prepared to go to understand the condition and quality of the property.

Before purchasing a property, you should consider obtaining at minimum:

1. For a house – a building and pest inspection report; and
2. For a strata unit – a strata inspection report.

The cost and time required to obtain a building and pest report of an entire strata complex usually makes this unviable except for small strata complexes (say 2 or 3 lots).

A lawyer’s primary focus is on ensuring that the title of the property is conveyed to you. Building inspection reports often speak to the physical condition or quality of the property. Lawyers are typically unable to provide advice on the contents of the reports and cannot recommend that a purchaser proceed with the purchase or not, based on the contents of the reports.

When do I need pre-purchase inspections?

The above inspections should be completed before contracts are unconditionally binding on you.

If the property is selling by auction, you should obtain a building inspection before the auction as the purchaser is not entitled to a cooling-off period.

If you are purchasing a property by private treaty and:-

1. your 5 day cooling-off period was retained (i.e. your lawyer did not provide a section 66W certificate on exchange), you should obtain the inspection report before the expiry of the cooling-off period; or
2. you are required to waive your right to a cooling-off period (i.e. the vendor insists on a section 66W certificate as a condition for exchange to proceed), you should obtain the inspection report before exchange.

Additional searches to consider before buying a property

Additional searches to consider when purchasing a house include:

1. Identification survey, which identifies encroachments on or by the property, the position of the home upon the land, the distance of any wall of the home from the boundary etc. It also indicates whether there is any apparent breach of any easements, restrictions or covenants registered on the title. A survey is not a mandatory attachment to the contract and if the vendor did not already have a survey, then you would usually have to obtain one at your cost.
2. Building Certificate – a survey will not cover whether the construction of the home complies with the Environmental Planning and Assessment Act 1979. Nor will it determine whether the building of the home or any extensions have been undertaken with council approval. You may obtain from the local council a Building Certificate for the home. If granted, a Building Certificate states that the local council will not require any part of the house to be demolished or substantially altered.

Takeaways

It may not be possible to understand all potential issues with a property before the cooling off period expires or contracts are exchanged. But you should consider obtaining the above pre-purchase inspections to enhance your knowledge of what you are buying so you can make an informed decision.

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