23 Feb Vendor Reports – Let the Buyer Beware – Garth Brown
Changes to the real estate sector in NSW that came into effect mid-way through 2016, require real estate agents to disclose all reports taken out by a vendor or potential buyer – usually building, pest and survey reports. Conveyancer Garth Brown tells us now that this has led to some agents and vendors supplying false reports.
Kevin: Homebuyers in New South Wales will soon have greater access to discounted pre-purchase inspection reports with reforms announced by the state Minister for Innovation & Better Regulation in that state.
We very rarely do a state-only story, but we will in this case because I think there’s a lot of lessons that can be learned by people right around Australia. Apart from New South Wales, the ACT is the only other state that asks sellers to get the pre-purchase inspections done. It could happen in other states. And if it does, maybe there are some lessons in what we’re about to talk about now.
Conveyancer Garth Brown from Brown and Brown Conveyancing has warned buyers that they should beware of these reports. He joins me.
Hi, Garth. Thanks for your time.
Garth: Hi, Kevin. Thanks for that.
Kevin: Why are you sounding this note of caution? Surely, it’s a good thing; it’s going to save buyers some time and money.
Garth: Yes. Look, it’s a good thing in theory but there’s this proviso or red flag where I warn potential purchases of property where a vendor has had these pre-inspection reports produced is that they could be dumbed down. Maybe an agent regularly uses a particular pest and building report and they’ll just brush over any potential major problem and maybe list it as a minor problem when really it’s a major problem. It’s that independence of opinion, as well.
Kevin: What regulation is there around this to prevent that and protect consumers? Surely, a qualified building inspector who has a license, he’s doing this, doesn’t he have an obligation to make sure that he reports accurately and correctly?
Garth: Yes, that’s what he’s employed to do. He generally has insurance for that. But other than that, it’s really up to the freewill of the billing inspector as to what he reports.
What’s a really good thing with the pest and building reports is any report that has pictures of different parts of the house, it gives you a bit more confidence in their report – and videos. Some of those pest and building inspectors carry those sorts of technology. That gives you a bit more confidence in the report and independence of it.
It’s just there’s a red flag that some purchasers, they’ll rely on those reports and then they’ll end up doing their own after exchange of contracts.
Kevin: After exchange of contracts, what position are they in at that stage to dispute the contract if they find something?
Garth: Not in a very good position, but if a major problem is found, they could still negotiate with the vendor. So, that is potentially a problem. But most vendors I have encountered do come to the party and negotiate, but you are running that risk.
It’s just that between exchange and getting these reports together, there’s so much going on that potential buyers can miss out on a property and just decide to do it afterwards.
Kevin: Because in some other states of Australia, when you do take a contract out on a property, you can make it subject to a satisfactory building and pest inspection, which admittedly is funded by the buyer. In this case, you’re recommending the same thing should happen anyway, Garth. Is that right?
Garth: Yes, that’s right. Yes, you should. But most of those contracts don’t have that special clause in the contract in New South Wales unless it’s agreed to by the vendor before exchange of contract.
The other way is if you have a cooling-off period but some vendors won’t allow that; they want an unconditional contract.
Kevin: Yes. It really varies from state to state, doesn’t it? I’m just looking around Australia. Each state is totally different in how they handle. The New South Wales system seems to me to be very convoluted. There are lots of things that can go wrong and there’s no surety that you’re really ought to be able to settle on the date of settlement.
Garth: Yes, that’s true, but that is changing as well with this PEXA online settlement system, where it does away with the need for titles and people turning up with checks and other associated things at settlement. That is slowly changing where if a settlement day is chosen, it generally goes ahead pretty well with this new PEXA online system.
Kevin: I did an interview recently, Garth, and you may or may not have heard about this. In the States, they’ve enacted things they call Transaction Rooms, which is where all the documents are placed if there’s a sale going through. All the solicitors’ contracts and documents and searches are all inside the Transaction Room, and anyone can view them at any point in time. And even to the point of all the way through the settlement, all parties are there.
This is probably the way it’s going to go long term as we become more used to how the Internet as working and this need for transparency. I think it’s very, very important, isn’t it?
Garth: It is. And just on that note there, the PEXA have this little app that you can track your online settlement as to how it’s going. It’s like a countdown clock, letting you know where it’s all up to.
Kevin: How could those interested access this, Garth?
Garth: You go to Pexa.com.au. It talks about online settlements. If your practitioner is not registered for it or if your bank is not, you won’t be able to use it. But if all parties are, it’s a great system to make sure your property settles on time.
Kevin: Yes, well worth looking into. Thank you for your timely warning too, Garth. Garth Brown from Brown and Brown Conveyancers. Thanks for your time, Garth, and talk soon.
Garth: Thanks, Kevin.