Only the very wealthy can afford to be cavalier about building inspections when buying property. Once a contract on a house or apartment is signed, it’s legally binding. The law provides little protection for unsuspecting buyers who have not done their due diligence, and often it is only after settlement that any faults in a property become obvious.
The chances of buying a property with costly-to-fix defects are on the rise. Auction clearance rates and house and apartment prices have increased in many Melbourne areas during the past six months and investors are taking out home loans at a faster rate than owner-occupiers.
In a more crowded market, it can be tempting to make a rushed decision. The possibility of making quick gains also attracts ”pick and flick” buyers.
These buyers scour the market in search of bargains. Many undertake a renovation in the hope of selling in the short term and turning a profit.
There’s nothing inherently wrong in this – it’s free enterprise, pure and simple. But you need to exercise care that you don’t get saddled with a dud.
Buyer’s advocate Peter Rogozik says that as the market improves, we’re seeing the re-emergence of the ”professional renovator”.
He says TV programs such as The Block, Channel Nine’s show that features couples undertaking renovations to achieve a high selling price, should be viewed as great reality television but the realities of the market can be very different.
The Block contestants have to deal with a project manager monitoring the quality of their work. ”But, out on the streets, away from the cameras, professional renovators are in charge of their own quality control,” Mr Rogozik says.
He says plumbers and electricians are the only tradespeople required to be licensed and insured against unsatisfactory work. These are also the only tradespeople whose work is audited through the issuing of a certificate of compliance and who can be ordered to fix work that doesn’t comply. This gives consumers protection that doesn’t involve going through the Victorian Civil and Administrative Tribunal (VCAT). ”Anyone with little or no experience can pick up a tool and call themselves a carpenter, a tiler or a restumper,” Mr Rogozik says.
”Disputes that arise between these tradespeople and the consumer inevitably end up at VCAT.”
Bureau of Statistics figures show owner-occupation lending and investment lending in Victoria increased by 4.2 per cent and 15.5 per cent, respectively, in 2012.
You need to be vigilant, however. David Hallett, of building advice service Archicentre, says lower interest rates and more affordable prices give buyers an advantage.
But he warns this can be lost quickly through a lack of due diligence. ”Many buyers start behind the eight-ball by purchasing a property without having arranged a pre-purchase property inspection, only to find they face many unbudgeted costs after taking possession,” he says.
Unbudgeted costs for repairs, such as rewiring, can run into tens of thousands of dollars and can blind-side buyers.
Many people think houses have more problems than apartments but this theory is being tested.
Archicentre says water leaks are among the biggest issues facing apartment buildings. Water can damage apartments through the poor sealing of balconies, a lack of roof maintenance and the deterioration of the tanking in below-ground car parks and basements.
Mr Rogozik says what you see isn’t necessarily what you get, and defects can appear five years after the keys are handed over. ”Using cheap materials and cutting corners to save money have proven to be a temptation all too great for some professional renovators,” he says.