from the secret diaries of a frustrated ......between buyers and sellers, real estate agents,...

THE NAKED TRUTH

A MUSTREAD

IF YOU ARE

BUYING REAL ESTATE.

FROM THE SECRET DIARIES OF A FRUSTRATED INDEPENDENT PROPERTY INSPECTOR.

Learn How To:Avoid all the incredibly dumb & stupid mistakes

smart people make when buying Real Estate.

Get an expert on your side and profit from other peoples mistakes.

Use the secrets smart home buyers use to save thousands.

Disaster proof your next real estate purchase.

Gain an unfair advantage.

“A must read for every home buyer”

LEON CUPIT

STREETWISE REAL ESTATE

FOR THE HOME BUYER

©Streetwise Real Estate 1

Streetwise

Real Estate

THE NAKED TRUTHTHE NAKED TRUTHTHE NAKED TRUTHTHE NAKED TRUTH

EXPOSEDEXPOSEDEXPOSEDEXPOSED ---- FOR THE FOR THE FOR THE FOR THE

HOME BUYERHOME BUYERHOME BUYERHOME BUYER From the Secret Diaries of a Frustrated

Independent Property Inspector

You Will Learn How To

� Avoid all the incredibly dumb & stupid

mistakes smart people make when buying

Real Estate.

� Get an expert on your side and profit from

other peoples mistakes.

� Use the secrets smart home buyers use to

save thousands.

� Disaster proof your next real estate

purchase.

� Gain an unfair advantage

“A must read for every home buyer” Leon Cupit.


DISCLAIMER AND / OR LEGAL NOTICES Copyright © 2011 by Leon Cupit. All rights reserved. No part of this book may be copied,

reproduced or stored in a retrieval system or transmitted by any means or changed in any

format, sold or used in any other way than what is outlined within this book, under any

circumstances without the express written permission of the publisher or author.

The information presented herein, represents the view of the author at the time of this publication.

The author reserves the right to alter or update his opinion at any time, this book is for informational purposes only. While every attempt has been made to verify the information provide in this book, neither the author nor his affiliates, partners or the publisher assumes any responsibility for errors, omissions or inaccuracies. The advice and strategies contained within may not be suitable for every situation. This work is sold with the understanding that the author or the publisher is not engaged in legal, accounting, taxation or other professional services. Any slights of people or organisation is unintentional. The services of a fully qualified professional should be sought if the reader needs legal, accounting, taxation or related matters. The author and publisher specifically disclaim responsibility for any liability, loss or risk – personal or otherwise – which has occurred as the direct result of the contents of this book. Neither the publisher nor the author shall be liable for damages arising herefrom. Publisher Cupit, Leon G Sandy Bay, Tasmania. Streetwise Real Estate ISBN 978-0-9870970-2-6


Acknowledgements

I want to thank all of those who helped me become the person who could write this book. These are the special people who have helped to shape my mind. The list of people I could thank would fill up another entire book, but let me mention a few who had the greatest influence on me. There is my mum and dad, they taught me my prolific work ethic and many other qualities to numerous to mention here I hope to pass on to my children. My wonderful wife Karen who almost single handed raised our children to become successful young adults in their chosen fields whilst affording me the time and flexibility to follow my career. To all the business people I’ve met along the way as you have become, sometime unknowingly my mentors. To all the wonderful people I’ve met in all areas of the real estate industry who have freely given sage advice and honest feedback, and to the thousands of home buyers, sellers and property investors. Who with out sharing your experiences and lessons this book would never have been written. Most importantly. Thank You, for having enough passion for property to want to learn so you to can benefit from your real estate experience.


Table Of Contents

1. Introduction. 2. A Historical Perspective

3. Checks & Balances 4. Understanding Property Inspections

� Exposing the naked truth and exploding the myths � The Scope and Limitations

5. For The Home Buyer

� Don’t sign anything until you read this � How to use your inspection report to save thousands

6. Choosing The Right Inspector

� Not all home inspectors are created equal � Accepting referrals � Errors and Omissions Insurance � Price shopping

7. Inspecting Brand-New Homes

8. After The Inspection - What Now � Repair or renegotiate

9. Other Types of Inspections to consider 10. The Real Estate Process

� Summary � Smart homes buyers flow chart

ANNEXES

A. Useful Links B. Australian Standards C. Mortgage Essentials GLOSSARY

Common real estate abbreviations


1. Introduction Over 30 years building experience, including 10 years and over 12,137 property inspections, has taught me a lot. If nothing else, it has taught me there is no such thing as a perfect house. Thus, in my view, a professional and independent property inspection should be mandatory in each and every real estate transaction, including new homes. Although it might appear self-serving for a property inspector to suggest that you need the services of a professional property inspector for buying your home, I can only say that my years of experience have repeatedly supported this advice. I see client’s everyday save thousands of dollars by having an inspection report at hand, and I have seen the total financial devastation caused by not having an inspection report on hand. You will discover this for yourself as you read the information and examples of real life horror stories throughout this book, and come away with a more complete understanding of how you can best use your inspection report to profit from your real estate transaction. Every home stands in silence, just waiting for a professional, experienced independent inspector to uncover and reveal its secrets. Property defects come in all shapes and sizes, from minor wear and tear to significant and costly structural defects. Having a pre-purchase building inspection carried out before you buy a property will arm you with information that is genuinely worth its weight in gold.

An inspection report will identify significant building defects or problems and provide repair costs for the defects found. When many people think of a property inspection, they think of timber decay, termite damage, and the like. But that’s merely scratching the surface (forgive the pun!). The condition of the building and how that may impinge on its value can play a crucial role in what is

undoubtedly the most important purchase or sale you will ever make. The intention behind this book is to teach you how to use the inside knowledge of an inspection report to get an unfair advantage in your real estate transactions.

If you’re buying this book will demonstrate just how valuable your property inspection can be. Even brand new homes hide secrets that are only obvious to the expert eye of an experienced property inspector. Property faults and defects are often not obvious, or may be intentionally hidden and remain undisclosed during the marketing period. An experienced inspector knows what to look for.

However, good building inspectors are hard to find, so how do you know what “good” means? Due to all the thousands of components and complexities that make up a house, experienced property inspectors are challenged every day to uncover the secrets hidden within. While the possible defects are limitless, wide-ranging and often very deceptive, an inspector is trained and armed to meet this challenge with intimate knowledge of buildings and investigation skills and using cutting edge investigative tools

Defects and problems that are readily visible to everyone often appear only cosmetic in nature. However, as a trained and equipped professional, your inspector can discover and reveal significant and costly defects that will need urgent attention. Consider, for example, a seemingly minor symptom such as a sticking door or window. The average home buyer would simply note that the door needs a little shaving off the top, but an experienced, qualified inspector might uncover major structural movement of the foundation system of the building. All homes, regardless of age or condition, will harbour a list of defects. Learning just how severe these are, and how long the list is, will have a direct bearing on your purchase decision. It can determine whether you are happy and satisfied with your well-informed decision to purchase, or


whether you become overwhelmed, angry and frustrated when the magnitude of unknown, previously undiscovered or undisclosed defects become apparent after settlement, when it’s too late. A buyer’s first line of defence against property losses is known by many different names which vary from state to state; home inspection, pre-purchase inspection, building inspection, defects report, property inspection, condition report. When you hire a professional, independent inspector, that expert is contracted to visually inspect the property using the Australian Standard AS 4349 as a minimum guide for what needs to be included in the inspection and documented in the written report. The information and the findings passed on to you by your inspector in that report will enable you to make an informed decision about your property, and avoid costly mistakes. This book will help prepare you for real estate transactions whether you’re looking at buying, selling or investing, protecting you from undisclosed defects by assisting you to select the most qualified independent inspector; avoiding conflict of interest and increasing your understanding of the inspection process as well as what to expect from a good inspector; and ultimately knowing how to use your inspection report to profit from other’s mistakes. Real estate buyers want to know how to gain an unfair advantage during the real estate process, so this book is not a manual or check list for DIY inspectors; that’s an entirely different story! This book will help you understand the inner workings of the real estate transaction and disclosure process within the context of a home inspection. By addressing all of the essential aspects of the home inspection procedure as they relate to the needs and interests of home buyers and other parties to a real estate transaction (for example, lenders), this book will reveal the complex interrelationships and conflicts of interest that exist between buyers and sellers, real estate agents, property inspectors and others. It will also reveal lesser known complexities of defect negotiations, conflict resolutions and other disclosure related difficulties that have the potential to derail a property sale or purchase and result in large unexpected costs. As a home buyer, you will be forewarned and forearmed against the common traps and costly mistakes, equipping you to sidestep these mistakes and profit from the exercise. It is our sincere wish that after reading this book, you will join the top 30% of property buyers who insist on an independent property inspection on your own terms as an integral part of your real estate transaction. Above all, the intention of this book is to convey the understanding that every home has imperfections, but all buyers can profit from a property inspection, regardless of the age, size, price or location of the building.

Before we get into the meat of the issue, we should clarify some of the terminology. As inspections are known by many names in different states and territories, for the purpose of this book I will refer only to ‘property inspections’, simply because I believe this term best describes precisely what we do. In contrast, other terms such as pre-sale, pre-purchase, pre-settlement or handover inspections only refer to the timing of the inspection.

In my opinion,’ home inspection’ or ‘building inspection’ implies that we only inspect the structure, which is not strictly true, as we do inspect every accessible part of the whole property. Similarly, terms such as ‘defects reports’, ‘maintenance reports’, and ‘dilapidation reports’ can be misleading or carry different connotations. Thus, for the sake of clarity, I refer to ‘property inspections’ throughout this book; meaning, an inspection and report that meets the minimum requirements as set out in the Australian Standard for the inspection of buildings, and in particular AS 4349.0 and AS 4349.1. These standards will be explained in more detail in the next chapter.


2. A historic perspective

Property inspections have grown dramatically in popularity since the late 1970’s to early 80’s. Conservative estimates suggest that fewer than 5% of homes sold in Australia were inspected by professional property inspectors. Back then, most lenders only required their branch manager or loans officer to take a brief look at the property and make a note of its general condition. Often these inspections were done on a ‘drive-by’ basis; clearly, they were not going to discover real defects! They were simply assuring the lender that there was a ‘location factor’ on the property.

Why has there been such a rise in popularity for property inspections?

� A larger number of property transactions due to population increases

� Buyer awareness through increased advertising

� Disclosure laws for sellers being tightened and fast becoming normal practice

� Due diligence requirements for lenders being tightened

� Public awareness of real estate horror stories thanks to TV reality, drama and current affairs programs.

Caveat emptor, or “Let the buyer beware”, has never been more relevant or more applicable to the real estate industry. With the unfortunate blame game trend that we Aussies are following the USA in the litigation path of: “It must be somebody else’s fault and they must pay”, the case for professional property inspections has been made even greater. Today, estimates indicate that up to 30% of homes sold in Australia are inspected by professional inspectors. More recently, state governments have also moved to tighten consumer laws. Some of the regulations around the real estate industry in particular do directly affect the property inspection sector.

A number of states have already placed regulations on the industry to protect the consumer and maintain a purely optional approach to property inspections. By taking the soft way out to appease the various stakeholder lobby groups, I believe that this is condemning us all to the outdated last century principle of caveat emptor. The disturbing part of the 30% estimate is the implication that a massive 70 percent - over two thirds - of the thousands of properties sales each year are still carried out without an inspection to determine the true condition of the property.

It’s almost unbelievable; more people will get a $10,000 second hand car checked out by a mechanic than those who have a property inspection done when they are risking hundreds of thousands of dollars –especially when this is mainly borrowed money. Perhaps ‘Buyer Beware’ would be more accurate as ‘Buyer Don’t Care’!

Thousands of home buyers and sellers are playing Russian roulette with financial disaster everyday. I could retire now with the money I have personally saved for smart homebuyers over the years. I could have retired three times over with the money I have seen lost by other home buyers and sellers, simply because they didn’t get an inspection done. It is truly amazing, especially when the only reason that this is not more widely known is because all those home buyers and sellers are too embarrassed to admit to making such an inane mistake.


They suffer in silence for a while, and then they call in a professional to do an inspection report, to tell them the bad news of what the damage really is, what needs to be done to fix it and how much it is all going to cost them. There is plenty of debate in the real estate industry as to whether we need to bring in new laws or strengthen existing regulations to protect unsuspecting buyers. This is clearly backed up by the 70% of home buyers who fail to get any type of professional inspection carried out. They simply don’t know their rights as consumers. It seems totally unsatisfactory that the industry and/or government doesn’t take a more active role in educating potential home buyers and sellers before they enter into any contracts or agreements.

The property inspectors in Australia are largely unregulated, unlicensed, and unprofessional, some are even uninsured, unqualified, and unaccountable, and to top it off, many are inexperienced. I propose that mandatory property inspections should form a part of the seller’s disclosure statement. There is a strong case for this.

Why have mandatory property inspections? Today, a number of factors are forcing banks and financial services firms to take a closer look at the property appraisal and valuation process before approving a mortgage. These factors include an increase in the number of foreclosures, an increase in the number of applicants applying for mortgage extensions to include unforeseen repairs, and a rise in bankruptcies due to clients overextending as a direct consequence of unforeseen repair costs.

Unfortunately, the standard lender's appraisal and valuation often fails to reveal the true condition of a home or the applicant's ability to pay for required repairs on the property. This is where a property inspection conducted by a qualified independent property inspector - perhaps commissioned or required by the mortgage lender or the mortgage insurer – would serve as a valuable adjunct to the appraisal. This would be preferable for both the lender and the borrower in that unforseen defects could be considered and factored into the loan application process upfront.

While only a small number of buyers commission a property inspection for their own protection, they are not obligated to share the results with the lender, even if the report reveals serious defects with the property. Despite these facts, property inspectors are not routinely hired by lenders, and are typically called in only when a bank appraiser or a valuer has a specific concern. In fact, we have found that less than 1% – that is, one in 100 inspections conducted by our inspectors – are done on behalf of a lender or as a requirement of a mortgage application.

The inspector is only called in when the appraiser or the valuer notes an obvious structural problem, such as springy or uneven floors, or maybe a leaking roof. There are many other serious problems that are not as obvious and would normally go unnoticed in an appraisal by an untrained eye; examples include failed framing systems, unsafe or defective electrical wiring, blocked underground drainage systems, old roofing in very poor condition, or subtle cracks in walls that may be symptomatic of a more serious foundation failure.

Another concern is that the appraiser’s request is usually for the inspector to perform only a partial inspection in order to investigate one or two items, meaning that other serious problems may still be overlooked. Even though such limited inspections may seem simpler and even adequate at the time, this reflects short-sighted thinking. Ultimately, it is in everyone's best interest to have the property inspected thoroughly, to make sure the buyer only has the home repair bills they have bargained for.


Horror Story:

Julie was a single mum with two kids; a 9-year old named Oliver and his 6-year old brother Ben. Julie had a full-time executive job and worked 50 hours a week, sometimes from home. Julie decided to downsize last year when she lost her husband to illness, as she needed to be closer to work and the kids’ school, and she could not manage the mortgage on her single wage. Julie found the perfect home, just 10 minutes’ walk to school and a further 15 to her office. It had three bedrooms and the ensuite she so desperately wanted, a secure backyard, and even a lockup garage.

On the auction day, Julie was beside herself with nerves, so she got her brother to do the bidding for her. She was pre-approved for $380K. Julie's brother won the final bid at $384,500. She came up with the extra $4,500 by maxing out her credit card. The day that Julie and the kids moved in was the day their world fell apart. The house sure looked different without the furniture, floor coverings and all those wonderful paintings on the walls.

Julie immediately found termite damage in the floorboards where the king size bed had been; the bathroom floor was rotten around the shower from years of leaking; the ceiling in the second bedroom had collapsed under the weight of the water soaked insulation; the timber stumps under the third bedroom and the hallway were also rotted out, from water gathering under the house. The total repair bill was in excess of $17,000 and the lender refused to advance Julie any more as she had reached her limit. The bank’s valuer didn't raise any concerns and excused himself by saying that he was not qualified to comment on property defects as he was not a building professional.

The lender said Julie had demonstrated her ability to pay the mortgage and ticked all the other boxes, so the numbers stacked up. Julie couldn’t afford the repairs and it eventually sent her broke. The word got out about the house damage and Julie couldn't resell it. Julie ended up declaring bankruptcy and she lost the house. Julie is now living with her retired parents, catching a 1.5 hour train ride to and from work six days a week. Oliver and Ben were forced to change schools and friends after losing their dad. The bank was forced to sell the house for $290,000 around a year after Julie left, taking a loss of $90,000.


A simple $350 building inspection could have prevented all of this. If there was ever a case that demonstrates the need for mandatory property inspections, surely this is it! Unfortunately, there are many horror stories not unlike this. They could fill several other books, and I’m sure all the other experienced property inspectors out there could easily share their own similar experiences. Sure, you can argue that Julie should have secured a property inspection and even a timber pest inspection before the auction. But try to imagine having just lost your spouse, being left on your own to bring up two kids, trying to make ends meet, having to sell the family home and downsize just to survive.

How many times should you pay out for building and pest inspections before you finally win the bid at an auction? On the other side of the coin, I’ve heard of an instance where nine property inspections have been carried out on one property during the week prior to auction by various inspectors for different potential buyers. Can you imagine the inconvenience and interruptions caused by nine separate property inspections and nine separate timber pest inspections? These interruptions do not include the normal disruptions of open homes and private viewings leading up to the auction day. It’s no wonder they say selling real estate is so stressful!

Wouldn’t it be much easier and more affordable for the vendor to provide copies of these reports to every potential buyer as part of the disclosure documents, and have the successful buyer reimburse the $350 fee to the vendor as part of the settlement costs? That way, the inspections are done once and made available with full disclosure to every potential purchaser. I’m sure that you can see the benefit of a property and pest inspection being conducted once, at a time that suits the vendor and the selling agent, and then being made available to any potential buyers via the selling agent.

“But not all inspectors are the same,” I can hear you saying. Yes, I totally agree, because you are 100% correct. This leads me on to my next frustration with this industry I love.

Scope of property inspections

Buying a home is a big decision, and therefore it is vitally important to do the necessary research prior to making a purchase. You should look at many houses before choosing the right one, and inspect the area and state of your dream house. Whether the home is newly built, old, or under construction, you should make an effort to do thoroughly investigate potential problems with the house, and any possible defects. If you decide to buy an old house, there are certain to be some problems in the roof, structure, plumbing, gas or electricity. These can be risky factors and may lead to expensive consequences, so make sure that you check all these aspects meticulously. An investment in a professional building inspection report is worthwhile. For newly constructed homes, problems related to weather-proofing or leakage have been commonly observed. Other problems around material installation, supervision, design and construction are also quite common. For all these reasons, you should have an experienced and qualified property inspector to inspect your property thoroughly. It is important that the inspector you choose has some practical experience in the building industry and a thorough knowledge of how to properly inspect a house. The inspector will generally not check certain areas of the house like underground portions of the foundation, electrical installations, or concealed plumbing and gas fittings, nor the functioning of some appliances like heating units and air-conditioning, spas and pools, chimneys and fireplaces, soft furnishings, alarm systems and appliances. They will only inspect those appliances and areas if


you specifically request so, and only if they have the appropriate qualifications. If not, they should be able to recommend the appropriately qualified experts for you. Later, we will look at a typical property report. Obviously, the property report cannot be considered as final, in terms of inspection and survey. The report provides information about defects that are visible during the inspection. The report on the property doesn’t provide you with a guarantee that the house has met all requirements as per the Building Act (as applicable in each state). It may be that the house does not comply with the building code, and alterations may have to be done with the consent of the building owner. One of the benefits of a property inspection, which we will cover in more detail later, is that the report can be used to negotiate with the seller for concessions, or save you thousands by deciding not to go ahead with the purchase based on the knowledge of any significant defects. It is important that you have a clear understanding of the Australian Standards that form an integral basis and minimum standard for all property inspectors to follow. I would like to give you some very relevant information in relation to the Australian Standards AS 4349, Part 0, Part 1 and Part 3. These are annexed under B at back of book. You can appreciate the importance placed on developing such a Standard by the industry experts. As acknowledged in the Standards, the decision to purchase a property is an important one, and should be supported by the knowledge of the physical state of the building and the property. Therefore, independent and objective advice is required to enable an informed decision to be made. It is implicit that an independent inspection will include a subjective appraisal by a competent inspector assessing the condition of the property and residential building/s. In any subjective application, it is inevitable that different inspectors or even the same inspector on a different occasion may reach differing conclusions. AS 4349 seeks to provide an appropriate balance between reliability of outcomes, economic constraints, and the flexibility required to address numerous different types of residential dwellings and properties. The inspection is not intended to include any rigorous assessment or testing of all building elements of a property. It is important that you have a full understanding of the Scope and Limitations under which a pre-purchase inspection is conducted. The following is a typical excerpt from a standard property inspection report that is commonly found throughout Australia that should leave you in no doubt as to exactly what is and isn’t normally included in a standard property inspection that would comply with the Australian Standard AS 4349.1. So that you get a complete understanding of the Australian Standard AS 4349.1, Standards Australia have generously permitted me to use these excerpts.

The scope and limitations of the Building Inspection and Condition Report

This may read somewhat officious but is useful to understand:

1) The building inspection and pre-purchase condition report does not include or consider compliance with any building regulations or building act, local law or by-law. The building inspection and pre-purchase condition reports are limited to the areas that could reasonably be accessed at the time of the inspection, and rebased on a visual inspection only. During the course of the inspection, we do not and will not use any invasive measures or techniques to dismantle, move, or break apart anything (including but not limited to floor coverings, furniture,


stored items, appliances, insulation, linings, cladding, plantings or debris) without the property owner's written permission. We will not inspect areas where safe unobstructed access is not available. When considering if a defect is significant or not, the age and type of building must also be considered. All items will be assessed in consideration of similar properties of the same age that have been reasonably maintained. 2) No inspection will be made for the identification of, or comment on, and the exclusion of, but not limited to: footings below ground; concealed damp-proof course; electrical installations; operation of smoke detectors, light switches, and fittings; TV; sound and communications and security systems; concealed plumbing, and adequacy of roof drainage as installed; gas fittings and fixtures; air-conditioning; automatic garage door and/or gate mechanisms; swimming pools and associated filtration, heating and similar equipment; the operation of fireplaces and solid fuel heaters including chimneys and flues; alarm systems and intercom systems; soft floor coverings; electrical appliances including dishwashers, incinerators, ovens, ducted vacuum systems, paint coatings except external protective coatings; health hazards (e.g., allergies, soil toxicity, lead content, radon, presence of asbestos or urea formaldehyde); timber and metal sizes and adequacy; concealed tie-downs and bracing; timber pest activity; other mechanical or electrical equipment such as inclinators; soil conditions; control joints; sustainable development provisions, concealed framing or any areas concealed by linings/sidings; landscaping; rubbish; mould, illegal building or plumbing or electrical work; stored items; insulation; furniture and accessories; energy efficiency or lighting efficiency; environmental matters and water tanks, dams, pumps, septic systems, or on site water treatment systems. 3) Unless otherwise stated, the inspector is not granted access to any neighbouring properties and is therefore unable to comment upon the external state of any boundary fencing. Settlement cracking and/or movement are a normal occurrence in most buildings and can occur at any time, including the early life of a new building or extension. If cracking is noted, the only way to determine if the movement has ceased is to monitor the cracking over a period of time (twelve months is recommended). Unless a qualified pest expert prepares this report, any comments in this

regard are from general observation only. These items can be included upon request in a Special Purpose Inspection. 4) The building inspection and pre-purchase condition reports will not make comment on: relevant proximity of railway, flight paths, traffic, fire protection, heritage concerns, durability of surfaces, life expectancy of materials, noise levels or health and safety issues. This report is not a guarantee that defects and/or damages do not exist in any sections or areas that were not granted with full, unrestricted access. A building inspection and pre-purchase condition report will not make comment on subsurface drainage, rising damp, seepage or leaks that may be subject to prevailing weather conditions at times other than the inspection time. Many drainage problems are difficult to detect particularly if there has been prolonged dry periods prior to the inspection. The only way to determine if the site drainage is adequate is for the site to be inspected during or after extended heavy rain periods. These items can be included upon request in a Special Purpose Inspection. 5) A report is made solely for the use of the client (purchaser of the report). We accept no responsibility or liability, in contract or tort, to any third party who may rely on this report in part or wholly. Any third party relying on this report does so at their own risk. You must read and understand this report in its entirety before acting on it. 6) You must contact the inspector who carried out your building inspection and pre-purchase condition report. It is often very difficult to fully explain situations, problems, access


difficulties, and building faults in a manner that is readily understandable for the client. Should you have any difficulty in understanding anything contained within the building pre-purchase or condition report, then you must immediately contact the inspector and have it explained to you. If you have any questions at all, or require any clarification, you must contact the inspector prior to acting on the building pre-purchase or condition report. 7) Annual Inspections: We recommend that regular building inspections be carried out by a competent professional at least annually, but more frequent inspections are strongly recommended. Regular building inspections will not prevent defects, but will help in early detection, and will allow remedial treatment to be commenced sooner for damage to be minimised. Due to the degree of risk for structural movement in buildings, we strongly recommend an inspection and a written building defects or condition report in accord with AS 4349.1 to be conducted at your property every twelve months, with all regular maintenance carried out.


3. Checks and balances

We need to be smart with property! It seems incredible that so many people, in their haste to buy that elusive ‘dream home’ fail to prepare properly. It inevitably costs them. Although there are many aspects you should consider, first we must raise your awareness of some of the most neglected areas that can have the largest impact on the final outcome of your purchase.

The research process

Here is the shocking truth about how to confidently buy a property: you need to do your research first. Make a list of all the reasons why you want to buy, and of what you want in a house in order of priority, so that you have a clear understanding of what you need to look for before you start looking. All too often, people fall in love with a home because it has the rumpus room for the kids, or the kitchen they have always wanted, or the double garage or workshop they need for work. Because of this, people get trapped into buying for the wrong reasons. Sure, it’s great if you can find a home that has the rumpus room for the kids, but what if it’s not near any schools or public transport to get the kids to school every day? You must look at the whole deal, not just a small part of it. You are making a huge commitment; one that can be very costly if you get it wrong.

By doing some basic planning and research, you can minimise your chances of failure dramatically. I recommend doing your research on the internet first, to find a vast amount of information about the area, the neighbourhood and community. It helps to visit the area at different times during the week; during the day and at night, doing simple things like taking your dog for a walk around the streets or spending a day with you kids in the local parks etc. Talk to the locals and the shop keeper. Find out where and how often the buses or trains run. All of this research will give you a much better feel and understanding of where you want to live. If there is vacant land nearby, talk to the local council and find out what is planned for the site. You can also go online and find what development applications are listed as an indication of development activity. Would living next to a night club or a parking lot make a difference to you?

Negotiating

As we noted earlier, you are going to be negotiating possibly the biggest deal of your life. Get this wrong, and it will cost you thousands, or you could miss out on the property. Are you prepared for this? Can you confidently match your negotiating skills with a seasoned, trained, and experienced professional selling agent? If you're not confident, then I suggest you consider using a Buyer's Advocate to negotiate on your behalf. The cost savings they negotiate for you will far outweigh their modest fee. You must also be aware that the realtor is working for the vendor at all times. If you are aware of some simple facts, you can profit from the mistakes of others.

1) The house is up for auction.

Did you know that studies have been reported which show that in many instances a successful purchaser would have paid more than they did to secure the property? For example, if a property went to auction and sold for $232,100 when the Reserve price was $225,000, this looks like a fantastic deal for the seller. However, the successful buyer, she confirmed she would have paid $245,000 if necessary to secure the property.


The difference between appearance and reality is significant. There’s a wonderful line by the famous poet TS Eliot in his work ‘The Hollow Men’: Between the idea and the reality falls the shadow. In real estate, a lot may be said about a property, but you need to get the real facts. While the seller was finally willing to settle for $225,000 (the reserve) and actually got $232,100,this seems like a very successful sale. In reality, the property could have sold for $12,900 more.

This is a common occurrence with auctions. The fact is, the highest bidder only has to go a little higher than the next bidder to win the property. The purchaser in the example above saved $12,900 from what she was willing to pay. If this property was for sale by another method, the vendor would most likely have achieved a much better result.

2) During your due diligence (in talking to the neighbours), you find out the seller has

committed themselves to another property and is desperate to sell quickly. You can ask the realtor, who may or may not disclose the real reason. As the buyer, you can use this knowledge to your advantage with some aggressive negotiations, and you could pick up a bargain – profiting from the mistakes of others, because the seller should not have disclosed their situation to the neighbour.

3) The seller doesn't have a current property inspection report to disclose any defects to you. This is your opportunity to get a report done, and you can then negotiate a reduction in the price to allow for the repairs of the defects found. It is very difficult to argue against the independent expert evidence contained in a property inspection report.

4) The seller doesn't understand the true value of the home and the property is "For Sale By

Owner”. There is a perception that you will save on an agent commission fee by selling privately, however, this is often incorrect, because a skilled agent can get a higher price. Another difficulty that the seller must face is, not being a skilled negotiator; they are pressured to sell at a much lower price. As the buyer, you can take advantage of this and profit from the seller’s mistakes.

5) Know your Pre-purchase checklist. Here are a few considerations to note before you start searching for your new home. This checklist will keep you focused on your needs. Deciding where to purchase property is not as straightforward as you might think. You need to consider your stage in life and current circumstances:

• Are you single or in a relationship; contemplating children or pets? How will you cope with your travelling distance to work? Do you prefer inner city living versus parkland and the open spaces of the suburbs? How close are to schools, retail outlets and other services?

• How close are you to family and friends? Have you considered your children and their friends? Have you considered your hobbies and interests and where they are located?

• Suburban aesthetics may also be important to you - you may love the house you are looking at, but does the rest of the street measure up as part of your ideal location? What do you know about the other people in the street?

• Make sure you go for a drive around the areas you are thinking of buying in, and do this on numerous days at different times. You might see a number of For Sale signs, and you can use agent contact details for further research information and make a comparison.


Don’t forget to check out the FSBO properties (For Sale By Owner), as there are often some gems found in there also, as discussed earlier.

• Use real estate agents to your advantage! They can do a lot of the searching work for you, especially around the suburbs you are interested in. You can also watch the printed guides to find out who is listing or selling the most properties, as this will help guide you to the most active agents in your target area.

• Many real estate portals like Realestate.com.au have find-an-agent and search-for-a-home features, which lets you view properties and agents as per your specified search criteria. You can also register for the Real Estate Alert service.

Don’t be shy in telling an agent what you are really looking for – once you’re known to them, they will keep you at the forefront for newly listed properties that match your search criteria. You can often get a heads-up or even get to look at a property before it goes on the market officially. This is a favourite tactic of investors who almost always seek to buy at below market value as they don’t need to fall in love with a property for their home.

When you locate a property you’re interested in purchasing, you must remember a few key points: if you’re dealing with a real estate agent, you must conduct all negotiations through the agent, and you should not contact the vendor personally to negotiate at all.

If you’re purchasing at an auction, remember that the dealings are final and there can be no negotiation of contractual terms or contingencies such as arranging finance or building inspections if your bid is successful, so be sure to ensure you have satisfied all your requirements for an auctioned property before you bid; finally, do remember that being pre-qualified for finance is very different to being pre-approved for your home loan.

• It is in your best interests to arrange for an independent property inspection. If you’re looking at homes in a termite prone area (you can find this out from the local council), ensure you also have a timber pest inspection contingency in your contract before you commit to purchase a property.

• Save time by getting pre-approved for your finance before you begin hunting for a property. While 100% mortgages, are possible, a deposit of 5-10% of the property value is expected. Consider how you would like to structure your mortgage (see ANNEX E) and exactly what type of financial product you are seeking to finance your property purchase. Think about fixed interest, variable interest or a combination of the two, as well as the terms of the mortgage you are looking for. How will your loan repayments impact on your lifestyle?

• You need to formally apply to a financial institution to get pre-approved for your finance. Generally, the more information you provide to them at the beginning – such as proof of income (Tax Assessment Notices), asset and expenditure figures – the quicker your finance can be approved.


Financial institutions will approve your finance in writing, and pre-approval normally lasts for three months. Written pre-approval from your lender helps make your offer attractive to the seller, and has been known to be the key to a winning offer.

Don’t learn from your mistakes

I’d like to offer you a quick guide to the 7 Incredibly Dumb and Stupid Mistakes Smart People Make When Buying A Home, so you will be sure not to repeat any of these yourself.

Mistake # 7. Not knowing how much you can afford before making an offer.

The easiest way to avoid this is to get pre-approved finance. As noted earlier, this is very different from just getting pre-qualified for finance. Even with pre-approval, you should not sign an unconditional contract, because if the valuation doesn't come up, the lender can still withdraw the offer of finance. Then you can be left in default and risk forfeiting your deposit. To avoid this, I recommend you always sign a contract with at least two contingencies:

• Mortgage Finance. You are pre-approved, but is the house pre-approved? Before a lender will give you the money, they will want an appraisal of the property to confirm that there is enough equity in it to justify the loan. If the property appraisal is too low, then the loan may be declined. To avoid this, have your lawyer make the purchasing contract subject to finance approval.

• Inspection. Never buy anything, existing or new, without a thorough independent professional inspection. We will be dealing with this more thoroughly in the book, but for now, just be prepared for it. If termites are active in your area, I strongly recommend you make the contract contingent on being “Subject to receiving a satisfactory building and pest inspection from appropriate

experts." Again, your lawyer can advise you on the correct wording to use.

• Insurance. You will also need to confirm that you can get adequate insurance coverage. In some areas, it can be difficult to get hazard insurance for flooding or storm damage.

Mistake # 6. Not doing proper and thorough research and preparation.

It is often said that "knowledge is power" and this has never been truer than when you are looking to buy a property. It’s absolutely critical that you research the neighbourhood before you buy. Check out the area, facilities and schools, transport systems etc. It's also a good idea to attend a community meeting, if possible. You're not just buying a house; you're buying a piece of that community and the land around it. Do whatever you need to do to get to know the area. Research the property values and recent sales in the area. You can find a lot of free information on the internet. (See “Useful Links”) This decision to buy can be a life changing experience or disaster, not only for you, but also your family.


Mistake # 5. Failing to get a check survey to confirm property boundaries and house location. This is a very simple check that can be carried out by a land surveyor to confirm the boundaries and that the house is actually situated on your property. Simply measuring the fence lines is not enough. You only get one chance at this, and if at a later stage something is found to be incorrect, the consequences can be significant and devastating. This step should never be taken lightly. I’ve heard of reported cases where people actually brought and lived in a property for years before somebody did a check survey, only to find out that they had been living in the wrong house. In another case, a check survey ordered by the people purchasing the house next door found that half of the brand new double garage and workshop from next door was actually on the neighbour’s land. The neighbour was forced to either pull it down or buy the land that it was standing on. Obviously, this is not a great start to developing a friendly relationship with your new neighbour!

Mistake # 4.Failing to take out adequate insurance after signing the contract.

This is a much neglected area that does need your attention. When you sign a contract to purchase a property, you are deemed to have an interest in the property. At this point, you have no idea if the seller has adequate insurance or if they have any insurance at all. I strongly recommend you get professional advice to confirm the replacement cost of insurance for the house, and this should be your starting point. It is not wise to insure for the purchase price only as this will often leave you under insured.

Horror Story

Peter brought his dream home subject to receiving finance within 21 days. Peter was advised to take out insurance immediately but he decided to wait until his finance was approved, as the contract was unconditional. Unbeknown to Peter, the seller had not renewed his house insurance that had run out the previous month, thinking that he shouldn’t renew the insurance if he was selling it. Seven days after Peter’s offer was accepted, it rained heavily for three days, causing massive water damage to the house, not only from the flooding, but also from leaking roofing. Peter’s finance had since been approved and the contract was unconditional. Peter was not told about the water damage until after the finance approval was confirmed. The water damage repair and cleanup bill is estimated to be over $35,000. Today, the lawyers are charging upwards of $285 an hour to argue "Who's going to pay?” A simple $250 insurance policy is all that was needed to avoid this disaster.

Mistake # 3. Not using a buyer’s agent; trying to negotiate without help or advice.

Sadly, this is a mistake smart buyers make daily, and it can cost you literally thousands of dollars. When trying to negotiate to buy a property, you are forced to deal with the seller’s agent; a seasoned professional negotiator who knows all the intricacies of the property market and real estate negotiating. That’s what they do every day to put food on their table and they have been contracted to negotiate the very best deal for the seller. That's how they earn their living.


Many buyers make the mistake of thinking an agent is just the person in the middle who passes on the offers for both parties. Wrong! Make no mistake about it; the selling agent is working for the seller to negotiate as much money out of your pocket as possible. If you really think you can out-negotiate an experienced seasoned trained professional like a real estate agent, then you have to be really be on your game, or it most definitely will cost thousands more. How to avoid such a loss? Hire a Buyer’s Agent or Advocate, who will more than match their negotiating skills with the seller’s agent.

Mistake # 2. Not getting proper legal advice before signing anything.

The first thing you must realise is, when you sign the contract, you are obligated not only to buy the property but to do it exactly in accordance with the terms and conditions of that contract. Even seemingly insignificant changes in the wording of the contract can have a huge effect in shifting the risks and costs between the buyer and the seller. If you sign a contract without fully understanding every word in that contract, then you are making one of the biggest mistakes in real estate. Not knowing or understanding all of your legal rights and obligations when signing a contract may be disastrous, as real estate law can be confusing and complex. The contract you sign when buying a home is legally binding.

Most standard contract forms are heavily weighted in favour of the sellers (perhaps why they are often referred to as "sellers" contracts, not "purchase" contracts). After the negotiating is done, all is agreed, everyone's temperature is high, the contract document is prepared, and it is handed to you for signing. This is when you must stop! Take the contract away to get some trusted advice from a legal adviser who is experienced in real estate law. Good advice at this stage, even if it is just changing a few words in the contract, can save you many times the cost of the advice, as well as protect you from making a mistake that will cost you thousands.

Mistake # 1. Failing to get a Professional Property Inspection done.

I can only say that many years of experience have repeatedly justified this advice (to the extent that I could easily fill a "Book of Horror Stories"). I really believe that this one piece of advice is the best and most valuable in this entire book. No one else in the home buying process (apart from your lawyer) has the comprehensive training and experience necessary for the protection of your interests. No one else in the process has the true independence required to protect your interests. No one, that is, apart from the independent professional property inspector. Gone are the days of getting your home inspected by a well-meaning friend or relative! You know the ones I am talking about here: “Dad’s mate was a builder; he’ll take a look at it for us.”

This process demands professionalism and expertise that can only be delivered by an experienced independent property inspector. Not getting a professional pre-purchase inspection done to reveal any hidden defects before you buy is one of the most expensive mistakes you can make, and the easiest to avoid. If you are not a professional home inspector, hire one. You should make your contract subject to receiving a satisfactory building report from a professional independent inspector. Whether the house is new or used, it can have a wide variety of defects that go way beyond the obvious cosmetic ones, and it will take a skilled inspector to uncover these defects that could prove very costly to repair after you buy the property.


In addition, you can also make the contract contingent on more specific systems in the property; plumbing, electrical, heating, air-conditioning, etcetera. Alternatively, a well-written contract can also require the seller to warrant that these systems are all in proper operating condition. If you're buying in a termite-prone area, then a timber pest inspection should also be included. If you're buying at auction, the building inspection must be done before the property is auctioned. We’ve seen too many buyers have their dreams shattered by not having a professional pre-purchase inspection carried out before purchasing. It seems incredible that all this can be avoided with just one phone call, yet so many still make the same old mistakes.


4. Understanding Property Inspections

Not every inspector is the same, so making the right choice of inspector is a very important decision. The fact is, the quality of work depends entirely upon the individual inspector’s efforts, qualifications (which can be varied), experience, reporting methods and pricing. While the property inspection industry remains so unregulated, the only consistency that you can rely on is from experienced, professional and expert inspectors, who sing from the same songbook; report on the same items, in reports structured the same way, documented in plain English, not industry jargon.

Wouldn’t it be simpler if all inspectors had to follow the same guidelines or standards? As we noted earlier, the Australian Standards are such a “song book”. In particular, AS 4349.0 and AS 4349.1 – 2007 for pre-purchase inspections of residential buildings and AS 4349.3 for timber and pest inspections. It may surprise you, but most real estate agents don’t know these standards exist, and certainly most of the general public would never have heard of such a thing. I’ll explain what it all means, because if you understand the Australian Standard you will immediately have a huge advantage over most real estate agents, home buyers and sellers. It might also surprise you how often you can use this new knowledge and understanding in negotiating to buy or sell property.

Buying real estate is probably the biggest investment you will ever make, and risking financial ruin just to save a few hundred dollars is one of the biggest mistakes home buyers make across Australia, each and every day. The only real way to protect you and your family from buying a lemon is to get an expert on your side and hire an independent property inspector. While my expertise is primarily in the residential building inspections (AS 4349.1), it is reasonable to assume the timber pest inspections (AS 4349.3, see ANNEX B), along with many of the other topics covered, may also be applied and used in the same way in most cases. In saying that, I must make it clear that this book is not intended to be a guide on how to conduct inspections.

That, by necessity, would be a much larger book! But it is very important that you understand what is included in a standard property inspection and why. Following the Australian Standard as a guide, all inspectors are only allowed to inspect and comment on items and areas that we are appropriately qualified for. For example, I’m a qualified builder. Most good inspectors are building professionals, but because I’m not a licensed electrician or plumber or timber pest inspector, I am limited by my professional expertise as to what I can or can’t advise during an inspection. I wouldn’t check and test electrical systems and appliances unless I have an electrician’s license. I wouldn’t test the sewer or stormwater drains unless I’m a registered drainer (and even then it takes specialised equipment), and I wouldn’t inspect the property for white ants (termites) unless I also have timber pest inspector license.

However, in saying that, if I see something suspicious during my property inspections, then I do have a ‘duty of care’ to warn you. A good inspector will handle this by drawing your attention to the issue in their written report, possibly supported by a colour photo. Never accept a verbal-only report from any inspector; always insist on a written report to confirm the inspection findings. For specific issues requiring professional advice, I would recommend you seek further advice from the appropriate source. By way of illustration, during the course of my inspection of the roof space, if I noted what appeared to be old lead wiring joined to new PVC wiring and coloured electrical tape wrapped around it to hold it together, I would be rather alarmed. Now, I’m not an electrician, but I know that may be substandard, so I would include in my report of the roof space a statement like: “Some old wiring noted in this area. I suspect it may be substandard. I strongly recommend you seek further advice from a licensed electrician to determine the significance of this.”


Similarly, if I saw that the water flowed back up through the bath waste and the shower base when running the taps and toilets, I would refer you to a licensed plumber. Or, if I noted damage to the under floor framing and the property was in a known termite infested area, I would, of course, refer you to a timber pest inspector; if I note significant cracking in your brick foundations, I would offer the alert for that too. Yes, I can tell there is cracking there, but only a structural engineer has the expertise to confirm what caused it and what, if any, further action is needed.

The truth of it is, for myself at least, I know no one who is a property inspector, licensed electrician, licensed plumber, qualified structural engineer and licensed timber pest inspector, all in one – let alone an air-conditioning technician or a wood heater installer, swimming pool expert, and environmental scientist (for example, to test soil for toxic substances). It is amazing how often we inspectors get asked to test the TV reception or even the phone lines and internet connection. While most good inspectors can refer you to these experts, it is unreasonable to expect all these to be included in your property inspection report from a building professional. The Australian Standard is a detailed document that accurately spells out what should and should not be included in a standard residential property inspection, as per the outline of scope and limitations earlier in the book.

Exposing the naked truth and exploding the myths

Myth # 1. A property inspection should take 3 to 4 hours to complete.

This can be true – sort of – if you contract an old school inspector who still uses a clipboard and pen to painstakingly write down every defect they find, which room it was in, what part of that room, and how bad they think it is, sometimes even photographed with a disposable camera. When they finally finish the inspection, they go home to the typewriter and get to work typing up the report. Some may have a word processor or ask their secretary to do the typing for them. After they review the report, add all the defect summaries etcetera, you will – finally – get your neatly typed report in the post, with a few Polaroid photos included.

In my opinion, this type of inspection which only documents the defects leaves some doubt as to whether he actually inspected everything he is supposed to. You need to trust him as you don’t have any documented evidence that all the other items in the property are actually satisfactory or did he just miss them? On the other hand, you can contract a professional independent property inspector who is highly skilled, and trained to use the most up-to-date technology. He inspects the same items in the house, armed with a PDA (Personal Digital Assistant) that is loaded with the latest reporting software. This software guides the inspector through the house by room and by item, in a very deliberate and systemic manner. The inspector can not only identify each item, but, at a click of a button or touch of a stylus, can enter the appropriate predetermined narrative for every item inspected or tested.

Due to the massive amount of time saved by not having to physically write out every narrative for every defect found, the professional independent property inspector can also document all the items that tested satisfactory. The report is automatically uploaded to a computer with digital photos of all the house elevations, with every room and every defect – even photos of the roof space and under floor space – are all uploaded instantly, and the generated report is ready to email within minutes.


This inspection can take up to 1 to 11/2 hours. The time taken to complete a property inspection has absolutely no bearing on the thoroughness of the inspection or the quality or accuracy of the report. The time taken is dependent on the competency of the inspector, and the size and complexity of the property. Often, a professional independent property inspector produces a much more comprehensive report, because the reporting software provides a guide so that nothing is missed or left off the report. Everything is inspected, tested and commented on as per the minimum guidelines as set out in AS 4349.1 I know the reporting software that I use myself has a built-in completeness checker so the report can’t be generated if something is missing or not complete.

Myth # 2. Anyone can be a property inspector

It is incredible how far away from the truth this statement really is. As a franchisor of a property inspection business, we are constantly getting requests from people who want to be property inspectors, but without in-depth prior knowledge of the building industry and especially cottage construction, it is just impossible to be an effective property inspector. To do this job properly, you need to have an intimate understanding of how homes were built back in the early settlement days of Australia, right up to the ultra modern homes being built today. You need to know the materials and all the different building techniques and styles used throughout our history.

As a property inspector, we must be able to firstly identify any defects, which will all be different for different types of construction; secondly, we must be able to recognise what was standard construction for the period when the home was built; thirdly, we must be able to accurately explain any defect to our client in this context, and give advice on the different options for repairs. Simply being a painter for thirty years will not give you the knowledge required; nor will you have the knowledge if you have renovated a few homes, or have been a property investor with ten homes, or once helped put together a kit home. Just having had some building experience or a trade background doesn’t mean you can be a property inspector.

I know real estate agents shudder with fear when the ‘expert relation’ is called in to do a property inspection. These well-meaning friends or relatives have good intentions, but in most cases, they can never put anything in writing and really have no idea about what should or should not be inspected, miss real defects, and often try to make minor insignificant damage sound dramatic and serious in a misguided attempt to give the buyer something to negotiate the sale price down. This is often done with little or no knowledge of what is needed. I’ve even heard an expert relative say stupid things like, “Don’t buy this one, it’s not facing north so you won’t be able to sell it later,” or, “That’s too much, it’s not worth anywhere near that much,” or, one I hear a lot:” The brick joints are cracked, so it will need underpinning and that will cost another $30,000.”

What usually happens then is that the buyer gets frightened and pulls out of the deal, I get called in by the owner to find out just how bad these defects are and find only typical, minor thermal joint cracking in the brick veneer (the brick veneer is a type of cladding only, not a structural part of the house). The result is that the buyer missed out on their dream home, the seller lost a sale, and the realtor missed out on her commission –because the ‘expert relative’ doesn’t know what he is doing. Although there is no formal recognised training, and the industry is so unregulated and unlicensed in most states, to be a property inspector in Australia does take years of building experience and ongoing training and education in order to maintain a high level of competency. It is a constant learning process, and if over 12,137 inspections has taught me nothing else, it has made me realise there is always something new coming up that I’ve never seen before.


Myth # 3.You shouldn’t use the Inspector referred by the realtor.

This is a myth of gigantic proportions that has been jumped on by the media and sensationalised in many areas. Many inspectors also spruce this repeatedly, simply because they don’t get or can’t get referred by professional realtors. The fact is, the real estate agent is the only person in the industry who sees firsthand every day what inspectors do. The buyer only deals with an inspector once and the seller sees what they do while their home is inspected, but the real estate agent gets exposed to all the inspectors every day. The real estate agent is in the best position to judge the best inspectors for the most thorough job, and most of them want you to have the best inspection available; after all it’s his or her professional reputation on the line.

Some realtors refer two or three inspectors who they are confident will deliver a great inspection and report. I mentioned earlier that Australia is fast becoming more litigious and everybody is suing everybody at the drop of a hat; this is completely true in the real estate industry, and I know all realtors are continually reminded of their legal obligations to only recommend appropriately qualified, insured expert property inspectors. The real estate agents know and understand the consequences of doing anything else. One thing I recommend that you ask your agent is, “Who do you get to inspect your house?” The agents talk to us and tell us what the other inspectors do. I’ve had stories relayed to me about architects showing up at an inspection dressed in a suit, armed with just a clipboard and tick sheet, and then charge the client twice the market average for the privilege.

How can they inspect the roof space, the under floor space or the roofing, gutters and flashings without the basic tools, dressed in a business suit? I sure don’t know. Almost all of our clients come to us through a referral. Many are referred by family or friends who have hired us in the past, and like what we do. Some find us through professional realtors, real estate lawyers and conveyancers, bank lenders, mortgage brokers and insurance agents – industry professionals who trust us to look out for our client’s best interests. The best realtors look for an honest evaluation of the condition of the home. The best realtors know that a thorough, professional independent property inspection is in EVERYONE'S best interests. It will protect the buyer, obviously, but it also protects the seller and the realtor from having to deal with problems or financial complications in the future.

Because of the referral and relationship-based nature of real estate, realtors operate in small areas, usually within a few suburbs or one town. They spend all of their time building and nurturing trusted relationships with their local community database. They also understand that bad news travels fast in a small community, and if a realtor refers a bad inspector and the job goes wrong, their reputation will be undone or even lost in an instant. Take notice of who your realtor refers, and see who else refers the same inspector. If the same name keeps coming up, you have found the one.

Myth # 4. All inspection reports are the same

The different levels of reporting include:

� The Basic Structural-only report

� The Standard Pre-Purchase Report

� Premium Reports often includes digital photos of everything

� Premium-Plus Reports include all the above plus a walkthrough DVD of the whole property.


This myth is not true by a long way; just as every inspector is different, and every inspector offers different types of report depending on their individual experience and expertise, every good inspector will produce different levels of reports. To put it simply, not all inspection reports are the same, and they do vary greatly according to the quality and expertise of your inspector, and the type of report that you order. Can you believe that some inspectors charge $300 or $400 for a verbal-only report? You get nothing else but a receipt if you’re lucky. Some will supply a very basic written version of the above, only reporting the defects found, on a couple of typed pages on the inspector’s letterhead. At the other end of the scale, some inspectors will deliver a huge 30-40 page report filled with lots of useless information, industry jargon and long-winded explanations that only the inspector can understand, which only serve to confuse the client more.

The only time when you can get consistently high quality reports that will give you the confidence and peace of mind you need is when your inspector is using industry leading reporting software that has been specifically designed to mirror the Australian Standard AS 4349.1. There are numerous property inspection reporting packages available in Australia. Many of these are rebadged versions of American software packages. However, when setting up our property inspection franchise, I found that none of these could actually provide all the functions we needed to produce the highest quality and standards of consistency in the time frames we wanted, so I decided to develop our own proprietary reporting software to provide our clients with the most comprehensive and easily understandable reports available.

Myth # 5. The cheapest inspector is the best choice

Choosing your inspector by how much they charge is fraught with danger. Above all, please believe me when I make that statement. I get calls from potential clients daily, and many times, price is the first question they ask. I don't think it's because people are cheap, rather, they don't know what else to ask. Don’t confuse cost with value. While I understand that no one wants to pay more than they have to, in most cases, you do get what you pay for. The cheap inspectors are usually new to the industry and to business; inexperienced, or just doing inspections as a sideline to their main business. You will find many builders, architects and engineers who fit in this category. Some so-called inspectors are cheap and nasty, and they prove it by charging sometimes hundreds of dollars under the industry average.

The only way to separate cheap from great value is to dig deeper, and ask the inspector some hard questions, such as:

� Is property inspection your only business, and how long have you been doing it full-time?

� Can you show me Certificate of Currency for your insurance and a sample report?

� What equipment do you use during the inspection?

Some inspectors can offer excellent value at affordable prices because they are professional full-time experts who operate a highly organised business using the latest technology and deliver superior reports on time, every time. These inspectors are easy to recognise by the way their name comes up in conversations and as referrals from many different sources, and when they have professional websites offering lots of value with free information, free reports, and even guarantees. You should never make such an important decision on price alone. You can’t risk your financial future with the cheap and nasty inspector, so if you scratch just below the surface and ask a few questions, you can find a good inspector who has real local knowledge and will deliver great value.


5. For the home buyer

Sadly, public awareness of property inspections has not kept up with the dramatic growth of the real estate industry. Most home buyers start looking for property through rose coloured glasses, and have no idea about the ‘buyer beware’ protocol they are at risk of, and pay very little attention to the consumer protection process. Many buyers are very surprised to discover the wealth of knowledge and information that a professional experienced property inspector can provide, while others have expectations that far exceed the scope of a property inspection and are left feeling disappointed.

Home buyers regularly confuse property inspections with valuations, building code compliance, or termite inspections, and some presume their property inspection will include environmental hazards, structural engineering and electrical system and many other conditions that are not within the scope and limitations of a property inspection. Some believe that there is no need for a property inspection on a new home because they will be free of any significant defects due to their age, and only older homes will need an inspection, or if it has not been recently renovated. Many are even misled into thinking that an inspection is not needed because the current owner had one done when they bought the place only three years ago.

These misconceptions cause buyers to waive their right to getting a property inspection done before they buy. They don’t realise that this is their last and best chance to obtain detailed information on what is probably the biggest investment of their lives, and to profit from using this information correctly. For many unsuspecting property buyers and investors, they only find out when it’s too late, as they move in and start to discover the expensive hidden secrets of their new home. Thus, anyone entering the home inspection field should be trained in the highly skilled discipline of home inspection. Assuming that the home inspector has been properly trained and has sufficient experience, they should be able to provide a satisfactorily detailed inspection of a property, within the scope of their education and any home inspector licensing requirements.

Where licensing or certification is not a requirement, anyone can claim to be a home inspector, and there are no laws to prevent them from doing so. Interestingly, in Canada and the United States, a contract to purchase a house will often include a contingency that the contract is not valid until a home inspector has inspected the property (and the contract will usually provide for remedies of problems found in the inspection). Further, many local governments within the United States and Canada require that new-home builders provide a home warranty for a limited period, and this typically results in home builders conducting a pre-delivery inspection with the buyer.

I’ve been frustrated for many years by the unwillingness of sellers to grasp and appreciate the need for professional disclosure when selling a home. While some states and territories have vendor disclosure statements, this only means they should disclose what they know about the property. The fault in this system is, most vendors have no idea what the crack above the door really means. The vast majority of vendors have never been up in the roof space or under the floors, and they wouldn’t know what they were looking at anyway. The fact is, without professional disclosure from an independent property inspection, you just don’t know what to disclose.

The real estate industry is now in a transition period in many states and territories throughout Australia, with both state and federal governments and the leading stakeholders in the industry constantly reviewing our consumer protection laws. Sadly, the fear of litigation now dominates the marketplace. Active, full disclosure has been recognised as the best pre-emptive defence.


Information contained in a good property report is now a central platform; independent property inspectors have been cast to centre stage as consumer advocates. Some real estate agents now pay for independent property inspections themselves, rather than risk the liability of undisclosed defects being found after the sale. Unfortunately, there are also less principled agents who view property inspections as a threat to their sale. They view a property inspector as a deal breaker and do not encourage inspections, or they limit the scope of the inspection to structural and/or safety items only.

In my opinion the assumption that property inspectors are only deal breakers is a very ill-informed opinion, I believe our client only wants us to confirm their new home is truly as good as they think it is, they only want an expert like us to tap them on the shoulder and tell them they have got a good one. I have never been asked or encouraged to find as many defects as possible to help my client get out of a contract. In my experience of delivering over twelve thousand reports my clients are very disappointed if we find any significant defects, and absolutely delighted if we can deliver a good report. What these agents have to realise is the house is what it is, we can’t change that, our report only delivers the facts. But if the property is hiding defects, you can be sure we will find them.

There are a few things that you need to understand and decide on first, even before you start looking at houses and making offers. Firstly, why you need to get a property inspection done before you buy? Essentially, to avoid buying other peoples’ problems! You also need to know what you are going to do with the information when you get it, and how to re-negotiate the contract price if significant defects are found. Get a detailed list and an expert opinion on maintenance and repairs needed before handing the property across. Your property inspection will give you a detailed understanding of the condition of the property and also highlight any significant defects, safety concerns, items or areas that will need further investigation. Buying a home is a stressful exercise and you should get some experts on your side.

None of these are more important than your independent property inspector. When spending the amount of money that a home costs and, in most cases, committing yourself and your family to that kind of mortgage for the next 20-30 years, you really can’t afford to make mistakes. You need to know everything you can about the property, the house, its fixtures and fittings. Do they all work as they should? A home is a complex structure with literally thousands of components, and includes many specialised systems such as electrical, plumbing, heating, gas, lighting, cooking, smoke/fire warning and security systems. Thus, unless you are an expert in each of these areas, and competent enough to inspect and test each and every one on all their various operating modes, then you need to get some experts on your team, and the best place to start is with a property inspection.

Here are eight reasons why:

� To be absolutely sure you're not buying a lemon;

� To confirm exactly how your new home rates;

� To ensure you don't make the number one most expensive mistake that people make when buying a home;

� To be satisfied there are no nasty things to find when it's too late;

� To avoid costly repairs you didn't budget for;

� To know you can buy with confidence;

� To give you peace of mind;


� To avoid getting hit with a huge repair bill as well as your mortgage.

Your independent property inspector will ensure there are no nasty shocks to find when it’s too late. If one comes up during the course of the inspection, your inspector will highlight those concerns and recommend you seek further advice from an expert appropriately qualified in that area. That’s why you need an inspection done. Now, let’s look at what you can do with the information. In my experience, the majority of our clients don’t want us to find any significant defects.

A very typical story goes something like this: The buyers have just spent weeks (sometimes months) searching for a suitable home. They have done all the research, looked at hundreds of properties advertised on the internet, gone to all the open homes every weekend. Now, finally, they have found their dream home. They make an offer, and with a little negotiating, the offer has been accepted, contingent on a property inspection. The property inspector goes through and finds a few typical age- and general maintenance-related items that will need repair, but the roofing is rusting out and leaking in numerous areas.

The report advises that the roofing be replaced. The buyers are devastated. Now what? Because they are what I call ‘smart buyers’, they can use the property inspection report and obtain quotes for the roof replacement, then re-negotiate the contract with options such as negotiating for the seller to replace the rusty, leaking roof before settlement. Or, they can negotiate a price reduction to compensate them for getting the work completed after the settlement.

Horror Story:

Jim had just been through a really rough period in his life. His children all lived overseas, he cared for his wife of 47 years through three years of cancer treatments until she passed away six months ago . Now, Jim just wanted a new start. So, with what little savings he had ands the money from the sale of the family home, Jim could afford a nice two bedroom unit closer to town, where he could potter around the garden and live out his days. Jim went to his first open home for a nice little unit with a garden, just like he wanted. There was a lot of furniture and all sorts of rugs and mats throughout. Jim thought it looked a bit cluttered, but his furniture would fit right in. Jim went to the auction (his first) with a pocket full of cash. It was his happiest day in years when he won the final bid and purchased his own little piece of paradise.

Jim called me the day he got the keys. The purchase had settled that morning and Jim had gone straight out there to start moving in. With all the furniture and rugs removed, Jim realised he was in serious trouble. When I inspected the unit the next morning with Jim, I found that the concrete floor had completely failed and sunk by up to 150mm or 6 inches in the old scale. None of the doors would close – some had even been removed completely – and the tiled roof was supported through the walls onto the floor slab and had also sunk. Jim had a major structural failure of the concrete floors and was looking at a possible complete demolition and rebuild. When I gave him the bad news, he just slumped in the middle of the empty lounge and sobbed. He kept repeating "Why didn't I take the advice and get it inspected first?" I must admit this one still upsets me now.


Buying a property is a complex transaction. Find a lawyer, a lender, an inspector, an insurer, friends and family, and enlist the help of all these experts early in the buying process.

Don’t sign anything until you read this

The key to a property inspection is all in the timing. There are two schools of thought here. One is to have the property inspection completed before you make an offer. This is the case with properties being sold by auction, as these bids must be made on an unconditional contract. However, in a normal Private Treaty Sale, getting property inspection done before you make an offer would mean your offer may not be accepted and you could waste a lot of money if you have numerous properties inspected with no result.

The alternative - which I recommend - is that you make your offer with the proper contingency clauses in your offer. But a word of warning here: get your own independent legal advice as to the exact wording to be used in any contingency clause.

A typical property inspection clause would look something like this:

“The Purchaser/s shall have the right to engage a qualified builder, property inspector, architect or engineer at their own cost to inspect the property and report thereto within 10 working days of the signing hereof, and if that person reports that the structure is seriously flawed, unsound or unsafe then this agreement shall be (at the purchasers discretion) at an end, provided always that:

� This inspection shall exclude non-structural considerations such as painting, decoration, chattels, trim or similar.

� The Vendor shall have the right to view the report


� If the period provided for this activity expires without the Vendor, the Vendor’s agent or the Vendor’s solicitor being informed to the contrary, then it shall be assumed that this builder’s inspection clause has been waived by the Purchaser/s and that in the absence of any other precedent conditions the matter will continue until completion.”

The above clause is often explained away by real estate sales people as being the standard clause used by everyone. It is a typical law society contract. The language used is often very easily misunderstood by unsuspecting buyers. The problem with this clause is that it restricts you to only being able to do certain things, like renegotiate or walk away from the contract, and only if there is a significant structural or safety defect. These items should definitely be included, but not so limited as they appear here.

In consideration of all the other components and systems that make up the whole property, using this type of contingency clause would be too restrictive if any of the other systems or components have failed or are in a poor condition. As long as the house is structurally sound and there are no safety issues, then in accordance with the above building clause, the buyer is still obligated to continue with the purchase.

Not Such a Horror Story:

Mr.& Mrs. SG are newlyweds with a six month old son. They very excited about buying their first home. Although it was a real struggle to get the deposit together (family and friends helped out here),Mr.& Mrs. SG had pre-approval for a home loan, so they had a budget. After searching for over eight months, they finally found a property they could afford that was close to the shops, public transport and schools. They had a tick in all the boxes!

Mr.& Mrs. SG made an offer with a building clause that read something like, “Subject to receiving a satisfactory structural report”. An inspector was contracted to perform a standard property inspection for $300.

The inspection found the property to be structurally sound. However:

1. The roof was rusted out and leaking in numerous places

2. The guttering was rusted out, and down pipes were broken or missing

3. The plumbing was badly corroded and leaking in walls and under the floor

4. The toilet bowl was broken and unusable

5. The plaster walls and doors were badly damaged in many rooms

6. Power points were hanging loose with exposed wiring

7. The electrical wiring was the old lead case wiring and the light switches and power points were cracked & broken with exposed wiring

8. Numerous windowpanes were broken and exposed to the weather.


The property was structurally sound in its current condition, so under the contract they had signed (without having it checked by their solicitor before signing) they were still obligated to buy the property. The day after we delivered the report, Mr.& Mrs. SG arrived at our office in tears with both their parents, wanting to know how much the repairs would be. We estimated about $30,000 to make the house habitable and safe, but about $50,000 to restore the house to a reasonable standard similar to properties of the same age that have been reasonably maintained. More tears flowed when the realization set in that the house would bankrupt them before they could even move in.

Both their parents were also devastated to see their children in such a predicament and asked us what they could do. We suggested that they take the report and show their lender so the lender would have a better understanding of the actual condition of the property they were lending the money on. The lender had no hesitation in withdrawing their offer of finance once they understood the true condition of the property, as the only research the lender had done up until then was basic curbside property valuation which does not take into account the condition of the property. The property inspection cost our client $300. Their total savings for were over $50,000 in repairs and a lifetime of mortgage debt, or likely bankruptcy, if they couldn’t raise the funds for the repairs.

In my opinion, your property inspection contingency clause should include everything that you are buying. If I can return to the used car analogy, would you buy a $10,000 car without checking to see if everything is working? You lift the hood – yes, there’s the engine, great – but upon a closer inspection when you test drive, the gearbox is jammed in reverse and doesn’t work, or the engine rattles and bangs, then stalls in a puff of smoke.

My point is, just because the gearbox and the engine are present doesn’t automatically mean they


are all in good working order. It is the same with a property. You are buying the whole property, therefore, you must be allowed to inspect and test everything, and not be restricted to only the structural and safety items. Then you can make an informed decision as to whether you wish to buy it, re-negotiate based on your new information, or walk away from the deal.

With the sample contingency clause, it is relatively easy to modify your document to match the one illustrated here. Simply cross out the text and add the new words as per the following page.

The Purchaser/s shall have the right to engage a qualified builder, property inspector, architect or engineer at their own cost to inspect the property and report thereto within 10 working days of the signing hereof, and if that person reports that the structure is seriously flawed, unsound or unsafe property is not satisfactory then this agreement shall be (at the purchasers discretion) at an end, provided always that:-

� This inspection shall exclude non-structural considerations such as painting, decoration, chattels, trim or similar.

� The Vendor shall have the right to view the report

If the period provided for this activity expires without the Vendor, the Vendors agent or the Vendors solicitor being informed to the contrary, then it shall be assumed that this builder’s inspection clause has been waived by the Purchaser/s and that in the absence of any other precedent conditions the matter will continue until completion.

If you make your first offer assuming everything is okay and then you find out it isn’t, then of course you should have the option to either re-negotiate or walk away. The property must be satisfactory to you in its entirety. I don’t have a problem with the second of our bullet points– “The Vendor shall have the right to view the report” – if you as the buyer wish to use the report to cease the contractual arrangements. However, you should be aware that this only gives the vendor the right to view the report, not to possess or obtain a copy. I know many selling agents who seek a copy of the report and use it as a selling tool, making your confidential inspection report available to any prospective purchaser. This practice is illegal and can backfire, as an inspection report is not transferable to any third party.

Unless you gave express permission for the agent to use the report you paid for as a selling tool to help sell the property for the vendor, they could land themselves in hot water over this. The report can be shown to the vendor, but at no stage should it be copied, emailed, or out of your possession. You should also always have the contract checked by your solicitor before you sign anything. The wording of every clause is critical.

Another trick used by real estate agents

I’d like to draw your attention to another little trick that many agents use, which I have seen firsthand. Many years ago, before I entered the industry, I wanted to make an offer on a property and the agent said the vendor would not consider an offer if it was not in writing. The agent produced what looked to me like a contract, filled in my offer, the property details, the details of my solicitor, and asked me to sign it. He insisted, and I still remember him saying, “This is not a contract to buy, this is only an offer”. My offer was accepted, the vendor signed it and – you guessed it –it became legally binding contract.


I was as mad as hell, as I had no opportunity to include any contingencies and no opportunity to get proper legal advice. I was misled into believing the agent when he had said it was not a contract, only an offer. He had failed to go on and mention that it would be a legally binding contract as soon as the vendor signed it. Of course, the vendor signed it. It was a fair price and an unconditional contract as soon as he signed it. You might say that I was naive. In hindsight, I’d say you are probably right; I was naïve and trusted that a professional real estate would be telling the truth. Maybe in a technical sense he was correct, but that didn’t stop me from feeling ripped off.

I wanted to include some contingencies for a property inspection and finance, but I was never given the opportunity. I wanted to get the contract checked by my solicitor before it was finalised, but I was told it was only the offer. One thing I have learned over the years is that, when large sums of money are involved, people do strange and unexpected things on both sides of the fence. This was many years ago, and I know most of you are smarter than me and won’t get caught the same way, but I have to wonder how many times other property buyers like me have been caught out in the same way. Agents using clever words and half truths rather than telling the whole truth can bring anyone undone, so I say again: Don’t Sign Anything Until You Get Proper Legal Advice!

What types of inspections should I have?

After your property inspection, there are plenty to choose from, and the choice of inspection will greatly depend on the type of construction in your property. For example, you don’t need a timber pest inspection for termites in Tasmania, because they are not a threat in that state. However, in every other part of this country, there are only two types of houses; the ones which have termites and the ones that will get termites. We definitely strongly recommend that you get a timber pest inspection for your property, at least. The only exception to this would be for a home that has no timber in it at all, like a solid brick home on a concrete floor with a steel roof frame, as this is unlikely to be structurally compromised by termite damage.

However, if that home has timber door frames, architraves and skirtings, timber cupboards and trims, then there is still risk; a timber pest inspection would be prudent. There are many other inspections to consider. It is a personal choice that will depend on your own expertise, personal fears and concerns. If you are an electrician, you may not want a separate electrical inspection, but if you are buying a 50-year old home and intend to carry out significant renovations, you might want to get an asbestos audit to identify any materials containing asbestos. I have another horror story that directly emphasises this very point. I should warn you to be prepared to be shocked, especially if you have children of your own.

Horror Story:

I received a call from a renovator (we’ll call him John) who had found some cement sheeting in a wall he wanted to remove during renovations. To John’s credit, he had the common sense to call us in to identify if it was dangerous or not and seek advice on what to do if there was asbestos found. We made arrangements to meet at the property the following morning to analyse the situation and possibly take a sample of the suspect sheeting for testing. To my absolute horror, I arrived at 10:30 AM to find John using a spade to chip off the old vinyl floor tiles on the kitchen and dining room floors with his 5 year old son (we’ll call him Jack) using his toy wheelbarrow to load the tile pieces.


Jack would wheel them across the dining room and throw them out the window on the rubbish pile below. John and Jack had already completed the removal of the same tiles from the bathroom, toilet and laundry floors the previous day. John obviously had no idea at all that the floor tiles may contain high levels of asbestos fibres. I did warn you, and I will reiterate that, because the story gets worse. On the other side of the dining room, his wife (we’ll call her Mel) sat feeding their seven month old baby (Sally-Anne). They had both been present in the room all morning and the previous day. In his haste, John may have exposed his family to high levels of asbestos fibres.

I immediately told them of the possible danger, and we evacuated the house. Using proper protective clothing and a breathing mask, I re-entered the house and took samples of all the various materials I suspected may contain asbestos. The list included the Tilux shower linings, laundry wall and ceiling linings and cover strips, the vinyl floor tiles and cement sheet backing, the cement sheet that lined the wall oven cabinet, and the old carpet underlay. All the samples were submitted for testing by 11:30 AM, and the laboratory results were emailed to me by 4:15 that afternoon.

Although from experience I thought all samples tested would come back with a positive reading, it was definitely not the news I wanted to deliver. In fact, most of the samples did test positive for Chrysotile (white asbestos) and some also had a small content of Amosite (brown asbestos). But the really disturbing fact was that the floor tiles contained a very high 50-75% of Crocidolite; the blue asbestos, widely recognised as the most dangerous asbestos of them all. I called John to confirm the test results; understandably he was devastated to the point that he was physically sick.

In his haste to get the renovation work underway so he could move his family into their new home, John had unknowingly exposed his whole family to high levels of asbestos fibres. Now he has to wait for 40 or 50 years to see if he condemned his family to a slow horrible death from an asbestos related disease. Please get a professional Asbestos Audit completed before you renovate.

Your choice of any other inspections should be based on your concerns and fears, and the various features of your property. You must also give close consideration as to what you intend to do with the property in the future. Here is a list of possible inspections you might like to consider. Many of these come under the category of a Special Purpose Inspection for which there are also minimum standards set out in the Australian Standard AS 4349:


� Building code compliance, including identification of illegal work

� Timber pest inspection

� Electrical inspection, including identification of illegal work

� Testing of all appliances, heaters, air-conditioners, cooking appliances, dishwasher, garbage disposal unit, security systems, intercom, TV reception, broadband connection

� Plumbing and drainage inspection (this may also include a septic system or some other on site sewage system) including identification of illegal work

� Gas fittings and system

� Swimming pools and spa baths, including filtration and heating systems

� Noise pollution

� Health & Safety issues like Asbestos, mould, lead contamination, and soil toxicity, allergies

� Energy efficiency and sustainability concerns

As you can see, the list is endless, and it could easily fill another page. The important point is that you need to be aware of all the things that should be inspected, so you can choose what is important to you and your family. I would recommend that, when you first talk to your independent property inspector, you relay all your concerns in detail. A good inspector will, in turn, respond to these, and may be appropriately qualified to take care of all of your queries for you. As part of the inspection, anything in those areas that looks suspect should be highlighted in the report for further inspection.

Another way to put your mind at ease would be to make arrangements with the realtor for the vendor to demonstrate the function of any items of concern for you. This can be a little time consuming, but is invaluable in giving you a better understanding of the property you intend to buy, and saves the special inspection fees. A good inspector will always identify and note any items of concern during the course of the inspection, and will recommend you seek further advice from the appropriate expert if the issue is outside their own particular area of expertise. While this advice is given regularly, many buyers choose to ignore it rather flippantly, and some can suffer significant consequences in the future.

In this next horror story, a client lost his holiday home – totally!

Horror Story:

Harvey is a 47 year old accountant, married with three children, living in an inner city suburb. He is a mad keen, passionate trout fisherman. His wife Di would say he was possessed. Harvey is very proud to have passed on his passion for fresh water fishing to his two teenage sons, and they regularly spend their weekends together fishing and camping out. After a few weekends of very cold weather while fishing in their favourite part of the lakes country, Harvey was dreaming of a warm, cosy, wood fire and a nice warm bed. He wondered what it would be like to shack up in that place, rather than huddling in a tent on the hard ground.

Being an accountant in a busy city office Harvey meets a lot of people in all different financial situations. One of Harvey’s regular clients (Peter) came in with some financial problems in his business, and needed an immediate cash injection to survive. Peter, also a keen fresh water fisherman, owned an old fibro shack on the shore of one of the best fishing lakes in the district.


Peter had not used the shack for years, being too busy with his business. Harvey thought Christmas had come early. They talked it over, made a deal, and exchanged contracts by the end of the week. ‘What a bargain,’ Harvey thought. Even with all the excitement, Harvey still insisted on doing his due diligence. He inspected the shack that weekend with his whole family, camping there overnight.

Harvey phoned me on Monday morning, told me all about his dream shack, and asked me to check it out for him. I inspected it on Wednesday, finding that although it was old, it was structurally sound, just in need of a good coat of paint on the outside. I did notice some discrepancies in the electrical wiring with missing junction box covers and what appeared to some pretty average handy man wiring and connections. I also noted that some birds had nested in the roof space. I highlighted all this in my report, recommending an electrical inspection. I even included some colour photos so that Harvey could see exactly what I was talking about. One photo in particular showed the exposed wires with some dry straw/grass from the bird nest over them; I even noted in my report that it was “a fire just waiting to happen”.

The power was not connected, so nothing was working at the time of the inspection. Two weeks later, the property was settled and Harvey arranged for the power to be re-connected as the family were going to spend the weekend cleaning the place up, squeezing in a bit of fishing, of course. The energy company re-connected the power on Wednesday afternoon around4:30 pm. By 10:00 pm that night, the shack had burned to the ground. Can you imagine how devastated Harvey was when he received the phone call from the police the following morning? But it gets worse. In all the excitement of the purchase and planning of all the weekends to come, Harvey had forgotten about the insurance. Harvey called the previous owner in the hope that his insurance would cover it, but Peter had let the insurance lapse because of the financial stress in his business. What a nightmare!

This shows not just the importance of getting a property inspection done, but also taking notice of the advice given in the report. This advice is not given lightly. It is easy to get caught up in the excitement, but you must tick all the boxes as you go through the real estate transaction. I’ll provide a flowchart to follow later, because these tragedies happen to real people and I don’t want your real estate experience to become another horror story. From over 30 years of experience as a builder and property inspector, I have no doubt that failing to get a property professionally inspected before you buy is the most expensive mistake smart people make when buying property.


This is something that I still see happening daily. Conservative estimates show that more than 70% of people buying property fail to get a professional independent inspection done. This may be due to a lack of knowledge that the service is available, or submitting to undue sales pressure to sign contracts without a building inspection clause to make it a more attractive offer; I just don't know.

Consider the following:

• If you do any basic research into buying property, having the house professionally inspected before you buy is always in the top two or three of the absolutely ‘must do’ items on every list. This is because the consequences of not doing so can mean financial devastation for which your family will suffer for years to come, as it has for so many who make this mistake.

This is the type of mistake that nobody admits to because of the embarrassment of having to admit to such a basic failure of common sense.

• The modest cost of the property inspection is insignificant in comparison to the potential consequences of not getting it done. The property report also delivers peace of mind and eliminates buyer’s remorse. Even top of the range Rolls Royce inspection reports normally work out to be less than 0.1% (that's a tenth of one percent) of your contract price.

• The inconvenience of arranging an inspection is one phone call and three minutes, or you can go online and arrange it without even talking to someone. Your independent inspector will take care of it all for you.

• The value of a professional inspection report is regarded by those who use them regularly as absolutely invaluable. I doubt that you will ever see a real estate agent or a lawyer buying a property without one, because they have also seen the disasters firsthand.

As professional inspectors, we often get called in to look at a property months after the settlement, when the buyer has moved in and starts to notice strange things happening. No, I’m not referring to ghost sightings. But these jobs alone would be another chapter in my "Book of Horror Stories”. The first question we ask is "what did your inspection report say?" Following are some examples of the comments we get in reply.

• "I didn’t think I needed an inspection because it's not very old.” Yet when we inspected the home, we found that the tap penetrations in all the showers had never been sealed, so all the showers had leaked and caused over $3,800 damage. The external doors had not been painted properly and now needed replacing – another $1,200 – and the site drainage had not been installed as per the plans, and had caused flooding of the rumpus room; another $7,300 for new carpets and painting after cleaning, and $6,000 to install the site drainage, and replace the garden and paving.

• "I didn't get an inspection because it has been standing for 60 years now, I thought it must

be okay.” Upon close inspection, we found that inadequate under floor ventilation, no rising damp protection, and poor drainage had combined to cause rot and fungal attack in timber floor framing and subsidence of numerous internal piers that caused uneven floors and plaster cracking in the walls, leaving a total repair bill of $18,270.


• Or one of my favourites:” I got my dad's mate who is a painter to check it out and he said it

looked okay to him.” As it turned out, dad's mate was also the brother in-law of the person selling the house, and of course he knew the painting was okay because he did it – but he failed to tell the buyer that the wiring was old, damaged and needed replacing at $7,800, plus the roofing was rusted out and would need replacing at $8,370 (a new coat of paint doesn't hide the rust on the inside).

• Another classic: "I didn't think I need an inspection because I couldn't see anything wrong

when I looked at it.” Sure, it presented very well, but our professional eye for detail noted that the back bedroom window was jammed shut and cracked, and the plaster and brick cracking under the window confirmed that the foundations had failed and needed underpinning. Repairs cost $15,200.

• "I didn't get an inspection because the agent wouldn't accept a contract with a building

clause.” This should ring the alarm bells to start with. On inspection of the under floor area, we found signs of past flooding, rising damp throughout the lower room walls, and rotten carpets. The repairs were $9,770.

• "I didn't get an inspection because the vendor had one done when they bought it seven years

ago.” The vendor had ignored the advice of the previous building report to get a timber pest inspection done. Due to termite damage, the house had to be demolished, at a total loss of $385,000.

I could easily go on and fill pages with more excuses, but that won’t change the fact for these poor people. One simple phone call could have avoided all the grief and expense.

How to use your report to save you thousands

Having a pre-purchase inspection report completed before you buy, or even as a contingency in your contract, is widely regarded as the single most powerful negotiating tool that you can use when buying property. There have been hundreds of situations where buyers have used the findings in a report to negotiate reductions of thousands of dollars off the sale price of a property, or re-negotiate an existing contract due to report findings. However, not doing so can lose you thousands more.

Horror Story Avoided:

Karen, a single mum with two kids, made a successful offer on a three bedroom brick veneer home. It was close to her work and schools, making it a perfect scenario for the whole family, Karen was smart enough to include a building clause in her purchasing contract. The property was listed for $380,000 but Karen managed to negotiate down to $377,000 for a quick settlement. This suited the couple that owned it as they were moving interstate.

Karen was very pleased with herself, and didn’t think she needed an inspection because the house looked like it had been well looked after; the garden and yards were neat and tidy, the roof and timber windows had just been painted, they had just put new gutters all around, and the inside was as neat as a pin with family photos all over the walls and down the hallway. Karen got the impression that it was a good family home. She decided to get the report done anyway, just in case.


The inspection report revealed that the old corrugated roofing was rusting out, with numerous signs of leaks, and would need replacing at a cost of$7,680. The timber fascia boards were rotting at the joints and the timber windows were rotten in many areas, poorly patched with body filler, fixed and painted shut. The repair cost for this was quoted at $4,800. The shower base was cracked and leaking and needed to be replaced at a cost of $1,565.

The inspection report also contained digital photos as evidence of these defects. Karen was able to go back and re-negotiate a total of $13,000 off the original contract price to allow her to make the repairs. Karen’s independent property inspection cost $350 and because of the report she saved herself $13,000 in repair costs. Put another way that's a 3,714% return on her investment and it only took one phone call and three minutes to arrange.

Make no mistake – this is a secret that many in the industry don't want you to know about. This might be part of why 70% of homebuyers don’t get inspections. This scenario is repeated over and over every day, and only the smart homebuyers are saving thousands with their inspection reports. Armed with a completed property inspection report before purchasing, you have the single most powerful negotiating tool in your hands.

You can use the report to re-negotiate for the repairs to be completed by the owner before settlement, or you can re-negotiate a price reduction to allow you to carry out the repairs when you move in. Either way, it is by far the very best bargaining chip you can have for the negotiating table.

The power of negotiation remains with the person with the knowledge and the evidence, so don’t sign anything without understanding all the detail of the report. Be suspicious! No place is perfect and will always have surprises.


Tips for negotiating from a low power base Firstly, appreciate that people do things for their own reasons and motives, not for yours. Hence, to influence the other party when you are in a weak bargaining position, you should develop a deeper understanding of their broader desires and needs, and work with these. They may, for example, be under serious pressure to settle on the due date because they are making another purchase.

Secondly, check your assumptions. Consider the range of costs associated with any repair work, and look at covering your position at both ends.

Thirdly, identify what else you can say or offer to the other party in order to make it easier or more attractive for them to say ‘Yes’, on issues like timing in relation to settlement or work to be done.

Fourthly, appreciate that whatever you feel emotionally, the other party may feel the same way. Finally, learn how to say ‘no’ nicely.

Another Horror Story Avoided:

Warren ordered a property inspection after his offer was accepted. When placing the order, he mentioned that he was concerned about the second bedroom and rumpus room ceilings, which had just been painted and looked a little odd to him. So while doing the inspection, we paid particularly close attention to these areas and we found that they were sagging away from the joists and battens. The popped nails had just been filled and everything painted over, in the hope that nobody would notice.

I climbed up inside the roof space and crawled over to the bedroom and rumpus rooms to find a lot of rust in the roofing sheet laps. Obviously, the house had become rotten with long term water damage to some of the roof framing; water soaked insulation batts made the plaster ceiling linings sag and they were almost ready to collapse with the next big rain. I climbed onto the roofing over this area and noted that some very crude repairs had been done some time ago, but it was clear that the roofing was past its use by date and needed replacing.

Using the negotiation techniques I mentioned above, Warren got the repair and replacement quotes and re-negotiated over $13,500 off the contract price. The work was all completed within the first week after the settlement. I went back and checked it all out for him again, and contractors had done an excellent job. My report only cost him $350 but it saved him over $13,000.


6. Choosing the right inspector Like any profession, you will find both qualified and unqualified individuals calling themselves ‘professional’ home inspectors. Due to the fact that in most of the country they can operate in an unlicensed and unregulated fashion, it's even more difficult to weed out the bad property inspectors from the good ones. This means that, in theory, anybody can print off some business cards and brochures that label the individual as a property inspector; they then go out, advertise themselves as a property inspector, and attempt to make a living from unsuspecting homebuyers. Your home or investment property is probably the most expensive purchase you will ever make. I know that’s a cliché and said every time, but it is still very true, because, well, this is the most expensive asset you will ever buy! This is no time to shop around for a cheap inspection. The cost of a property inspection is very small relative to the home itself, and the cost of not getting a professional inspection done can be enormous. If you don’t get this part right, it can be financially devastating for you and your family. Choosing the right home inspector can be difficult unless you know what to look for; you probably won’t meet them until the appointment. Furthermore, they will have different qualifications, personalities, equipment, experience, reporting methods, and pricing. Some ground rules in finding a property inspector

So, what should you look for? What types of skills or credentials are required? The inspector's skills and credentials are extremely important. Being a knowledgeable contractor with years of experience does not mean that they will be thorough in all areas of the building. The training or experience of an inspector is very important, but it also does not guarantee a thorough inspection. The inspector's ability to find defects is the most important criteria. No matter their experience or training, they must be able to find defects. To top it off, not all property inspectors are created equal. If two different inspectors inspect your home on the same day, you will find that their reports may not be the same. Some defects may be picked up by one and completely missed by the other!

Even when both inspectors detect the same defect, one will use a different narrative or phrase to describe it, and one might interpret the defect as a major problem or significant failure but the other might interpret the defect as minor, recommending a simple repair to rectify the problem. All these differences of interpretation can lead to a very different outcome in your final report. A suitably qualified person, such as a licensed builder, or a person who has received specific property inspection training, is the one who you should hire for your professional pre-purchase inspection report of the property you are thinking of buying. These professionals know what to look for, and can see through any cosmetic improvements covering up faults that might otherwise be missed by an untrained eye. A professional property inspector will also ensure that the format and content of your report complies with the Australian Standard (AS 4349.1).

For example: Say you have a loose top hinge on a bedroom door. This may result in the door binding (or sticking) on the door jamb, and the latch won’t line up any more so it also doesn’t work properly, and the door might scrape on the floor when open, which could also be marked down as another defect. Thus, for one inspector, this could be described in the report as four separate defects. By a strict reading of the Australian Standard, this would now be categorised as a major defect, because the door no longer functions as it was originally designed or intended.


In the report, the four defects from this inspector might be listed as:

1. The top hinge is loose and will need a repair to restore the correct function of the door. 2. The latch will need adjusting to restore correct operation. 3. The door is binding on the door jamb and will need easing to restore correct function. 4. The door scrapes on the floor and will need easing to prevent damage to the floor and/or

floor coverings.

The thing is, an inspector must have an inquisitive mind set. It is not enough to record that the door latch doesn’t work properly, or that the door is scraping on the floor. They must to have the investigative mindset to look further and find out what caused it to happen; this type of mindset will lead him to the loose hinge that is at the root of the problem. Although this is a simplistic example, it forms the crux of what you need to look for when choosing your inspector, because the second inspector might report on the same door follows:

The top hinge is loose, causing the door to bind on the door jamb and misalignment of the latch, which is causing the door to scrape on the floor and damage the floor coverings. I recommend that the top hinge is fastened by re-tightening the loose screws or fitting new screws. This will in turn re-align the door and latch in position and restore proper function.

This would be reported as a minor defect with a very simple repair of re-tightening a few screws. However, both inspectors are correct. The first reported the facts and appropriately listed each defect. The second inspector went to the cause of the initial problem and, in a practical manner, recommended the cause be repaired, which would in turn fix the other defects. It just comes back to different interpretations by the inspectors. Unfortunately, the client’s interpretation of the two reports will also vary greatly, and can have an adverse effect on your decision to purchase the property of not.

Some property inspectors will present you with a ‘laundry list’ of defects typed out in a basic letter format, while the more professional inspectors will present you with a complete report documenting everything that was inspected and the condition it was found in as good or bad. The disadvantage of the ‘laundry list’ document is that, unless you attended the inspection, you will never know if anything else was even inspected. You will never know if this inspector got up in the roof space or under floors, or even skipped a room or two simply from not knowing the real responsibility we have. Each property inspector will have had different experiences and training throughout their lives; some will have expertise in one area, but only a general understanding of many other fields.

For example, a builder who has spent his entire career working on residential building sites specialising in cottage construction will have a good general knowledge of electrical, plumbing, drainage, roofing, bricklaying, and structural engineering. A structural engineer whose career was designing and inspecting residential properties as they got built may not have the builder’s understanding of electrical, plumbing or roofing requirements, but will be a master of the structural integrity of the framing components, soil types, ground conditions and the effects the drainage system will have. Another builder may have spent the majority of his career fitting out homes, fixing joinery, cabinets, doors, etc. This inspector you would expect to have a greater eye for detail. This is why we say that not all property inspectors are created equal.


Experience is critical to this profession. Would you hire an inspector who has been a builder for 40 years and only does inspections on the side, or would you hire the inspector who was a builder for 30 years and has been inspecting homes exclusively for the past 10years? I would put my money on the second bloke. Building knowledge alone does not make you a good inspector. This is an acquired skill that is developed over years of experience. In summary, a basic list of factors that you should consider when choosing the right company would include the following:

� Are they full-time property inspectors? � What education and training or professional development have they done? � Are the inspectors qualified or licensed in the relevant states and territories? � Can they send a copy of a sample report? � How many years have they been a full-time property inspector? � Do they have any testimonials? � Can they send you proof of insurance for professional liability

Get a property inspection from a full-time inspector

Nobody works harder for you, the client, than an inspector who does this for a living. When their reputations are on the line, the success of a business depends on exceeding the client’s expectations for quality and professionalism each and every time. You just don’t get that level of service from a worker who does inspections part-time to fill in his week or to scout some extra work for his home repair business. A full-time professional inspector has a vested interest in ensuring your total satisfaction, and has the experience that develops the eyes, ears and nose for searching out and identifying problems. Part-time inspectors simply don’t have the time in the field to develop that radar, so be sure to ask how many inspections they do, to find the right one!’ Blind’ part-time inspectors can only conduct around 200 annually. A quality full-time inspector conducts 400-800 inspection annually, receiving extensive referrals by prior clients, lenders, real estate agents and others. Education and training:

Property inspectors are responsible for evaluating all the thousands of components that make up the home, including everything structural, plus anything that opens and closes in the home; not just one aspect, like the bricks or framing. To be able to provide a competent evaluation of all the elements takes formal education and training in building construction methods, as well as ongoing training to keep up with the new building techniques and materials of modern homes. Professional full-time inspectors also have detailed knowledge and understanding of all types of house construction throughout the ages.

You should also confirm that your inspector has had formal training in building and inspecting, not just a basic trade background, like painting for example. Did the inspector learn on the job at the buyer’s expense? If the inspector is a one-man or part time operation, who checks the quality of their work? Engineering and technology in the home is becoming more sophisticated all the time, so comprehensive continuing education and training is a must! Only if your full-time professional inspector is a member of a property inspection franchise group you can be assured that the standard of work and reports delivered will be consistent and considerably higher than other sole traders.


Professional affiliations

As stated previously, property inspectors in most states are both unlicensed and unregulated, and there are no formal training requirements by any government or industry bodies. While building industry bodies like the Master Builders Association and the Housing Industry Association play an important role in providing some information and ongoing professional development for their builder members, neither organisation have a membership category specific to property inspectors. In these organisations, property inspectors are classed as service provider or building consultants, along with mediators, hardware stores and retail shops.

While a professional affiliation remains a helpful link for builder members in staying abreast of the changing materials and technologies, neither of these organisations play a significant role in the property inspection industry. Thus, choosing your property inspector solely because of such an affiliation is no guarantee of quality. Joining a few industry bodies is only a matter of filling out an application form, nominating a membership category, and paying a fee. Actual qualifications, your past experience, or even the ability to adequately do the job has no bearing on membership.

Certifications

While certifications are certainly important, it’s the combination of experience, education, and training that make the difference in the competency of your home inspector. Certifications let the world know that the inspector can pass a test, not that they can inspect a home properly. We all know people who are certified for one thing or another that we wouldn’t hire them for under any circumstances! There is simply no substitute for experience and proper training. It is my view that a lack of licensing and regulation of property inspectors is a bad thing, and we regularly hear horror stories about the poor work and inadequate reports delivered by part-time property inspectors. It is important to acknowledge that there are some good inspectors out there as well! All you need to do to find them is keep your eyes and ears open for the names of good property inspectors who generate quality reports and provide true peace of mind for their clients.

The Inspection Report

A professional inspector will provide a combination checklist/narrative report that is consistent with the Australian Standard AS4349.1-2007 (see ANNEX B). The top property inspectors in the business today don’t produce handwritten reports. Technology has evolved, and you should expect to receive a full-colour report, with digital photographs of the issues discovered during the course of the inspection, on the same day. The report should also provide summary pages with specific categories like ‘Minor and Major Defects’, ‘Safety Issues and Items for Further Investigation’. Good inspectors will offer you a range of reports from a ‘Basic Structural Report’, ‘Standard’ full written report, and a ‘Premium Report’ that includes a photo protection package. If your inspector doesn’t offer you these options, choose someone else who can.

The report should not contain repair costs or action plans for repairs. Professional home inspectors inspect, they don’t repair! An inspector who also does repairs should always be avoided, due to the


inherent conflict of interest in that situation. Is there really a defect, or is he just looking to fill next week’s work schedule? I heard of one inspector who always found inadequate subfloor ventilation in every home he inspected, providing the inspection report with one hand and a written quote to install adequate ventilation vents by a local general handyman service in the other hand. This handyman was the inspector’s son-in-law, and the quote was twice the going rate for this type of work. This inspector also sent the quote to the vendor so he had a double shot at getting the repair job.

I’m all in favour of recommending good reliable tradespeople for repair work, but not when they are related, or overcharge; that’s clearly a conflict of interest. It should certainly be done if the repairs are justified, but that needs to be an arm’s length transaction. Also be careful of the label “The Very Best Property Inspections” or claims to provide the new 5 Star Condition Rating on the home. There are only a limited number of independent property inspectors in Australia who are authorised to deliver this 5 Star Condition Rating. In time, a licensing regime may remove all the cowboys from the industry. For now, at least be sure to ask for a sample of the inspection report you want, so you’ll know what you can expect for your time and money. After all, you are the client! If they can’t or won’t provide sample reports, then choose someone else.

How long has the inspection company been in business?

Is the inspection company locally owned and operated, or are they afar-away faceless corporation where no one is monitoring and evaluating the quality of their work? Is it one of those companies where you buy the report online and you can never get to meet or talk to the actual inspector who did your report? Then choose someone else. If you are dealing with a multi-inspector firm, how long has the inspection company been in business? If they won’t tell you the work history of the inspector they want you to hire, then go somewhere else. Can you actually talk to the inspector personally, or does the company hide them away because they are too busy? Talk to someone else. Does the inspector submit the site notes to a secretary, wife, teenage kid, or girlfriend to type up the report? If so, then you should choose someone else. Does the inspection company have dedicated employees serving as customer service representatives to schedule appointments and provide any follow up assistance required, or are they the gatekeepers preventing you from discussing your report directly with your inspector? Then choose someone else. Do they have a dedicated website, or are they just a one-man show; a part-timer with a business card; fly-by-night operation with no insurance? Do I even need to say it again? Ask to see what other buyers have said about the inspector

Quality, educated, professional property inspectors often receive testimonials from satisfied clients after the completion of the inspection, that you can view on their brochures or website. Professional inspectors want to know what they are doing right, as well as what might need improvement. If the inspector can’t or won’t provide client testimonials, they might be blind in more ways than one! The Checklist of Hard Questions


If the inspector can’t or wont answer these questions, then choose someone else – I don’t want you to be relying on poor quality advice from the wrong property inspector!

• Is property inspecting your only business?

• Can you send me your Certificate Of Currency for professional indemnity insurance?

• Can I attend the inspection with you?

• Can you show me a sample report?

• Will the report be completed on the same day?

• Do you include the photo protection package?

• What equipment do you use? (the minimum standard should be a powerful torch, ladder, moisture meter, a spirit or laser level, and digital camera)

• Do you supply the new 5 Star Condition Rating?

• Do you offer free building consultancy after the inspection?

• Can you recommend reliable contractors to complete any repairs?

• Can you include a Free Home Safety Report?

If the inspector can’t or won’t answer all these questions, then choose someone else. Accepting referrals Because we live in an increasingly litigious society, no one can afford to refer or recommend anyone without first knowing that they are appropriately qualified and insured. In my business, I send copies of my qualifications and insurance certificate of currency to all the realtors, bank managers, conveyancers, bank lenders, mortgage brokers, and insurance agents in my area. Thus, if they think I’m worthy of a referral, at least they will be confident in knowing that I’m appropriately qualified and insured. It’s not uncommon for a client to tell us that they were referred to us by a realtor, then for their lending officer to give them our business card when they went to apply for the mortgage, or for their solicitor to pass on our phone numbers when they call up to get their advice or arrange the conveyancing!

Accepting referrals is still the best measure of the ability of any person or business to perform the work, as the person referring them has in most cases had firsthand experience in dealing with that person or business, and they wouldn’t make a referral if there was a chance that it might backfire on them! I find that people who don’t have the confidence to make a referral will take a more diplomatic approach and either give out a few names or just refer you to the yellow pages with a not very confident wish of good luck. This is when you need to dig a little further, ask some more


questions around the traps, and do a bit of research. Your property inspection is far too important to leave to chance.

Errors & Omissions Insurance Property inspector liability insurance protects inspectors in the case of claims arising from allegations of wrongful acts, errors and omissions in residential real estate inspections. As a home buyer or seller, you want to be reassured that in the unlikely event your inspector makes a mistake, they have insurance in place to help protect you from any significant losses. In today’s volatile economy, business owners need to be more aware and informed of their professional vulnerabilities. For the home buyer or seller, it also gives you the peace of mind that the inspector is in business for the long haul. Professional property inspectors are experienced in identifying possible problems, deficiencies, and recommending and referring these to appropriate professionals. There are thousands of components that make up a property, and any of these may need replacement or repair. More often then not, home buyers and sellers neglect or fail to notice certain home problems or situations, convinced that the home is in a perfect condition to sell or buy. Typical homeowners might neglect as many as 50-100 potential problems that a professional property inspector can easily visually identity. The majority of the time, these defects tend to be in out of the way places like attics, under floor spaces, and roofs. These areas must be accessible for a visual inspection. Home inspectors are professionals when it comes to identifying water damage from showers or bathtubs; excess moisture; roof problems; improper repairs, and more. However, even the best home inspectors can miss signs of damage and defect, which is why errors and omissions insurance is necessary. Errors and omissions insurance applies to errors, omissions or negligent acts committed in the course of providing or failing to provide professional services. In the event that during the visual inspection, something is missed, errors and omissions insurance can offer protection. Professional home inspection insurance (E&O) can protect the inspector and you in the event of a claim grounded on an accidental error or failure. Errors and omissions insurance can cover the inspector and you, his company, and employees from claims or lawsuits in the unlikely event that a mistake is made. Errors and omissions insurance is the safety net for an inspector to protect their livelihood. No one should be caught without coverage against personal negligence in these trying times when some have to turn to desperate measures to survive. Be prepared for unexpected claims and accusations. Errors and omissions insurance is useful regarding claims against home inspectors who are accused of failing to identify a potential problem or item that later saw damage or harm. Home inspection claims may be inaccurate at times; some cases seek compensation for damaged items that the home inspector was not responsible for, or an item that was unknown or hidden from their view at the time of the inspection. In other cases, inspectors are unable to access areas of the home and is therefore not responsible for problems there. But there are scenarios where an inspector maybe at fault. We have found that the majority of good inspectors are very busy and conduct between 800-1,000 inspections each year. Because inspectors are busy, and due to the sheer weight of numbers, inspectors can become victims of claims. Errors and omissions insurance can protect home inspectors from cases of negligence, where there was limited or no access granted, cluttered areas leading to obstructed access, hard to detect water stains, roof problems, and more. Every home inspector will make mistakes at one point or another, so they should protect and prepare themselves with errors and omissions insurance, to ensure those


mistakes don’t ruin their business. This should also give you some peace of mind knowing your inspector is fully insured. Frequently Asked Questions We would like to remind you that a lot of lawsuits and claims occur for new and inexperienced inspectors or contractors. We encourage all home inspectors to be diligent and carefully supervise all trainees and contractors to ensure that the quality of their work does not compromise yours. This is another reason why the home buyer or seller should ensure an inspector is appropriately insured. Using the following list of frequently asked questions may help to ensure that, as a home inspector, you are getting the coverage you need. Question: Is professional indemnity coverage the same as errors &omissions (E&O)? Answer: Yes, both terms are used to describe the policy, and they mean the same thing however each policy will vary slightly depending on the supplier and any restrictions they may include. Question: What is a certificate of insurance? Answer: A certificate of insurance is a document that shows the business name, the dates for which coverage is granted, the policy number, the limits of coverage, and endorsements. It can also list a certificate holder or insured associates if it is required to have these by contract. The inspection process A home inspection is a visual inspection of the structural and mechanical components. A furnished home presents problems for inspectors, because many areas are typically not visible due to floor coverings (carpet, timber floating floors, tiles, rugs), as well as furnishings, storage, packed moving boxes, wall hangings and mirrors, etc. Interior furnishings and stored items can hinder access to, inspection of, or opening and testing, each and every window, cabinet, closet, or door.

What typically happens with occupied and fully furnished residences is that, since the residence is being lived in and systems are being used on a daily basis, it is possible that something will be damaged or fail during the contract period and/or during the move-out/move-in processes. As a homeowner rarely damages something during a contract period, they will rarely file a claim against their homeowner’s insurance policy, because they see it as not being their home anymore. They think you own it; why should they fix something belonging to you? Some sellers don’t understand (or care) that they still own the home during the contract period and should still take care of it.

Selling a home and leaving is a stressful event. To help relieve that stress, we have "moving parties", "last parties", "first parties", or "housewarming parties", or we move hurriedly so we don’t have to take too much time off from work or use up vacation days or sick leave. The actual days of moving are when most post-inspection damage occurs; usually by the guests (or movers) helping the owner (seller or buyer) to move, so the owner may not even know anything about the damage


that has occurred. In both these instances, sellers and buyers may say, "Your/our property inspector must have missed that one.” We poor old property inspectors get blamed for everything.

Here are some facts:

• Windows and window screens, and doors and door screens, are easily damaged during the contract period, and during the move-out/move-in process.

• Lights, switches, outlets, etc., can be damaged or fail. Lights, wall switches, and outlets (electrical, telephone, and cable) see a lot of use during this period, and the move-out/move-in process, and thus are easily damaged.

• Because of the location of water supply and drainage pipes in our sink cabinets where we start cramming things immediately upon move-in, plumbing pipes are easily damaged during the contract period and during the move-out/move-in process, possibly causing loose pipes and leaks.

In other words, by the time the buyer is completely moved in, there could be anything that just isn’t right or isn’t the same as it was on the day of the inspection. That, of course, is the nature of real estate. So, how do you remedy all this post-inspection damage? There are a couple of ways. First, we believe the purpose of a pre-settlement inspection is not only to make sure that any negotiated items have been repaired correctly and to a good standard, but also to make sure that any additional damage, deterioration, or destruction beyond normal wear and tear has not occurred. We strongly recommend you take this opportunity and have your inspector reinspect before settlement.

Re-inspection is also a great time to confirm that all the items listed under chattels and articles are still present and in good condition. We also recommend a careful, slow, and thorough inspection with your realtor as a final walk-through to ensure your satisfaction. On one occasion, I was called back to do a pre-settlement inspection two days before the property was due for handover and settlement. I arranged to pickup the keys from the realtor as the tenant had already vacated the property. It is not unusual to see curtains and blinds go missing, or even the odd light fitting swapped over by the previous occupants, but this one really wins the gong. I arrived at the property at 9:00 am to find the tenant, who had supposedly moved out a week ago and supposedly handed over all the keys to the property, up in the roof space.

There were five garbage bags full of the blown-in ceiling insulation on the floor with the ladder that led up to the man-hole, and two power leads going up into the roof space; one for the flood light, the other for the industrial vacuum cleaner. Can you believe the tenant was up there vacuuming out the fluff type ceiling insulation to take to his new home because it was not insulated? I didn’t have the heart to stop him. I simply took some photos of the ladder, the bags of insulation, and his van in the driveway. I left the property without him even knowing I had been there, called the realtor, and left a message on his voice mail. Because the realtor didn’t get my message until after lunch, the tenant had completed his task, locked up and left the property like nothing had happened.

The tenant got a visit from the local police with a ‘please explain’. My client got back his ceiling insulation throughout, plus another set of keys to the house that only the tenant knew about. This is an extreme example, but nonetheless it raises another anomaly that not many buyers consider. How


many other keys to your front door are out there and who else has one of these keys to your home? I strongly advise you to always change the locks as soon as you take possession of any property.

If my client had ignored my advice and elected not to get a pre-settlement inspection done, he may never have discovered that his ceiling insulation had been stolen; what a cost it would have been until years later when it was discovered, and every heating bill had gone through the roof, literally! This is another example of how you can benefit by talking to your property inspector and acting on any advice given. We don’t recommend further inspections lightly, and we can back it up with real life examples. Your independent property inspector appreciates your business, and is watching your back, if you only let him. However, sometimes things do go wrong; you may discover something wrong with the house, and you may be upset or disappointed with your home inspection.

Concealed problems or intermittent defects

Some problems can only be discovered by living in a house. They cannot be discovered during the hours of a home inspection. For example, some showers leak when people are in the shower, but not when you simply turn on the tap. Some roofs and basements only leak in specific conditions (i.e. only when the rain is heavy enough, the wind strong enough, and only then if the wind blows from NNE North-North East over 35 knots). Some problems will only be discovered when carpets are lifted, furniture is moved, or finishes are removed. Hidden defects are often found in renovations. These problems may have existed at the time of the inspection, but there were no clues as to their existence. Our inspections are based on the past performance of the house. If there are no clues of a past problem, it is unfair and unreasonable to assume your inspector should foresee that problem.

Inspectors always miss some minor things

Some say inspectors are inconsistent because their reports identify some minor problems but not others. Minor problems that are identified were discovered in the search for significant problems. However, these are often noted simply as a courtesy. The intent of the inspection is not to find the $50 problems, it is to find the $1,000 problems; after all, the significant defects are the things that affect a buyer’s decision to purchase. Some astute homebuyers even include a dollar value in the property inspection contingency clause in the contract for repairs up to an amount that is acceptable.

Contractors’ advice

The main source of dissatisfaction with home inspectors comes from comments made by contractors. Contractors’ opinions often differ from ours. Don’t be surprised when three roofers all say the roof needs replacement while we didn’t. We meant that, with some minor repairs, the roof will last a few more years. If you think about it, obviously the roofer can make the repairs, but upgrading the job to a total replacement really makes it worthwhile for them.

I’ve seen this happen on a number of occasions, and the property owner usually also takes the opportunity to upgrade from their 50-year old galvanised roof to a new Colourbond with matching fascias and guttering, only for this to be exposed in court as a fraudulent claim, where they lose the case and have to pay all the costs. In one instance, a roof was damaged during a hailstorm, and the new home owner tried to sue the property inspector who inspected the property three months earlier


for not telling him about the roof leaks. It was discovered during the proceedings that the homeowner did not have any home insurance in place and was trying to make a claim against the inspector to pay for the damage. Again, he lost the case and costs were awarded against him.

The “Last Man In” theory

While the inspector’s advice represents the most prudent thing to do, many contractors are reluctant to undertake these repairs because of the “Last Man In” theory. The contractor fears that if he is the last person to work on the roof, he will get blamed if the roof leaks, regardless of whether the roof leak is his fault or not. Consequently, he won’t want to do a minor repair when he could re-roof the entire house, make a lot more money, and reduce the likelihood of call-backs. It is understandable, but there is more to the “Last Man In Theory”. It suggests that it is human nature for the homeowner to believe the most recent advice they heard, even if it was contrary to previous advice.

Contractors may say, “I can’t believe you had this house inspected, and they didn’t find this problem.” There may be several reasons for apparent oversights, and the contractor neither knows nor understands exactly what a property inspection entails. As property inspectors, unfortunately we find ourselves in the position of “First Man In”, and consequently it is the inspector’s advice that is often disbelieved first. This scenario can often lead to distrust and end up in a dispute. The first thing a homeowner should do is to give their inspector an opportunity to re-inspect the problem area and form up-to-date advice, almost always leading to an easy and satisfactory solution for everyone.

It is very difficult for homeowners to remember what the circumstances in the house were at the time of the inspection. Homeowners seldom remember that it was snowing, that there was storage everywhere in the basement, or that the hot water could not be turned on because the power was not connected. It’s impossible for contractors to know what the circumstances were when the inspection was performed. I can recall a time when a structural inspection was ordered, and my client wanted to know why I had made no comment about the bedroom light not working, or why I hadn’t noted the leaking basin tap handle, and why I didn’t tell her the ceilings had no insulation. Sometimes it seems that even the homeowners forget what they asked to be inspected or what type of inspection they had included in the property inspection contingency clause of their purchase contract.

The wisdom of hindsight

When the problem manifests itself, it is very easy to have 20/20 hindsight. Anybody can say that the cellar is wet when there is 2 inches of water on the floor. Predicting the problem is a different story and this scenario repeats itself almost every year. For example; And this only happened recently, a property built on the side of hill is 30 years old and according to the previous owner has never had a water or drainage problem. After three years of record dry the drought finally breaks and wouldn’t you know, the rumpus room is flooded out after three days of the heaviest rain in years.

After further detailed inspections and some excavations, it was found that the deep clay sub-soils had cracked open due to shrinkage over the previous three year dry spell, forming a new pathway for the surface water to travel, diverting past the pre-existing site drainage system that had adequately served the property for the first 30 years, ultimately draining into the rumpus room. While some inspectors do have a large ego, I’ve yet to meet one with x-ray vision who could have


predicted this problem when no evidence existed on the day of the inspection. The fact is, some things that change are not discoverable at the time of the inspection, and that is one reason why a good inspector will recommend regular –preferably annual –property inspections are carried out, as well as any other inspections by specific experts that you should have done.

We are generalists

We are generalists. We are not specialists. If your inspector makes a recommendation in your report for further investigations or expert inspections, and you choose to ignore any of these recommendations, then you do so at your own peril. This is not done lightly, so you should follow through with whatever is recommended by your expert property inspector because your interests are paramount. Let me put this another way: choosing to ignore your property inspector’s advice will be detrimental to your wealth and will, at some stage, hurt your hip pocket seriously. In Australia, properties only either have serious defects, or will get serious defects at some point in the future.

An invasive look

Problems often become apparent when carpets are removed, or when fixtures or cabinets are pulled out, and so on. You must remember that a property inspection is a visual inspection only. We don’t perform any invasive or destructive tests unless previously arranged for as part of a special purpose inspection and we have express written permission from the current home owner, for example, of concealed spaces that require small holes to provide access for a borer-scope, or an asbestos inspection that may require taking small samples for laboratory testing.

Using the Australian Standard AS4349.1 as our guide, we are not permitted even to move furniture, shift stored items, or unscrew cover plates without the express written permission from the property owner. This permission is often difficult to obtain in a pre-purchase inspection as there is no guarantee that the property will be sold to this prospective buyer.

The property inspection is not insurance

A property inspection is designed to better your odds of sale and give you a much better understanding of the overall condition of the property, as well as highlighting any significant defects that will need immediate attention. It is not designed to eliminate risk. For that reason, a property inspection cannot be considered an insurance policy. It would also not include the value added by the inspection.

Price shopping for inspectors

Selecting a property inspector is not like looking for a discount shop for mobile phones – avoid price shopping! Lower property inspector fees should be regarded with suspicion until you know a lot more detail, as low quotes are often promoted by those property inspectors who are new to the business or do not spend sufficient time performing the inspection itself. With such a high value asset, one defect missed by a cheap inspector can cost you many times the bargain saving.


There can be exceptions to this rule, but you will need to ask your inspector some detailed questions to make sure that they still provide quality and experience. With the advances in technology, a good property inspector will use a new software reporting package to dramatically cut down the time previously spent painstakingly taking notes before moving on with inspecting the next item. Using this software, an inspector can actually cut time on site without compromising the quality of the inspection, and it can often enhance the consistency and accuracy of your report.

It amazes me when I read advertisements by other inspectors making a big issue about how long it takes them to do an inspection, bragging that they take five to six hours. These are the inspectors who are still caught in the last century. The only reason it could take someone that long is because they are un-organised, don’t follow a system, and constantly stop inspecting to take notes. It would then take another few hours to review all the notes and type it all up into some sort of order for some kind of report. However, most of the new reporting software comes with pre-determined narratives already available at a click of a button, thus only requiring the inspector to stop inspecting just long enough to select the correct pre-determined narritive to correspond with the item being inspected. It doesn’t take any longer to select a defect narrative than an approval confirmation narrative.

Inspectors using reporting software will deliver far superior quality reports than those using the old note-taking method which takes five to six hours per job. Just ask your inspector for a sample report to compare. I searched the world and compared every available reporting software package on the market, only to find none of them delivered to the standard I wanted. I had no choice but to develop my own property inspection software for delivering superior reports to my competition. The result is that I deliver very detailed reports packed full of colour photos, with thousands of pre-determined and categorised narratives, completed with automatic summary pages generation, as well as what is believed to be the world’s only fully integrated Five Star Condition Rating system. My software allows us to deliver these superior reports on the same day as the inspection. I continually improve and develop the software to meet any changes in the industry or in the available technology.

The timesaving is dramatic and reflects a significant cost saving that should not only reduce the inspection cost for my client, but allows the inspector to increase his business turnover by completing more inspections every day. Thus, choosing the cheapest inspector solely on price is not an accurate measure of value or what type of report or service you will receive. You need to dig further and ask the questions. I touched on this subject earlier, but I want to elaborate a little further for you because it is so important that you don’t get confused between the concepts of ‘cheap’ and ‘value for money’. Choosing your inspector by how much he charges is fraught with danger. Do not confuse cost with value! While I understand that no one wants to pay more than they have to, in most cases, you do get what you pay for.

This is often the first question prospective home buyers ask a property inspector, but asking the inspector about their qualifications, experience, and how they get most of their business should be your first questions. In property inspections, one size does not fit all. The level of experience and talent of property inspectors will vary greatly. Inspectors quote their fees with different criteria or methods. Some charge a flat rate; some by the square meters of living area; others by a percentage of the price of the house; perhaps by the amount of time spent. Some consider detached garages as part of the main house and do not charge for them (or may include the square meters into the overall size calculation) while others consider detached garages as outbuildings and charge extra for them. Some inspectors charge for all the optional items, while others charge for some of them. Many will not inspect for certain items such as swimming pools or septic systems unless it is within their scope of expertise, and most have a minimum charge for their services. Some charge for mileage


from their location to the inspection site. If they maintain a website, prospective clients can submit information about the property and receive a quote by e-mail, but I strongly advise that there is no substitute for calling your inspector and talking to him, as this can be a learning experience for you with asking all the questions we outlined earlier. I’m a great believer in trusting your instincts after this conversation, which you never get from an online quote.

The money equation

Let's put property inspection fees in perspective. If you're buying a $400,000 house and the inspection fee is $350, that's less than .1% of the cost of the house! Most real estate agencies charge 3-6% to sell a property, which would be $12,000-$24,000 for a $400,000 house. The cost of a property inspection is a bargain in comparison! The most important thing that you must remember is that the cost of not getting a property inspection can be financially devastating for you and your family. Aside from time invested, the value of the property inspection and report can also be measured by its usefulness. If the inspection turns up only a few minor cosmetic defects with the house, then you've bought some relatively inexpensive peace of mind. If the inspector finds significant structural defects or serious problems, your $350 is well spent.

The part that still amazes me is that many people do not think twice about paying a mechanic to check out a car before buying it, yet thousands of people will spend hours shopping for a property inspector who gives them the lowest price for checking out what is likely to be the most expensive and longest term investment of your entire life. A good property inspector can identify defects before you purchase, often allowing you to re-negotiate the contract to save thousands of dollars. A good property inspector can even prevent you from making a colossal mistake by purchasing a house that will end up costing you tens of thousands of dollars. A good property inspector helps you to go into this investment with your eyes wide open, with a sure understanding of things that will need repairs or replacing in the near future. A good property inspection report will also provide valuable home maintenance tips and ideas for reducing your energy consumption.

Think about this for a minute: how many homes does an average person purchase in a lifetime; three, maybe four? And how often; once every ten years or so? How would you like to go to a dentist who fills one tooth every ten years, or a heart surgeon who does one operation every ten years? You wouldn’t. So why would you even consider choosing the wrong property inspector just to save a few bucks, or worse still not even getting a professional property inspection at all?


7. Inspection of brand new homes I was recently reading the ancient Greek story about the Trojan Horse, and it seemed to me that the Trojan Horse was also new, and it too should have been inspected. Now, that would have changed history! In this version of the story, after a fruitless 10-year siege, the Greeks constructed a huge wooden horse and hid a select force of 30 men inside. The Greek army pretended to sail away and the Trojans pulled the Horse into their city as a victory trophy. That night, the hidden Greek soldiers crept out of the Horse and opened the gates for the rest of the Greek army, who returned under the cover of dark. The Greek army entered and destroyed the city of Troy, decisively ending the war. The parallel with this story for buying a brand new home (your very own Horse of Troy) is, if in the excitement of your victory, you fail to inspect your prize, only to find many hidden troubles within. ‘Why should I get an inspection if the house is new?’ I hear you ask. The plans have been approved; the engineers designed the structural parts; the work has been inspected at each stage; you have the final certificate of completion from the building surveyor. Isn't that enough? The short answer is, NO! Even new homes need an inspection before you sign off and hand over your hard-earned cash or the dreaded mortgage. Incidentally, did you know that a rough translation of the word ‘mortgage’ is ‘agreement till death’? Agreement till death! You had better make sure it is built right! People make false assumptions that can lead to significant losses, like assuming a brand new home must be okay. The consequence of this belief is that most new homes are purchased without any pre-purchase or even a pre-settlement or final handover walkthrough inspection. If a safety problem or defect becomes apparent after you move in, you can only hope your builder will honour the builder’s warranty - if he has one. (Note; Builders warranties are not compulsory in every state) Three myths that lead buyers to forego the benefits of a property inspection:

#1 The home was inspected and approved by the local shire or council inspector, or a private building surveyor. #2 The builder is ethical, competent, and has a great reputation for building quality homes #3 The home is fully covered by the builders warranty

Let’s examine these assumptions in more detail. Myth #1 Inspections are carried out by local council inspectors or private building surveyor agencies in every state. These agencies are usually run on a shoestring budget and are understaffed. They can be (but are not usually) as thorough and exact as you would hope and reasonably expect. They do not consider quality of materials or quality of workmanship. An independent property inspector will spend up to a few hours or more on the inspection and detailing his report for a single residence. However, a council inspector may have 15-20 homes to inspect on any given day, and thus can often only spend as little as 10-15 minutes on a quick spot check at each property. Worse still, in large subdivisions, sample inspections are typically conducted on a representative number of


homes, leaving many properties entirely uninspected. The result of this incomplete process is that many defects and building code violations escape detection and slip through. Myth #2 The most ethical, highly qualified, and reputed builder may construct an excellent home, but nobody can build the perfect house. To put it bluntly, the best builder is human, and so are all the contractors, installers, and tradespeople who also work on the house. The newly finished home can be of the highest quality, but with the thousands of components and innumerable details that are affected by various people performing numerous jobs, the excellent builder charged with overseeing all the work has neither the time nor the infallibility to scrutinise every aspect in order to get it all right every time. We are all human, and regardless of how qualified or reputable the builder is, some defects will inevitably slip through this process, leaving only your expert independent property inspector as your last line of defence! Myth #3 A builder’s warranty is their insurance that defects or maintenance periods are all good if they are backed by an ethical builder. Those builders should have reputations for quality work and a genuine concern for the satisfaction and financial wellbeing of their clients. Unfortunately, not all builders fit this admirable description. In too many cases, the integrity of the builder can render any warranty completely worthless, leaving the home buyer with costly defects, lawyer’s bills, years of aggravation, and in some horror stories, a home that is very difficult to resell. The best time to claim on this warranty or any defect/maintenance period from your builder is before the settlement or the before the final handover of the property. The builder wants to get paid; this is a very strong motivating factor that will encourage timely repair of any defects found by your expert independent property inspector. Many builders welcome an independent property inspection as an added quality control service to provide a final confirmation at the end of a project. However, some builders can be uncooperative and employ various degrees of resistance to prevent any inspector from entering the building site. These unfortunate practices range from unmistakable unfriendliness to an outright teeth-clenching refusal to admit an inspector on the property. Builders like this only make us wonder, ‘What are they trying to hide?’ and whatever it is often becomes very obvious when we finally do our job. Please remember that you do have the right to a professional inspection before you hand over your hard-earned money! The previous paragraphs reflect the importance of pre-purchase property inspections on brand new homes, and of course, this is also true for near new and especially older homes. Perhaps even more so, as a home that is a few years old has had a chance to settle, making defects much more obvious, and more expensive to repair. To reiterate, some common defects we find in new homes include:

� Water leaks in taps, pipes and shower screens

� Incomplete work

� Substandard workmanship

� Numerous roofing defects

� Incorrect surface drainage around the dwelling


� Inadequate subfloor ventilation

� Improperly installed insulation � Substandard materials and/or fittings

Get an expert on your side before you finalise any new property purchase. Just because everything is shiny and new doesn’t automatically mean it is right. To illustrate the point: I was asked to do an inspection on a property that had only been finished for six months, and the young couple selling it had separated during the construction stage. Due to the divorce, the property had to be sold, but the husband was living there while he completed the landscaping and arranged the sale. During my inspection, I was doing a routine check of the laundry; testing the taps for pressure, leaks, or rattling pipes. Then I opened the cupboard doors under the trough only to be met by about 5 litres of water all over the floor, the owner of the house, the realtor and myself! The husband admitted that, in the six months he had lived there, he had never used the laundry (his mum lives just down the street so he still took his washing down to her). The problem was that the plumber had never fitted the wastepipe under the trough; it was not there at all. On another occasion I was inspecting a brand new home in a very prestigious suburb; testing the shower, shower screen and hand shower in the main bathroom. I was spraying the water around liberally, and everything appeared to be great. I continued with my inspection, and then I went down the stairs and looked across the rumpus room ceiling. To my horror, it was like it was raining out of nearly every down light onto the new rumpus room carpet. I immediately called the agent, who gave me the builder’s details, and my conversation with the builder confirmed my suspicions. Apparently during the construction, the shower base in the main bathroom was damaged and then replaced, but nobody told the plumber who had connected the original base that the new one needed to be reconnected; the plasterers came through, followed by all the other tradies, and the house was completed. Nobody had actually run the water in the shower; the builder did not check it, the plumber did not do a final check, the council inspectors did not check it, and the building surveyor did not check it. The client did not even ask me to do the pre-settlement inspection until the day before the handover. The minor fault that slipped through the system ended up costing thousands for replacing the rumpus ceiling, repairing the new carpets, repainting the walls and the new ceiling, replacing the water-damaged lights, and connecting the waste pipe under the shower base. The repairs took another two weeks to complete and the builder had to also pay for the accommodation for the purchaser and her family, and also pay for the removalist to store all their belongings until they could get access to the their brand new (repaired) home. Another anomaly that is often relevant to brand new houses is due to the fact that, because often all the utilities like power, water, gas, computers, telephones, and televisions are not connected until after you have brought the property, all these services and the appliances, security and fire alarm systems cannot properly tested on every function or cycle until you move in and plug it all in. Thus you need contingencies in your purchase agreement to either have all these checked and tested prior to settlement or, alternatively, you should consider holding some part of the settlement funds until these have all been adequately checked and tested, It might not be the builder’s fault; it could just as easily be a fault from the manufacturer or supplier. But you need to be protected and you need to know before you part with your hard earned cash, and when buying a brand new home I


think it is reasonable to expect everything to be in great working condition. Another reason you need an expert independent property inspector on your side. A new home is the sum of many parts Many different trades and service providers are involved in building a new home, and not all are equal. Not all contractors, sub-contractors and suppliers who work for builders are the same; their work or materials are not always supervised or checked for quality; not all compliance inspections by authorities, local councils and private certifiers are carried out with the proper due diligence. I've seen building surveyors sign off on foundation inspections, concrete slab pre-inspections, framing inspections, and lockup inspections without even getting out of the car, because it was raining and the inspector didn't want to get his shoes muddy, or they were late for their lunch break. The fact is, unless you know and trust everybody personally, you can't be sure that what you are buying is, in fact, what you agreed to. I've seen $20,000 kitchens installed in the wrong home, I've seen many houses incomplete and leaking because nobody checked to see if all the roof flashings were installed. I've seen homes with no window flashings installed, ventilation openings completely rendered over, construction joints missed out completely, painting unfinished, plumbing leaks, electrical problems; I could go on, and the list is very long. Unless you are a building professional, you can't know everything you need to look for. It is an exciting time for a client; everything looks and smells shiny and new, and you can't wait to move in. It’s an emotional experience, but you should not be ruled by your heart. I know from experience that you may still have your rose-coloured glasses on. Another reason why you should hire your own expert independent property inspector is because most of the building works are subcontracted to the lowest quote to maximise the builder's profits. This means that speed, not quality, is the primary consideration of the home builder. In all my years of building and inspecting experience, I've never found a new home that didn't need some items either completed or repaired before settlement; some worse than others. Having an independent professional property inspector can also help you and your builder decide what defects must be completed before settlement and what maintenance items can easily be repaired afterwards. It is always an advantage to have a copy of the approved plans, the building contract, the project specifications, and the purchase agreement available on site at the time of the inspection. Hiring an independent property inspector for your new home may mean a small additional cost for you, but builders are notoriously difficult to get back for repairs once they have your money in their pocket.


8. After the inspection; what now? A word of warning before we go any further into this chapter: Failure to consider the information revealed in this section could potentially put you and your family’s wealth at significant risk. You are about to learn what to do with your pre-purchase building inspection report, how to understand it, and how you can use it to gain a financial advantage that helps reduce the price of your home in re-negotiations. Remember, this is being given to you by a property inspector with over 10 years of experience in more than 12,137 inspections. Your pre-purchase property inspection is complete, and your inspector went over the report with you, explaining the defects and recommendations. You have entered into an agreement or contract to buy the property assuming there are no major hidden defects – I say ‘property’ because you’re buying the whole property, not just the building. There can be significant defects in the property while the house is near perfect, so you must seriously consider all the property – and the inspection has uncovered some defects. What can you do? The first thing you need to do is sit down and read the entire home inspection report for yourself. Simply reading the summary pages is not enough. When your building inspector is reviewing your report with you, it can get a little overwhelming if there are many defects or things you don’t fully understand. It may seem a little intimidating at first, as it should go into considerable detail, but your report could potentially save you hundreds or even thousands of dollars, so it’s probably worth your time to read it in its entirety. Your inspector is your expert who knows your new home intimately. If there is anything in the report you don’t understand, ask all the questions you need to, until you fully understand! You should never feel intimated, as there is no such thing as a silly question. A good inspector takes pride in helping clients completely understand the report findings. Prioritising defects Now, you should decide what defects you are concerned about and prioritize them. This is a very personal thing, as everyone has different priorities. Review your list and decide for yourself:

1. Which ones are typical for a property of that age?

2. Which ones are fair wear and tear?

It is unreasonable to ask for some defects to be repaired – for example, scuff marks and small chips on the passage wall in a 50 year old home that has had four children raised in it would be typical. The same defect in a new home would be considered in a different light. You must be realistic and consider the age and history of the home in relation to the defects found. Another example would be signs of rust or corrosion on the corrugated galvanized short sheet roofing on the same 50-year old home. This is typical for a property of this age, but this would be a major defecting a 5year old home. Again, this is where you need to talk to your expert, the independent property inspector. Now is the time to prioritize the defects into those you will accept and those you need to get quoted for repair and renegotiate your offer. You need to decide if the scope of this project is more than


you bargained for. Are there some major defects or safety items that are cause for immediate concern? Since your property inspector is a generalist and not a specialist, you will most likely see recommendations for further evaluation from specialists, for certain items that fall outside the inspector’s field of expertise. For example, if a home inspector notes some significant movement and cracking in the foundations, he would recommend consulting a structural engineer. These specialists will bring in highly specialized tools and testing equipment to further troubleshoot these problems and will let you know the cost associated with repair. If your home inspector recommends a further investigation, I strongly recommend you get this done prior to confirming the sale. Do remember about the ‘contractors advice’ and the ‘last man in’ theory when getting quotes for repairs. Again, note: Contractors’ Advice. Contractors’ opinions often differ from ours. Don’t be surprised when three roofers all say the roof needs replacement when your inspector might say that, with some minor repairs, the roof will last a few more years. If you think about it, obviously the roofer can make the repairs needed, but if he can upgrade the job and convince you it needs a total replacement then it really makes it worthwhile quoting the job. (You can just imagine the roofing contractor walking away rubbing his hands together and feeling very pleased with himself; he was asked to quote on a simple roof repair but has now convinced to owner he needs a new roof) what he thought was going to be a small job worth a few hundred dollars has now blow out to many thousands and at least a weeks work for his team.

The Last Man In theory As noted earlier in the book, while your inspector’s advice represents the most prudent thing to do, many contractors are reluctant to undertake these repairs. They may not want to do a minor repair when they could re-roof the house and make a lot more money. One of the consequences is, if you as the buyer try to renegotiate for a complete re-roof, you have a very real chance of missing out on the purchase altogether if it is shown that this is not warranted. You can lose the trust of the vendor and the realtor, and all negotiations can break down. My advice would be to tread carefully and stick to the facts; don’t follow the whim and hopes of a contractor seeking to fill his work schedule.

To repair or not to repair Your ability to re-negotiate may be limited by the exact wording of your building inspection contingency clause. It is common to see clauses restricting you to structural or safety items only, and some clauses will specify if repairs must be over a certain dollar amount, or tied to a percentage value of the contract price. Contingency clauses like these can dramatically limit your ability to re-negotiate, which is why we strongly recommend that you use a much broader building inspection contingency clause covering the whole property. In my opinion, the simpler the better; something like “Subject to receiving a satisfactory property report”. Your legal advisor can determine the exact wording for you before you sign the agreement. This type of clause includes all the systems and components of the property, without restrictions. With that said, I believe you should always ask. This is another reason to have a professional legal advisor. If you have included an inspection contingency in your contract, you have rights; to hire an


independent inspector and to gain access to the home for the inspection. We often get asked, “Doesn’t the seller have to fix…?” The seller doesn’t have to do anything, and nor does the buyer for that matter. The buyer has the right to ask. literally, “What are (your) negotiating rights after an inspection?” No, the seller doesn’t have to fix anything. The seller also has the right to say NO! But they may choose to negotiate rather than risk losing the sale altogether. If people are honest and ask for only legitimate items and appropriate remedies, then no vendor would feel like they’re trying to rip them off. A home inspection is not a chance to take advantage of someone. There are reasonable and unreasonable requests, so put the shoe on the other foot. Ask yourself if you would replace a 14-year old hot water cylinder if it is still working beautifully and no actual defect exists, just because it is “past life expectancy” of 8-10 years? If yes, then ask. If no, maybe you’re not being reasonable. Apply that rule to all items, and you will negotiate fairly. If you are reasonable, you’re likely to get everything you should; maybe not everything you want, but maybe everything you should get. Using your priority list of defects and written quotes for the repairs to qualify and quantify the costs, you are now in a strong position to re-negotiate. Before you go into any re-negotiations, you must decide if you want the seller to make the repairs before settlement, or if you want to seek a reduction in the contract price to allow you to undertake the repairs yourself after settlement. Everyone has different thoughts on this, but here’s mine: I recommend you negotiate a reduction in the price using written quotes as the basis to establish the costs. My reason for this is due to past experience. I’ve inspected repair work completed by many sellers, and in most cases it is completed on the cheap, in haste, by unqualified contractors who could fit the job in their work schedule. In some cases, repairs had to be re-done to reach a satisfactory outcome, again delaying the settlement. These types of delays are incredibly stressful and cause so much tension when everyone has packing to complete; the removalist is booked, the cleaners are booked, the utilities are booked to be turned off; then all this has to be cancelled and rescheduled again. The alternative is, if the seller is willing to complete the repairs prior to settlement, then I strongly recommend you insist on a re-inspection of the repairs prior to settlement. This will encourage the seller to ensure the repairs are completed to an acceptable standard. However, if you negotiate a satisfactory price reduction to allow you to manage the repairs after settlement, you will have time to choose your contractors, and you have control over the project and the timeframe to suit you and your family. At this point, you should sit down with the realtor and/or your buyer’s agent and put your case forward. Whether you ask the seller to complete the repairs or a reduction in the agreed price, the realtor and/or your buyer’s agent will negotiate it out. It is important to keep in mind that if the sale falls over, then everybody loses including you, and you have to start the whole process all over again. A note of caution: be prepared for a flat out NO! Some sellers will not re-negotiate and will risk losing the sale to prove it. Be creative in your re-negotiations! I once saw a buyer re-negotiate to include a ride-on lawn mower valued at $2500 in the settlement instead of replacing the broken leaking skylights also valued at $2500. I saw one seller agree to pay the buyer’s furniture removalist costs in lieu of repainting the bedroom walls, and then gone to get a better 2-for-1 deal with the removalist. Look outside the square to get a better deal. The key points I would like to stress:

• Read the entire inspection report!

• Follow up on the home inspector’s recommendations for further evaluation!


• Get all the experts on your side; lawyers, inspectors, buyer’s advocates! The bottom line is, once you fully understand your inspection report and how to use it, the report is the most powerful negotiating tool you can have, and can save you hundreds, even thousands. Negotiating I’d like to give you some tips on negotiating skills which you can profit from if used correctly. Don’t play the “split the difference” game. You know how it goes. The repair costs total $8,000, so you want to negotiate a price reduction of $8,000 to allow you to get them completed as soon as you move in. The seller comes back with, “I’ll split the difference with you; I’ll drop the price by $4,000.” That’s the middle, so you agree. WRONG! Stick to your original offer, but negotiate on extras. For example, you can come back with, “I’ll agree to that, if you include $4,000 worth of extras; a fridge, freezer, outdoor setting, BBQ, lawn mower.” You could even ask them to pay for your moving costs, and/or your solicitors fees. Remember, everything in real estate is negotiable and you can also say, “If these are included, I will settle right now!” Of course, you’ve already done your homework and you know the extras are worth over $4,000. Don’t get sucked into paying more, because the repair costs will not change. With this strategy, you maintain your original offer for the cost of repairs, but negotiate for the extras. The seller must throw in the extras to make the sale happen. The biggest temptation is, you can settle on the deal NOW! Also, get the seller’s agent working for you. As you know, the real estate agent is working for the seller, and not for the buyer! Or are they? The real estate agent has a duty to the seller to achieve the highest possible price for the house, but now after everyone thought the deal was done, a building inspection has uncovered $8,000 worth of defects. You are armed with the evidence in the report and written quotes to verify the repair costs, and if the agent cannot broker a deal, the whole sale is in jeopardy. Thus, in re-negotiations, the seller’s agent becomes a negotiator/mediator to help both sides reach agreement. He or she is now working for you also! The bottom line is, if the deal falls over, then the agent misses out on his or her commission altogether. Ask yourself how far you are willing to go. Are you willing to walk away from the deal if you don’t get what you want? Are you willing to take your bat and ball, and go home? Some negotiators believe that the strongest negotiating position is the willingness to walk away from the deal if you don’t get what you want, but I must warn you to think very carefully if you’re thinking of going down that road. Stop and think clearly of exactly what it will mean if you walk away, now that you are so close. Are you willing to lose it all for a few dollars, just to say, “I’m a tough negotiator and I didn’t get the house of my dreams to prove it?” Don’t get so caught up in the negotiations that you lose sight of your goal. To own the house, always be willing to compromise so the outcome is a true win/win deal for everyone. When it comes to negotiating, I see some really dumb things happen. Horror Story: Geoff is a university professor who came along with me while I did the inspection, which I always encourage everyone to do, if you can. The vendor and the real estate agent were both there also. I


had just got down from the roof space and told Geoff the ceilings weren’t insulated, so he might want to consider getting that done to help save on heating and cooling costs. I also noted some minor typical corrosion in the short sheet roofing on the corrugated galvanised roof of the typical 1950’s weatherboard home . Geoff grabbed my torch and shot up the ladder to see for himself. A few minutes went by, and down he came, without saying anything to me at all. Geoff marched straight up the hallway and into the dining room where the vendor and realtor were enjoying a coffee and chat. I could hear everything; Geoff literally demanded with his big booming voice that the insulation be installed, and that the vendor also put a new Colorbond roof on the house, or he would not go ahead with the purchase. The realtor, to his credit, stayed calm and politely asked Geoff to wait until after he had evaluated all the findings in the inspection report to discuss any issues. That would not do. Geoff demanded, “No, this has to sorted out now before I go back to work.” I had finished the interior inspection, so I went outside to inspect the rest of the property. I didn’t want to get dragged into this one so I don’t know what else was said. Until the time I got up in the roof space, Geoff had been by my side all the way and I had explained what I was doing, what things I was looking for, and what the tell tale signs are. Geoff didn’t join me to inspect the outside at all. Finally, when I finished the whole inspection, it was time to give Geoff a verbal report of my findings. I asked Geoff to come outside with me so I could discuss the inspection with him, to which he replied, “Oh, hell no! What else have you found?” I was happy to report that I found no other defects at all, and the property was very well maintained for its age. I explained that the minor corrosion in the roofing only affected a couple of sheets, which could easily be replaced. I went on to explain that there was no requirement for the ceilings to be insulated when this home was built. Geoff admitted that he thought it was mandatory to have the ceilings insulated before a house could be sold (another urban myth that crops up from time to time).

I completed and delivered my report that afternoon, and it wasn’t until a few months later when I was doing another inspection with a client onsite who looked familiar to me; one of those, “I know you, but I can’t remember where from” moments. It was the owner of the property I inspected for Geoff. He told me they offered to go halves in the roof repair and the ceiling insulation, but Geoff would not budge on his demands for the ceiling insulation and a complete roof replacement. It was his way or the highway, so the deal didn’t happen. The owner sold his house two weeks later to a cash investor on an unconditional contract worth two thousand dollars more than Geoff’s contract and settlement when they found their new home (which was the one I was inspecting this same day).

Don’t get caught up in the negotiations so much that you lose sight of your goal. Your goal is to find a way to own this house, so always be willing to compromise for a true win/win outcome. By the way, your inspection report is a confidential document that should NEVER be given to a real estate agent in any way, unless specifically required by the terms of your contract. The report is a confidential document between you, your solicitor and your property inspector, and is non-transferable. If your contract has a provision for the vendor to view the report, then that is exactly what should happen; it is still not to be passed onto prospective buyers. Many agents will use your report as a powerful selling tool with the next prospective buyer if your deal falls through. I have had many strangers calling me, asking questions like:

� What did you mean by saying: “…On page three of the report?” � We have just bought the house and I don’t understand what you mean in the report, is it

serious? � How much will it cost to fix?


� Do I have to fix this or can I get the vendor to fix it? They are most disturbed when I inform them that they cannot rely on that report in any way, and I cannot be held responsible for any errors or omissions that may be discovered later. Finally, as soon as your contract has been signed by both buyer and seller, remember to get your insurance cover immediately.


9. Other types of inspections to consider I receive calls every day asking questions like: can you checkout the electrical system? Do we include testing all the plumbing system? Can I tell them if everything has been council approved, and is the timber pest inspection included? The simple fact is, these are all separate professional activities, and while I know some operators say they can do it all, I would have to question how any one person can gain the skill and expertise needed in each of these categories to complete all these tasks with any level of competency. The truth will come out only when it’s too late for the client. There can be little doubt that a licensed electrician is the right person to do the inspection where it is considered to be necessary (see later). It is widely accepted that professionals can only inspect and comment on items or systems that they’re appropriately trained or qualified in. It is important that you only use an inspector who is appropriately trained or qualified. Thus, if some say they can do your property inspection and include the electrical and plumbing, then for your own protection you should always insist on them faxing or emailing a copy of their trade certificates and membership of the relevant trade association or licensing authority. Timber pest inspections must be number one on your list of other inspections to arrange. In fact, I would go as far as to say that I believe a timber pest inspection is just as important as the property inspection, at least in the northern states and territory. In Australia, we have many types of timber pests that attack our homes, and none are more destructive than termites. In the warmer regions of our great country, termites– or white ants, as they are sometimes called – are notoriously more ferocious and active. In the cooler climates like Victoria, termites are still very prevalent, but not as ferocious as their northern cousins. The Northern Rivers region of NSW and Queensland are the obvious states affected, as is the Northern Territory. In Tasmania, although termites do exist, they are very docile and normally only found in some old bush logs. It is extremely rare to find any damage to houses; in fact, in over 10 years of inspecting homes in Tasmania, I’ve only ever seen termite damage once, in some imported Queensland timber that the owner had brought down with him. In northern Queensland, it is common to get a clean bill of health from your pest inspector one day and suffer significant structural damage from termite attacking in a month’s time. Most of us have seen the horror stories on the current affairs shows of the devastation that these insects can cause, but many go undetected due to the fact that the termites which cause the most significant damage are subterranean. (they live and move underground) Australia hosts numerous species of termites, falling into three main categories:

� Subterranean termites

� Damp wood termites

� Dry wood termites Statistically speaking, termites are the third thing people fear most, after rising damp and cracking.


On the mainland in Australia, one in every three houses has or will get them. They like moisture, and they live and move underground, which makes them hard to be spotted by an untrained eye. When they attack a house, all of the wood can get eaten, leaving only a thin surface shell. In most cases, nobody notices anything until it’s too late. Getting regular timber pest inspections will not prevent termite attack, but early detection and treatment will minimise the extent of damage and cost to the homeowner. Termite attacks can be prevented with common sense, like storing firewood away from the house in a dry place, reducing moisture in the under floor space by improving site drainage and ventilation, fixing leaking pipes, etcetera. These precautions taken in addition to physical and/or chemical barriers should be enough to keep your house termite-free. There are many tools that specialists use to discover termites; special devices that runs on skirting boards and find the hollow ones by the difference in the sound; a moisture meter (termites make the moisture level rise); thermal imaging cameras, and specially trained detection dogs. There is a cure for termite problems, but the structural damage to the house can be significant. The report you get after a termite inspection should specify the damage (number and location of damaged timbers), whether or not the termites are still active, and how you can get the most appropriate treatment. For specific advice about termite protection for your proposed new home, contact the building surveyor at your council, your builder or architect, or a licensed pest control professional. Advice about types of pesticide treatments can be obtained from the various organisations listed in ANNEX C. Wood borers come in many species in Australia, most of which have little impact on our homes and buildings. Basically, there are two major kinds of borers. The distinction is based on their preference for certain types of timber, especially moisture content. Pests of Living Trees and Fresh Logs (Green Wood):

Wood Moths attack growing trees, and so they are true forest pests. Damage from larvae is mostly detected during the saw milling stage. Wood wasps are also forest pests and aren’t native, but have been found in Australia. Damage may be detected by emergence holes in timber, but no treatment is necessary, as these pests do not reinfest sawn, milled, or seasoned timbers. Greenwood Longicorns are pests of forest trees and freshly felled logs. Their damage is often carried over into buildings. The beetles can emerge from timber up to 6 months after saw milling. When the timber containing larvae is used in buildings and covered with plaster board or other wall linings, they emerge through large oval holes, causing great concern to home owners. These borers don’t reinfest dry or seasoned timber, so no treatment is necessary unless the structural integrity has been compromised. Ambrosia Beetles (Pinhole borers) attack green (fresh) logs. They leave stained holes, which can degrade the appearance of the timber, but their presence rarely affects the structural integrity of the timber. They also won’t reinfest seasoned timbers.


Pests of Dry Seasoned Wood: These borers are a more common pest of timber that is in use. Treatment of some of these borers is possible, but in most cases, timber replacement with suitably treated resistant timbers is the best option if damage is extensive and the structural integrity has been compromised. Lyctid Borer (Powderpost Beetle) is a pest of hardwoods timbers that only attacks the sapwood sections of the timber. They produce a very fine powdery dust, similar in consistency to talcum powder. They readily re-infest timber, so anything with a high sapwood content can be at risk of failure. They are not considered a significant pest of timber, and treatment of infestation is not usually required. In large dimensional timbers (such as rafters, bearers and joists) the attack rarely weakens the timber significantly enough to cause a failure. In small-dimensional timbers (such as tiling and roofing battens) the sapwood may be more extensive, and its destruction may cause a failure in these timbers. This may require the support or replacement of the affected battens. Furniture Beetle (Anobiumpunctatum) will prefer cooler, humid conditions. Their 'frass' is a lot grittier than the Lyctid borer. The damage from this species is usually to pine timbers; mostly in flooring, wall panelling, and furniture that has been in use for a number of years. It is seldom encountered in areas of high temperature, such as the roof space. This species is mainly found in coastal areas of high humidity, or more even temperatures. Where attack has occurred, it must always be assumed that the area is still active unless proof of treatment is provided. It is impossible to determine conclusively if activity has ceased, unless the affected timber is broken up. It is often difficult to determine to what extent the borer has damaged and weakened affected timbers. Queensland Pine Beetle (Calymmaderusincisus) has very similar characteristics to the Furniture Beetle. They are commonly found in Queensland and the northern coast of New South Wales. Attack to timber in dark sub-floor areas is common with this borer. They have a preference for softwood timbers such as Hoop pine. In the case where attack of this borer has occurred it should always be assumed that the area is still active unless proof of treatment is provided. It is impossible to determine conclusively if activity has ceased unless the affected timber is broken up. Wood Decay Fungi is not often considered a serious pest of timber, but it can become so severe that structural integrity is compromised. Most fungi that affect wood produce microscopic spores that are very lightweight and can be carried long distances by wind currents. These spores fall onto wood surfaces, and if the moisture conditions are suitable (approx 28-30%) they will germinate. Different timbers are less susceptible to wood decay fungi. Brown Rot Fungi is also known as brown cubic rot. These fungi only attack the cellulose, leaving the lignin, which turns brown when exposed. Wood that is attacked by brown rot fungi cracks across the grain, often producing large cubes of wood darker in colour than before the attack. White Rot Fungi is also known as white stringy rot fungi, and attacks both the cellulose and the lignin. The exposed surface becomes white and fibrous, which enables the fungi to be distinguished from the brown rots. After attack, the colour of the wood is usually whiter than it was before. Soft Rot Fungi attacks the cell walls of timber. The affected timber cracks across the grain, but the cubes are mostly smaller than those of other brown rots.


Mould Fungi. are the spores of mould fungi that cause many allergies in humans. These spores germinate on moist timber surfaces, but their activity is superficial and they do not decay the wood. However, their presence does betray a high moisture level. As you can see, there are many biohazards awaiting the homeowner, and there is much more to consider than just the common elusive termite. A competent timber pest inspector should be your priority after, or to complement, your property inspection. Only experienced timber pest inspectors have the skills and expertise to identify different pests and recommend the appropriate treatment.

Electrical Inspections If you are buying an older home, you must beware of wiring done by the previous homeowners or their friends– especially if it was done right before the home went on the market! Usually, most of the time, it all looks okay, but home electrical wiring (if done by an unqualified person) is more than 1,000 times more dangerous than it ever was over the last 60 years! Why? Because someone tampered with the original approved wiring done 60 years ago! It can be quite a disaster for a new homeowner, because of the demands they impose on the wiring system. Repairs to such rewired homes can add up to thousands, and much more if you need a complete rewire.

The condition of the electrical systems in a property you are considering is important for your family’s safety, as well as short-circuiting (excuse the pun!) any expensive repairs that may be needed in the future. An electrical inspection will check both the safety of the electrical systems in a property and the possibility of repairs being required. A building inspector is unlikely to have specialist electrical knowledge, but if you have your electrical inspection completed by an electrician, they can pinpoint any hazards or safety issues, and accurately quote on the spot for the cost of any repairs needed. These could be potentially hazardous and expensive situations, such as:

• GFCI receptacles. It is especially important to examine all receptacles in older properties because they are the most common cause of electrical problems if loose or corroded.

• Grounding. In case of an electrical malfunction or surge, you want to make sure the property is safely grounded, and doesn’t conduct the electricity back into your home – and into you or your children!.

• Water leaks into service parts. Water leaking into the main service parts can create a very dangerous electrical situation, which you may not notice at the time of purchase.

• Light fittings. Anywhere your electricity comes out needs to be checked for safety and secure fitting, and light fittings in older homes can be loose and dangerous. Make sure you replace old light fittings as soon as possible.

A property inspector will likely tell you if there is some old wiring present, and refer you to a licensed electrician. Anyone can flick on a switch to see if the light is working, but the problems start if the light doesn’t work. Your first assumption will be that the bulb has blown – but has it? How do you know if it is not a faulty switch, a faulty light fitting, or even faulty wiring? The truth is, unless you have been trained to use the proper testing equipment, and have the experience of a licensed electrician, then you don’t know. If you have any concerns or suspicions at all, then you


should arrange to have the whole electrical system inspected and tested. You should also confirm with the selling agent that the power will be connected and turned on at the time of the inspection. The same goes for your appliances; unless you can test every appliance on every cycle, and measure the results, then you don’t know if it is actually working correctly, and this gets more confusing when you have to know the performance statistics for every brand on the market. Imagine trying to learn the performance criteria for every appliance available – every brand of heat pump, every space heater, every oven, cook top, stove, grill or range hood –when you could simply have a trained experienced expert to inspect your electrical system. Remember, electricity can KILL. If you choose not to get an electrical inspection done before you buy, then maybe you should consider this: Whenever I have bought a home, moved in and started putting my furniture around, I’ve always needed a few extra power points, and an extra light or two, I’m also a great believer in having an exhaust fan in the laundry, and usually need a mains upgrade because I wanted to install a larger heat pump. The point is, you always need to get work done, so why not get it checked out before you buy? Your electrician can test the systems and appliances so you have that peace of mind, and also quote you on the work you will need doing after you move in. Plumbing and Drainage Inspections

The plumbing system is a little easier to test, as most plumbing defects leave quite visible signs of leaks from taps, waste pipes, tap handles, showers, shower screens, toilets, suspended pipes, hot water cylinders, etcetera. Your property inspector can easily check and test all these fixtures and fittings and report any visible defects, but problems arise when the water takes a long time to drain out of the hand basin or the kitchen sink; is it a blockage? Is it because the waste pipes have not been installed correctly? Is there a hydraulics problem? Why is the water pressure so low in the bathroom when the kitchen water pressure is terrific? Another scenario that often plays out is during a standard pre-purchase inspection we flush the toilet and the bowl fills up, almost overflows then it takes ages to drain away. Your inspector can only make an educated guess that there may be some sort of blockage somewhere. But it will take an experienced plumber/drainer with the appropriate investigative equipment to find what, or where, and how to fix the problem. Your property inspector can only do a visible inspection and report on that. If you want to know why something is not right, then you will need to employ a licensed plumber. Most good inspectors will recommend a licensed plumber to be consulted for determining the cause, and recommend any further action needed, but you may not have enough time left in your inspection period to find and employ the plumber you need. You may find yourself having to go, cap in hand, asking for an extension to your inspection deadline allowance so you have enough time to get your plumber in, to find out what’s happening. The vendor is under no obligation at all to grant you an extension. The plumbing system is a major integral part of your home, and getting a licensed plumber/drainer to confirm everything is in good shape both above and below ground is well worth your consideration. Many homebuyers choose to wait for recommendations from their property inspector first, however, they are smart enough to ensure they have enough time for further inspections.


Building code compliance This is another one of those grey areas. Not all states and territories follow the same checking processes or have the same disclosure laws in real estate transactions to confirm all the compliance inspections have been successfully completed. In many cases, the only way you can confirm that the authorities even know about a suspected illegal extension or illegal renovations is to compare what is present on the property to what the approved plans at your local council say. Simply relying on your conveyancer to send a form to the council to check a few boxes will not be adequate, because the council can only check off from the plans and paperwork they have. If, for example, the vendor or previous owners had transformed the garage under the house into another bedroom without first getting the appropriate approvals, then the council will still check all the boxes in the affirmative confirming all inspections have been completed. But the council will only be referring to the original house approvals. By the way, you should know that the council authorities have the power to demand any illegal building work be upgraded and approved to current building code compliance standards – or even dismantled and removed at any time . If you don’t want that knock on your door, then you must get all the checks and balances before you buy. You must get confirmation of building compliance before you buy. If illegal work is discovered, you can still proceed with the purchase, but you have some choices:

1. You can re-negotiate to get the appropriate approvals and do any upgrades if needed

2. You can re-negotiate for the vendor to get all the compliance approvals before settlement

3. You can negotiate to hold back part of the settlement funds until all the compliance approvals are in place

4. Depending on how your contract is worded, you might even have the choice to cancel the contract and start looking for another property.

Check Surveys A check survey confirms that your fences are exactly where the title boundaries are. This is not the same as measuring the fences from corner to corner, because there is no guarantee your fences are on the boundary lines. We have seen many home buyers just assume the fence is on the boundary line and build up to it, only to find out later that they have built partly on someone else’s property. One Last Horror Story: Andrew had just moved from interstate due to a job transfer. He didn’t know which area he wanted to live in at first, so he chose to rent for six months until he got to know his new home town a little better. Andrew spent most of his weekends driving around the suburbs doing research, checking out the open homes, and generally getting a feel for what and where he wanted to buy. After five months, he found just what he was looking for; close to work, easy access to the beach, and on a slightly elevated block that gave him magnificent views of the river, the mountain and the city


nestled in under the mountain. Andrew was successful with his offer and the sale process started with his property inspection. A few weeks later, Andrew called us asking if we could check fences. He explained that the solicitor sent him a letter asking for confirmation of the boundaries. I advised him that it would be wise to get a land surveyor to do a check survey for him, as this was an older area of Hobart; who knows if the fences are on the boundaries of the property! I didn’t hear from Andrew until about four years later when I met him at the market one Saturday morning. He had married, had a little boy, and another baby on the way. As we talked over a coffee, Andrew confessed to me: “I wish I had taken your advice to get a check survey done when I bought the property.” As it turned out, Andrew had built a double garage and workshop in the back corner to pursue his passion of building hotrods in. The plans were drawn up and approved; the builders were fantastic, the job come in on budget, and just a few weeks overtime. Everything was great. The house next door was put on the market for sale with a prominent realtor in the area and sold within days. The solicitor’s letter came, asking the buyer to confirm the boundaries. But this time, the buyer did engage a land surveyor for a check survey, which confirmed the worst; Andrew’s side fence was 1.5 metres inside the neighbours boundary. His new solid brick double garage and workshop was built 1.5 meters on his new neighbour’s property. All hell broke loose, tempers flared, the lawyers got involved; everybody was pointing fingers and blaming everyone else. Finally, it went to mediation, and Andrew was forced to buy back 1.5 meters of his new neighbours’ property at a very high premium. Paul and Joanne also negotiated a reduced sale price on their property–enough to pay their legal bills. If there is a moral to this story, it would be that if you employ an expert and then choose to ignore his advice, it is at your own peril, because the consequences can be devastating. Andrew is tens of thousands of dollars in debt, for the sake of trying to save of a few hundred dollars, and ignoring the advice from the expert he hired to help him. Some other less common inspections to consider

There are many other more specific inspections that you might like to consider, depending on your individual concerns and the type of property you are buying. One of the most common ‘Special Purpose’ inspections we get asked to do are asbestos audits; with all the media coverage over the last decade, many people tend to be quite paranoid about asbestos, and much of this is because of misinformation and sensationalised half-truths in the media. If you are buying a property that was built between 1940-1990, and you are concerned about the possibility of the presence of asbestos, then an asbestos audit is the smart thing to do. If you are planning on renovating the property, then in my opinion, it is an absolute must to get expert advice and have samples tested before you start any work. Then you will know for certain, and you can deal with the problem safely. Other inspections or testing to consider include;

� Checking the property environmental concerns like the aspect of the house, sunlight, privacy, streetscape, views, and aesthetic considerations

� Noise levels, proximity to busy traffic, railways, flight paths


� Health & Safety issues; mould, soil toxicity, allergens, for any lead, radon, urea formaldehyde

� Heritage concerns

� Bush fire protection

� Security concerns

� Analysis of site drainage, (apart from surface water drainage)

� Spas, swimming pools and saunas, plus the operating systems

� Common property areas in strata titled developments

� Document analysis; council plans, drainage, strata plans, land titles and property easements.

� Proximity to overhead power lines and transformers

� Durability of exposed finishes

� Detection of illegal or unauthorised work like building, electrical or plumbing. There are many things to consider when buying or selling a home, and at least by reading this, you will be more aware of any concerns for you and your family. I would also like you to consider the timeframe in your sale agreement needed to first source the appropriate professional to carry out the extra inspection/s, then for them to be able to complete those necessary investigations. Finance clauses in your agreement are commonly up to 30 days. The contract is not unconditional until this is confirmed. It is therefore reasonable to use the same timeframe to complete all your inspection contingency clauses also. The longer the better; if you need to get additional quotes after you receive your inspection reports, the extended timeframe should be adequate to achieve this.

10. The Real Estate Process


SUMMARY In summary, I would suggest the following framework for deciding which inspection to undertake. 1 For all buyer and sellers

Every week without fail, we see innocent people getting caught out, simply by failing to follow a few simple rules! These rules are common sense for people in the know these days, but unfortunately, this kind of common sense is not very common for first timers. Here are my recommendations for your exciting, stressful, and sometimes emotional journey in real estate.

� Knowing how much you can borrow or how much you can sell for before you start. If you are buying, find out how much you need to borrow and then get your loan pre-approved. This will give you a huge advantage over anyone else who hasn’t secured finance. If you are selling, work out what you need to get out of the sale, what fees you will need to pay, how quickly you need to sell, and what you are willing to compromise on to secure a deal. You do need to think about this before it happens to you.

� Do your homework. Knowledge is power, and that should not be underestimated. The time spent doing your homework, finding out what’s on the market and what similar properties are selling for, attending open homes in your area, and searching the internet in due diligence can be worth a small fortune for you. It will alert you to bargains in the market where you can profit from other peoples’ mistakes, and you will learn which realtors in your area get the best results. You can also see firsthand the quality of their advertising and promotions of properties, and even find out how much previous homes in your area have sold for.

� Get a check survey of the property boundaries.

This is a common stage that many buyers skip during the purchase process for the sake of saving a few hundred dollars, but it can come back and bite you in the hip pocket very dramatically. You have read the earlier horror stories, and I have many more of those that I can share with you, and unfortunately we are adding more and more of these all the time. All those people also thought they could get away with it; that it wouldn’t happen to them.

� Make sure you take out adequate insurance at the appropriate time.

This is a little know secret that many buyers neglect, however, it is another very important box that you need to tick. As soon as you make an offer and it is accepted, you do have an interest in the property and it is your responsibility to protect that interest the correct and adequate insurance cover

� Using a buyer’s advocate to help you purchase a property.


I don’t know many people out there in the general population who have the negotiating skills to match the highly trained professional salespeople in real-estate. Using a buyer’s advocate to negotiate on your behalf is one of the smartest moves you can make in this transaction. A buyer’s advocate knows all the tricks of the trade, the jargon and the market, and they will go to bat for you hard. A buyer’s advocate is one professional you should have in your team.

� Getting proper legal advice before you buy or sell.

So many buyers and sellers fall into this trap. You have been deep in negotiations; it’s all very exciting, the emotions are running high; your family and friends are giving you advice; the numbers stack up with the deal you want; and finally, “Sign Here!” You think you must sign now, before they change their mind. In fact, what you must do is stop, and take the written offer to your legal advisor. By legal advisor, I don’t mean just a senior family member. Only a lawyer knows the true meaning of all the fine print, and without their input at this critical stage, you may never know that the deal you have is not so great after all. Your property lawyer is one of the most important experts who you must have on your team.

� Get your property professionally inspected before you commit to anything

Not getting a property professionally inspected before you buy or sell is easily the single biggest and most expensive mistake smart people make when buying or selling real-estate. If you learn nothing else from this book, this is the vital step in the buying or selling process. All the advantages far outweigh the small fee that clients are trying to save in most of the horror stories about failing to get a professional inspection. Most of these horror stories are never told because of the outright embarrassment suffered by clients in having to admit to such a fundamental basic mistake. Many buyers and sellers (or victims) suffer in silence, paying out thousands of dollars in repairs or reducing their sale price, because they didn’t get a professional inspection first. I have enough horror stories to fill series of books, and the real tragedy is that they still happen every day throughout Australia.

2 For investors First, you must follow all the same procedures for buying or selling a property as above. Secondly, you must include three more professionals to your expert team!

� The first is a good property accountant who is experienced in property investing. Your accountant must have an intimate knowledge of your portfolio and both your short and long term goals. As the already complex tax laws change regularly, it is important for your accountant to structure your property portfolio to achieve the maximum tax benefits for you.

� The second professional you will need is a quantity surveyor to accurately complete your property tax depreciation schedule, so your accountant can maximise your benefits. A good independent property inspector can help you, as many have been trained to gather all the relevant property data and photos for the quantity surveyor. This data collection can often be done at the time of the property inspection, saving you valuable time and money.


� The third professional you will want on your team of experts is a property manager to manage the property for you. The advantages here is that they know the legal minefield intimately, the expectations of landlords and tenants alike, and how much rent you should get for the property. A property manager is a specialist who can make your life as an investor very easy. I must admit, it is nice to get a cheque every month when I don’t have to worry about any of those trivial phone calls that go hand in hand with renting. In short, your property manager will take all the stress out of your investment.

3. For houses older than one year When buying or selling older homes – and by older homes, I’m referring to homes more than one year old –you will want to seriously consider adding a few more experts to your team. I strongly recommend that you follow your independent property inspector’s advice in your report. If they refer you to further investigations by another professional like a structural engineer, then you should heed this recommendation, as it is not made lightly and is in your interest to do so.

� A timber pest inspector is a key person to have on your team if you have any timber in your home. We know from experience that there are only two types of homes on the mainland of Australia; the ones that have termites, and the ones that will. When buying a property, you need to confirm if your home is on the menu of these ferocious and unpredictable insects

� A licensed electrician needs to inspect the electrical system. We have found that in most homes, new or old, there is often some remedial work needed. It could be simply adding or removing a few power points or lights, or upgrading the mains supply to install a modern heat pump. The temptation is often to get this work done on the cheap, and this may not be completed to standard. Remember, electricity kills. A simple check can confirm if your home is safe for you and your family.

� A plumber is also a great professional to have on your team. Anyone can turn on a tap and see if it leaks, but only a plumber knows why the water doesn’t drain out of the sink. Is it a simple blockage in the waste pipe under the sink, or is something more serious like tree roots in the sewage pipes requiring the backyard, driveway and paths be dug up to the fix the problem? Only a plumber can tell if the septic system is working properly.

� Are you concerned about asbestos (the silent killer) in your home? If it is a concern to you and your family, or you intend to do some renovations, then I strongly recommend you have an asbestos audit done on your home by an appropriate professional. Again, your independent property inspector should be able to help you with this.

� Some other defects that are more evident in older homes can be rising damp and mould, which can cause serious health problems for you and your family. When talking to your independent property inspector, you should raise all the issues that concern you and your family before the inspection takes place.

4. For new houses, we recommend:

As mentioned previously, nobody checks the home for quality of materials and workmanship throughout the construction. With literally thousands of components in a home, the majority of these are covered or buried in the final product, and you simply don’t know what went on. Without an independent property inspection at various stages of the construction, you are putting your blind


faith in the builder. While this will generally be okay, every builder comes under time and budget pressures. They may inadvertently miss something, and then it is covered forever, or until it shows up at some later date as a defect. It is much easier on your peace of mind and your hip pocket if you have a pair of independent professional eyes checking the quality of materials and workmanship during the process, so any anomalies can be nipped in the bud before they turn into expensive defects. This is particularly relevant to site drainage issues during the initial site works and foundation stages. 12. Smart Home Buyer’s Flow Chart, & The Smart Home Seller’s Flow Chart Please note: The following flow charts are a very basic example and included only as guide for you to ensure you don’t make any incredibly dumb or stupid mistakes. There are a myriad of variations that could occur throughout this complex process and to bring this transaction to a successful conclusion. The experts like your solicitor and or conveyancer, the realtor and your independent property inspector perform a huge amount of work behind the scenes to make your real estate experience seem faultless and pain free. For example; Your solicitor and/or conveyancer will

� Confirm your instructions to the real estate agent and the other parties solicitor

� Conduct all the standard enquiries and searches like rates, title, land tax, heritage and local council or shire searches

� Bankruptcy search, mines and subsidence search

� Respond to any requirements required by your lender

� Registration on discharge of mortgage

� Stamp duty

� Prepare the documents including settlement and transfer

� Finalise settlement details with the other parties solicitor

� Provide your lender with final settlement details

� Settle your purchase/sale

� Advise your and the realtor that the property has settled successfully

� Confirm everything in writing and arrange keys and cheques on settlement. It is vital that you give your experts clear instructions and that you keep in regular contact throughout the sale and settlement period to ensure a smooth and satisfactory settlement in your favour.


Smart Home Buyer’s Flow Chart

1. Do your homework; work out what you want, why you want it and where you want it

2. Find out how much you can borrow and get pre-approved (not just pre-qualified)

3. Start your search, using the internet, attending open homes, subscribe to real estate agent alerts, etc.

4. Talk to your solicitor and get advice on the correct contract and contingency clause wording

5. When you’ve found the right home, negotiate your offer with your contingency clause/s included

6. Sign the contract. Only after your solicitor has approved it, and pay the deposit.

7. Arrange and attend the property inspection with your independent property inspector

8. Carefully review and consider the report findings and recommendations in your property inspection report

9. Either confirm your acceptance of the inspection report findings with your solicitor and proceed with the sale, or gain repair quotes and enter into re-negotiations with the vendor and vendors agent until final

agreement is reached. Then notify your solicitor or conveyancer

10. Your solicitor or conveyancer will arrange to exchange contracts and start the conveyancing process

11. Arrange the appropriate and adequate insurance cover

12. Sign the loan and mortgage documents to finalise your home loan.

13. Confirm settlement date and arrange removalists, utility connections, mail delivery etc.

14. Carry out your pre-settlement inspection a day or two before settlement to confirm everything is complete and in good condition

15. Final settlement. Pick up the keys, move in and enjoy your new home.


ANNEX A: Useful Links In today’s increasingly electronic world, more and more people are starting their searches for the things they want on the Internet. Using search engines like Google, Bing, and Yahoo are second nature for anyone with an internet connection, meaning a massive increase in websites all vying for your attention. Recently, these new websites have changed the way they treat us, no longer simply showing us what they have to sell, how much it costs, and letting us click to buy it. The purchaser or researcher is treated with the respect we deserve, because if we don’t get all the information we want, we can go somewhere else – possibly to their competitor – with a click of a mouse. This revolution has been grasped by the real estate industry, and all real estate businesses have their own websites to advertise listings. On some websites, you can even view every room in a recorded tour of the property –obtaining almost all the information you need from a guided tour to a valuation to a list of previous sales in the area – all from the comfort of your own home. www.experts.realestate.com.au/calculators Here you will get this selection of calculators to work with: www.infochoice.com.au/ General property sites: www.Domain.com.au www.Findmeahome.com.au www.propertynow.com.au www.property.com.au www.realestateguide.com.au www.agentpoint.com.au www.realestateview.com.au www.australia-real-estate-directory.com www.myhome.com.au www.realestate.com.au www.yourestate.com.au www.Homesales.com.au www.real-estate-australia.com.au www.realestate.ozfreeonline.com www.homehound.com.au www.realestateaustralia.com.au www.australiarealty.com www.buyacres.com.au www.luxuryhomesaustralia.com.au www.propertyextra.com.au www.premises.com.au For Sale By Owner or DIY Real Estate Sales www.owner.com.au www.smartvendor.com.au


www.home-sale.com.au www.forsalebyowner.com.au www.australianprivaterealty.com.au www.propertysalesdirect.com.au www.propertypost.com.au www.australiarealty.com www.propertynow.com.au www.housebroker.com.au www.noagentproperty.com.au www.netestate.com.au www.goprivate.com.au www.realestateads.com.au www.fastrealestate.com.au www.usellproperty.com www.myhousesale.com.au www.home-seller.com.au Real Estate Institutes: http://www.reiaustralia.com.au http://www.reinsw.com.au http://www.reiq.com.au http://www.reisa.com.au http://www.reit.com.au http://www.reiv.com.au http://www.reiwa.com.au For termite prevention and remedial action see:

• Pesticide Safety Section of the Health Department of Western Australia - 9383 4244 • Building Control Section of the Dept of Local Government & Regional Development - 9222 0511 • Housing Industry Association - 9244 3222 • Master Builders’ Association - 9322 5133


ANNEX B: Australian Standards These standards have been prepared by an Australian Standards Committee that consists of eminent representatives from the following groups:

� Association of Consulting Engineers of Australia � Australian Consumers’ Association � Australian Environmental Pest Managers Association � Australian Institute of Building � Australian Institute of Building Surveyors � Building Services Authority of Queensland � Concrete Masonry Association of Australia � Engineers Australia � Forest and Wood Products Research & Development Corporation � Housing Industry Association � Institute of Building Inspectors � Insurance Council of Australia � Master Builders Australia � Royal Australian Institute of Architects

The Standard was prepared by the committee with the objective of providing organisations and people concerned with pre-purchase property inspections of residential dwellings, and to provide a basic and minimum criteria necessary to facilitate reports and inspections to satisfy the requirements of both the home buyer or seller and the inspector. AS 4349 is a series of Standards that covers the minimum requirements for the visual inspection of residential property and buildings.

� AS 4349 Inspection of buildings � AS4349.0 Part 0: General requirements � AS 4349.1 Part 1 Pre-purchase inspections – Residential buildings � AS 4349.2 Part 2 Not yet developed - Non residential buildings � AS 4349.3 Part 3 Timber pest inspections

The AS 4349.0 and AS 4349.1 were first published in 1995 and have since been updated in 2007 to reflect changes in the industry. AS 4349.3 (Timber Pest Inspections) was first published in 1998 and have since been updated in 2010. Due to these documents being protected by © copyright we are not permitted to publish them here. However you are free to purchase your own copy of each Australian Standard at www.infostore/saiglobal.com


ANNEX C. Mortgage Essentials

A brief overview of the mortgage industry in Australia The great Australian dream of owning your home is alive and well. Unfortunately, most of us don’t have the cash at hand to buy a home outright, so we are forced to deal with the mortgage industry. Fortunately for us, in the late 80’s,the mortgage industry was deregulated, dramatically increasing the competitive nature of the industry and resulting in more competitive and flexible interest rates. This has also resulted in more independent non-bank affiliated mortgage managers and brokers entering the market. It has been reported that up to 40% of all home loans are now supplied by brokers or managers. With so many new players in the market, it is easy to get confused about who is who. The following information will help you to identify all the players in the home loan market. Lenders There are two types of lenders; traditional and non-traditional. Most of us will be familiar with the “Big Four” traditional lenders: the Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac and the ANZ. Credit unions and building societies also fit into the category of traditional lenders. Traditional lenders use their own funds to provide home loans, and are authorised deposit-taking institutions. You can obtain your home loan directly with the lender, however, most supply their home loans through professional, accredited mortgage brokers. Every lender will use their own lending criteria and policies that must be met to receive a home loan from them. Non-traditional lenders are also known as non-conforming or wholesale lenders. Unlike traditional lenders, the non-traditional lenders obtain their funds through financiers, trust funds or investors. Some non-traditional lenders will appoint mortgage managers to package, distribute, manage and administer home loans on their behalf. They may also distribute products through mortgage brokers. on-traditional lenders also have their own policies and lending criteria, however, they are often more flexible than traditional lenders. Mortgage Brokers Mortgage Brokers are intermediaries between borrowers and both the traditional and non-traditional lenders. Each has a panel of lenders whom they are accredited with or authorised to write home loans for. A mortgage broker will manage and administer the loan process to settlement on behalf of the loan applicant. While some mortgage brokers are sole operators, many work for an aggregator or finance group, which I’ll explain a little later. Because most mortgage brokers don’t usually act on behalf of one lender, they have the advantage of being able to offer you a selection of home loans with various fees and charges, which will allow you to choose the best facility to suit your personal needs. The majority of mortgage brokers do not charge for their services, as they are paid a commission by the lender they introduce you to.

Mortgage managers Mortgage managers are intermediaries between traditional or non-traditional lenders and borrowers. They provide home loan products, administer, and manage the home loan from the application to settlement and throughout the life of the loan. Your payments will be made directly to the lender, not the mortgage manager. Mortgage managers are paid through the application and establishment fees from the borrower, or management fees from the non-traditional lender. Mortgage managers can also affect the fees and charges you will pay and influence the interest rate of your home loan.


Aggregators The vast majority of mortgage brokers belong to an aggregator or franchise group. You will be familiar with some of the bigger players in the Australian market, like Aussie Home Loans, Loan Market, Mortgage Choice and Rams. These groups provide business support to mortgage brokers with administration, technology and software, education, training, communication and marketing. As a borrower, you have two options in obtaining a home loan; you can shop around and apply for a home loan directly through a traditional lender, non-traditional lender, or mortgage manager; or alternatively, you can seek the services of a professional mortgage broker. Loan products

The home loan process Whether you are seeking to refinance your existing home loan, or purchase a new owner-occupied or investment property, the mortgage process is basically the same. First, you need to understand the different types of home loans that are available, as there are many types with different features that can be confusing. The following information will help you understand the types of home loans available, as well as the features they may offer.

A standard variable home loan This is the 'benchmark' variable interest rate for each lender. This home loan is usually flexible, but not competitive as far as interest rates, fees and charges go. The interest rate will rise and fall as the lender chooses, as set by the Reserve Bank of Australia, or as the banks determine from time to time, all of which will affect repayment requirements. A basic variable home loan This is a 'no frills' variable rate home loan with a discounted interest rate. These generally have fewer features than a standard variable home loan and may not be so flexible. Like the standard variable home loan, the basic variable home loan rate will rise and fall as set by the Reserve Bank of Australia and/or as the lender chooses. A fixed rate home loan A fixed rate home loan is where the interest rate and repayments are fixed or locked in for a set period of time, usually 1-10 years, and longer in some cases. After the fixed period ends, the loan will revert to a variable rate (usually the standard variable). Should you fix your loan now to escape further rate hikes? Our experts suggest that the time to fix may have passed. The Reserve Bank's decision to hold off on a rate rise this month, combined with concerns that the European sovereign debt crisis may is the beginning of a second GFC, might lead people to think that the Reserve has taken further rate increases off the agenda. The real possibility is that higher rates later this year and throughout 2011 will emerge. The major providers of mortgage and refinancing have forecast that the official cash rate will rise from its current level of 4.5% to 4.75% in the September quarter and then to 5% by the end of the year. Some banks are even suggesting that the cash rate will reach 5.5% by September next year. It is the strength of the Asian economy that is the real determining factor for Australian monetary policy, not what is happening in Europe. Economists say that the key driver of our upward forecast


is the additional income generated by sharply higher forecasts for the terms of trade - up 18%over 2010 –meaning more money flowing into the economy, meaning additional investment, profits and consumption. When people feel that economic conditions are good, they buy more, borrow more and drive the cost of money higher. Economic pressure can drive inflationary pressure, causing the Reserve Bank to adjust its rates up. Recent market data from a number of sources shows an increase in the take-up of fixed-rate home loans. Although still only representing a very small percentage of overall loans, fixed loans made up over 3% of approvals in May, compared with 1.7% in April. The Australian Bureau of Statistics' housing finance data shows fixed-rate loans dropped from a peak of 8% of all dwellings financed in June last year to a low of 2.1% in February and March. There was a pick-up to 2.4% in April. Competitive pressures are forcing some lenders to slash rates on mortgage products, and indeed, some are lower now than when the Reserve Bank started putting rates up last year. This is definitely an opportunity for borrowers. Investors especially are moving into fixed loan mortgages. Most investor borrowers do take a risk-averse approach to their borrowings, and want to lock in the amount of interest they pay. This is particularly the case for interest-only loans, which are also popular for some mortgage refinancing. Some home borrowers will look to split loans, which can provide some relief (see below). Here, homeowners should ideally have a split of fixed and variable rates. Fixed rates are just above variable rates, but variable rates are still likely to rise above current fixed rates within the next six months. Split loans may also be attractive in a mortgage refinancing strategy. Typically, two-year fixed rates are around 7.25% or lower, which is competitive with a number of lenders' variable rates. The biggest advantage of any fixed interest rate home loan is in having the certainty about your required loan repayment amount, which will make your budgeting much easier. It can also protect you from potential interest rate increases. The biggest disadvantages are reduced flexibility; extra repayments, redraw facility, and the fees involved if you break the terms and conditions of the facility. Obviously, if the interest rates fall, you will still be paying your existing repayments, as the fixed rate will not change. Another disadvantage is that the interest rate on this type of home loan is generally a little higher than with the standard or basic variable home loans.

The honeymoon or introductory rate home loans These are variable rate home loans with a discounted interest rate for the first 6 or 12 months of the loan. After the 'honeymoon' or ‘introductory’ period is over, the interest rate will automatically roll onto the standard variable home loan. Some lenders often cap or fix the rate during the honeymoon period of the loan. The biggest and most obvious advantage is the lower interest rate, which reduces your repayments and gives you the opportunity to pay more of the principal as quickly as possible. The real disadvantage is that once the 'honeymoon' period is over, you are usually left with a less than competitive interest rate, and there may be other charges, like higher exit fees. It is advisable that you do your research again, and make sure that you know the exit fees and/or switch fees (incurred when you change home loan products), so you are aware of the costs to secure a better interest rate once the honeymoon or introductory period is over.


Line of Credit home loan A line of credit is an approved limit of money that you can borrow, which is secured by a residential property that can be an investment or owner-occupied. It is a very flexible loan that gives you the choice of paying interest only, principal and interest, Or, in some cases, capitalizing interest until you reach your credit limit. For example, you can use the funds available in the line of credit to pay off the interest charged on your line of credit. There are two types of 'line of credit’; the first has a standard 30-year term with the line of credit option being available for 1-10 years depending on the lender, after which the lender can require you to make principal and interest repayments; the second is what is often referred to as 'evergreen' or a 'true' line of credit, in that it has no 'actual' term, and you will only ever have to pay interest on the outstanding balances long as you are conducting the facility according to the lender’s terms and conditions. A line of credit facility is a popular vehicle with property investors. Whether you’re building a property portfolio or renovating, you will only have to pay the interest on the funds you have drawn down as your project progresses, and it’s great to have the convenience of having your loan approved and waiting. Or, if you simply want to pool all of your income into your line of credit in an effort to pay your home loan off faster, this facility will support a variety of circumstances. Split or combination home loan This allows you to take part of your home loan variable a part-fixed or part-principal and interest and part-interest only. When splitting your home loan between fixed and variable, it gives you the advantages of fixing into a rate and having the comfort of knowing that portion of your home loan will not change if the interest rates go up, while still having the full flexibility on the variable part of the loan. Your variable portion is still vulnerable to interest rate rises and falls as set by the Reserve Bank of Australia or by your lender, but your fixed portion of the loan will always remain the same. Construction home loan The construction home loan is similar to the residential home loan, except the property used as security is yet to be built. The loan is drawn down usually in four or five progress payments according to the building contract, normally in line with the various stages of construction. Some lenders charge 'progress fees' to cover the valuation at each stage. A bridging home loan Bridging finance is a short-term loan that covers the gap between the purchase of a new property and the sale of the old property. The lender’s policy on bridging finance does vary significantly, so it is important to know what will be required under your credit contract; contingencies can include loan servicing requirements, loan terms, and interest capitalisation. Bridging loans come with a certain amount of risk, so it is important to allow for the worst-case scenarios just in case. Low or No Doc home loans The Low or No documentation home loans are commonly referred to as low doc or no doc home loans. These facilities have been designed for self-employed people who do not have current income, financial and taxation details available at the time of home loan application. Low doc and no doc home loans have become increasingly popular, and therefore very competitive, so almost every lender, traditional and non-traditional, has a product or policy to meet this demand.


Most lenders will only lend up to 80% of the property value under their low doc policy. There have been a few who have lent up to 95%, but these facilities are more expensive due to the increased risk to the lender. Lenders will often insist on a lender’s mortgage insurance (LMI) policy when you borrow over 60%, however, there are some lenders who will cover the LMI premium for you. It is important to do your homework so you can consider that option when choosing your home loan. A credit impaired home loan These facilities are offered to people who, for a range of causes, may have a bad credit rating or appear to be a higher risk to the lender. This can cover anything from not paying a phone bill to bankruptcy, which is noted on your credit rating for any lender to see. An entry is triggered when a borrower is considered in ‘default’ of the terms of the agreement between them and the lender. Non-traditional lenders provide products for people with a bad credit rating. The interest rates and fees can vary significantly depending on the level of risk the lender thinks there is in providing funding for your home loan. Reverse mortgages Sometimes known as equity release mortgages, these are designed for older home owners over 60 to access equity in their home to help them fund their retirement without having to sell their home. These products vary in terms of flexibility and the amount you can borrow, as well as how the funds are paid to you. You must make sure the lender and the loan you choose suits YOUR needs.

Some home loan features explained Interest-only loans Paying only interest off your home loan is an option that you may choose. This option is popular with property investors. The payments will be less than if you were paying off a principal and interest loan. As the term suggests, you only pay for the interest accrued on the amount borrowed. The principal balance of your home loan does not reduce during this period. The interest-only period is normally 1-5 years on a 25-30 year home loan. After this, you will have three options:

• Re-negotiate and continue paying interest only for another 1-5 years.

• Start paying the nominated principal and interest (which will be substantially higher than most, due to the fact that your loan term is now 25 years after 5 years of interest only).

• Refinance and start again! If you refinance, you can choose the interest only option again, or start paying the principal and interest over a new 30 year term.

A redraw facility A redraw facility offers you the opportunity to redraw or take back any additional repayments you have made on your home loan. Be aware of 'redraw fees' and the minimum redraw amounts set by the lender. Many people take advantage of this facility by putting their savings into their home loan saving interest and helping to pay their home loan off faster, rather than earning interest which is taxable in a savings account. I recommend seeking your accountant’s advice to confirm which is right for you.


All-in-one home loan This type of home loan works as an account where all your income is deposited and all expenses are withdrawn. If you can manage this correctly, you will have the ability to reduce the principal owing on your home loan, dramatically reducing the interest charges and overall cost of the home loan. It also has the benefit of being a one-stop-shop for all of your finances; your loan, cheque, and savings accounts are combined into one. These can be an interest-only line of credit, or a more traditional principal and interest term home loan. 100% offset facility An offset facility is similar to the 'All in One' account, however, the home loan account and transaction account are separated. All income is deposited into your offset account, and you can use that account for ATM, Eftpos, cheque, and internet transactions, and in many cases, to transfer money from your offset account into your transaction account when required. You are not paid interest on the money in the offset account, but the balance in the offset account is 'offset' against what is owing on your home loan. This can help you pay off your home loan sooner, allowing you to build up equity. There are two types of offset accounts; 100% offset, and partial offset. An offset can be termed as 'partial' in two ways, and may only apply after your account reaches a minimum balance or reduced rate. For example, if the principal owing on your home loan is $200,000 and you have $15,000 in your 100% offset account, then the principal is reduced by the $15,000 offset to $185,000. Interest only accumulates on the $185,000. Repayments continue to be made on the entire $200,000 principal and applicable interest. While savings in the offset account are actively working to reduce your home loan, repayments work to effectively reduce both the principal and interest it attracts. Again, I stress that it is important to check all the fees and charges associated with any home loan facility, as it often can mean tens of thousands of dollars difference to your total repayments. Most mortgage brokers today have modelling software that can show you what happens in different scenarios so you can see the significant savings you get for putting in a few extra bucks per week. Home loan fees

We all know that lenders have a little fee for this and a little fee for that, and before you know it, it costs you a bundle. So let’s learn all about those nasty little fees. Keep in mind that many other factors will come into play when you’re thinking about taking out a home loan. Much more than the interest rates and repayment schedule must be taken into account when selecting your home loan. Your lender, the mortgage broker, is vital in this process; and yes, they are another expert who you will need on your team. There are a number of fees and charges that can be payable, and it is a great idea to do your homework and know exactly what you’ll be paying well before you sign the mortgage documents.


Your mortgage broker will guide you though the fees and charges associated with your home loan, but I hope the following will help you understand what they all are.

Annual Fees: Some home loans, and particularly home loan packages, have an annual fee rather than a monthly fee. The annual fee also helps cover the costs of managing and administration for the home loan.

Break costs Break costs are usually charged if a fixed interest rate home loan is broken before the fixed rate term has expired. The fee will depend on the home loan amount, the current interest rate, and the outstanding amount left in the fixed rate term.

Discharge Fees or Deferred Establishment fees, also known as ‘exit’ fees If you payout, re-finance, or in some cases, change your home loan product, a fee may be charged that is payable by you as the consumer. The fee will depend on whether you are staying with the same lender, how much your loan is, and how long you have had your home loan.

Establishment or application fees A once-off fee to be paid to the lender once your home loan is unconditionally approved. Most lenders will deduct this fee automatically from the home loan proceeds. It covers setting up your home loan. Some application/establishment fees will include the valuation (on one property) and the lender's legal fees.

Legal fees and disbursements The borrower will have to pay the legal fees and disbursements to their chosen solicitor or conveyancer who acts on their behalf to finalise the mortgage contract, and who will also complete the relevant checks and searches as to the ownership of the intended property to be purchased, and will endeavour to rectify any problems that may occur in this process.

Lender’s mortgage insurance When the borrower does not have at least a 20% deposit for the property, the lender will usually require lender’s mortgage insurance (LMI). This is usually a once-only premium that you pay at settlement, and protects the lender if the borrower should default on the home loan.

Monthly fees: Not all lenders charge monthly fees to help cover the costs of managing your home loan account, but when they do, they are usually included in your repayment.

Mortgage registration fees The Land Titles office in your state will require a payment when the property is sold. This is paid by the purchaser of the property.


Property valuation fees All lenders have a panel of accredited property valuers who conduct a valuation on the property they are lending money against. This cost in most cases will be passed onto you as the borrower.

Split fees This fee can be charged if you want to have your home loan split.; having a $150,000 Fixed component and a $50,000 variable component, for example.

Switch fee This is a fee that may be payable if you want to change your home loan products, for example, changing from a variable interest rate to a fixed interest rate or vice versa.

Transaction fees Transaction fees are usually associated with most mortgage accounts, line of credit accounts, or offset accounts. They are charged when you take funds out of the account. Most lenders offer a number of fee-free transactions per month.

Stamp duty? When purchasing a home, you will be required by state law to pay a stamp duty to your respective state government. This is charged on a sliding scale based on the value of the property. Stamp duty amounts vary from state to state. A stamp duty calculator can be found on most good mortgage brokers and bank websites. We have included one in the links Annex.


Glossary of Terms The property inspection industry is like any other with many idiosyncrasies’ and jargon specific to the industry, so here I’ve put together some of the more common terms and their meanings you will may see in your dealings with property inspectors, real estate agents, and lenders. My hope is this will give you a valuable reference point and a better understanding of what it all means This section is followed by a Glossary of Abbreviations to help you through the maze.

Glossary of Terms - Property Inspection

AAA shower heads: a rating system adopted to help conserve thousands of litres of water every year.

AC wiring: regular electrical wiring.

AG drain: A perforated pipe usually covered with a geo-textile fabric and laid behind retaining walls or in trenches to catch seeping stormwater and surface water.

Ant caps: steel plates affixed to the ends of wooden posts and brick piers that support a floor. As termites cannot penetrate steel, they are forced into the open and can be detected.

Aperture: the opening of pipes

Architect: a licensed building designer with tertiary qualifications.

Architrave: a moulding used to disguise the gap between joinery and other work.

Art deco: a geometric style of home furnishings and architecture popular in the 1920s and 1930s.

Awning window: A window with hinges located on the top that makes it open out and up.

Backfill: the replacement of excavated earth into a ditch around a basement, retaining wall or foundation wall.

Bagging: A method of finishing brickwork involving the application of a thin mortar slurry using a hessian bag or sponge. Can be painted over or left to fade in an oxide finish. Bagging varies in texture & colour greatly and is not uniform like render.

Balustrade: A series of vertical members supporting a handrail of a stair, landing, platform or bridge.

Bay window: a window that projects outward from the walls of the building in normally a square or polygonal shape.

Beam: a horizontal structural member that supports a load such as a roof.

Bearer: a sub-floor timber that supports the floor joists.

Bearing point: a point where structural weight is concentrated and transferred to the foundation.

Bevel: cutting or shaping on the edge of a material to form an angle that is not a right angle.

Bi-fold doors: doors with a hinge in the centre, allowing them to fold into a smaller space than a swing door. Bi-folds are popular as they open up living areas.

Binding: When doors or window sashes are sticking or scraping they are said to be binding

Bluetooth: a short distance, low speed radio frequency technology primarily used to allow a Personal Digital Assistant (PDA) or mobile phone to interact with a laptop of desktop computer.


Borers: Generally timber pests that can cause damage to pine timber floorboards. Treatment is possible but replacement of damaged boards is recommended.

Brace: blocks of timber used to support framing members. Also diagonal timber or metal angel fixed to structural framing to prevent racking

Breaker box: a box that houses the circuit breakers or fuses that control the electrical current in a house.

Brick veneer: a house where the walls consist of a layer of brick covering timber framework. The bricks have no structural role and are cladding only.

Buckling: when a building material starts to bend or warp due to movement or other defect

Butt hinge: a hinge where the pin is inserted into a round barrel. They are commonly used on swinging doors.

Builder's warranty / indemnity insurance: compulsory insurance in some states for builders that is supposed to protect homeowners from faulty work in the case that the builder dies, goes missing or becomes insolvent.

Building period: the time that is allowed for your home to reach practical completion.

Carport: a car shelter which is generally open at the sides.

Casement window: Window with one or more sashes hinged vertically to a frame; opens out like a door.

Caulking: the material used to fill out joints, between building materials and or fixtures and fittings

Clerestory window: Window in the upper part of a room admitting light from above an adjacent window

Cement: a grey powder which, when combined with water and other materials, forms concrete or mortar.

Certificate of final inspection: issued by a building surveyor after final inspection of a renovation or new home to show that work complies with the approved plans

Circuit: the path along which an electrical current flows.

Circuit breaker: acting similar to a fuse, it acts as a safety device for surges or faults in an electrical system. Unlike fuses, a circuit breaker can be reset.

Cladding: a layer of material that protects the structural elements of a building. Metal, brick, timber and cement sheets are all common types of cladding.

Coaxial cable: used for data transmission, often used in home automation.

Colour wheel: a simple diagram that shows the relationship between colours.

Column: a vertical supporting member.

Commencement: when the builder commences physical work on the site.

Concrete: a mixture of cement, gravel, sand and water that is often used in construction.

Construction joint: where two successive placements of concrete meet, allowing for expansion and contraction.

Contractor: the party engaged to supply goods or services.

Contract price: the amount payable to your builder for any work. It can be adjusted according to terms set out in the contract.


Conveyancing: the legal process involved in passing a piece of property from one person to another.

Conveyancer: a professional who assists in the legal transfer of property.

Cooling-off period: the period when a person may legally withdraw from a contract without incurring a penalty.

Cornice: a moulding used at the join of a ceiling and a wall.

Cost-plus contract: a contract in which the builder determines labour and material costs, then adds a percentage to ensure a profit.

Covenant: guidelines that require structures in a particular development or area to conform to specific standards.

Crazing: A network of fine cracks in a surface or glaze of a surface. Often seen in enamel basins

Dado: The lower portion of a wall above the skirting when finished in contrast to the remainder of the wall e.g. with wood panelling

Dampcourse: waterproof membrane that protects brickwork or masonry from rising damp.

Default interest: the amount payable to the builder if you do not pay by the due date.

Defect liability period: the period of time specified in the contract in which the builder is required to rectify defects (except for minor settlement or minor shrinkage).

Defects: fault or deviation from the intended condition of a material, assembly or component, work or material that is faulty or not to the level specified in the contract, or no longer function as designed, or the integrity of the element is compromised to the extent that deterioration of function is imminent.

Defect – Appearance: an appearance defect is a fault or deviation in the intended appearance and integrity of a building component

Defect – Major: a defect of significant magnitude that rectification has to be carried out in order to avoid unsafe condition, loss of utility or further deterioration.

Defect – Minor: a minor defect is any defect other than a major defect.

Defect – Serviceability: a serviceability defect is a fault or deviation in the intended serviceability performance of a building component.

Defect – Structural: a structural defect is a fault or deviation in the structural integrity or performance of a building component.

Differential Movement: occurs when stresses within a building structure forces components to move in different directions, this can be horizontal, vertical or diagonal.

Double glass: also known as insulating glass. Two panes of glass are joined together with a pocket of air between them to reduce heat transfer.

Drywall: used for interior walls. Drywall usually comes in large panels and is made from gypsum, plywood or a similar material.

Easement: areas of land located above or around the equipment used for essential services such as pipes and electrical wires. Government authorities control use of this land.

Eaves: the overhang at the lower edge of the roof that projects over the wall.

Efflorescence: Efflorescence is a white crystalline or powdery, often fluffy/fuzzy deposit on the surface of masonry materials like concrete, brick, clay tile, etc. It's caused by water seeping


through the wall/floor/object. The water dissolves salts inside the object while moving through it, then evaporates leaving the salt on the surface.

Equity: the amount of your home that you actually own (that is, the actual value of your home minus the amount owing on your mortgage).

Estimate: the amount that the contractor expects to spend on materials and labour during the course of a project. Depending on the terms of the contract, this cost may change.

Fascia: a board which runs horizontally along the ends of the roof rafters, creating the 'edge' of the roof.

Fibreboard: A type of wallboard in which wood chips or shavings are bonded together with resin and compressed into rigid sheets.

Fibre optic cable: a high-end data cable that can handle huge amounts of information.

Finger joint: a glued timber joint often used in load-bearing structures.

Finial: A decorative fitting used at the junction of ridges and hips and at the top of conical, pyramid or domed roofs

Fittings: items that can be removed from a property without damage, such as ovens, baths and hot water systems.

Fixed-price contract: a contract in which the customer and contractor agree on a price that will not change, no matter what the project actually costs the contractor.

Fixed-rate loan: a loan where the rate of interest is fixed for a certain amount of time.

Fixtures: anything permanently attached to a house and regarded as part of the real property, such as cabinets and cupboards.

Flashing: waterproof material that prevents moisture from penetrating a house through the walls or roof.

Flue: a chamber in a fireplace or on a fuel burning heater that directs fire and smoke and other gases to the outside.

Footing: a rectangular masonry section which is usually made wider than the bottom of the foundation wall or pier it supports.

Foundation: the part of a building where all loads are transferred to the ground.

Full brick: a building where both the inside and outside walls are brick.

Furring channel: Battens fixed to the underside of trusses, rafters or ceiling joists to produce an even level ceiling

Gable: the triangular wall that sits between the sloping ends of a gable roof.

Gable roof: a roof where two sloping planes meet at a peak.

Galley kitchen: a kitchen where appliances and cabinets sit against a single wall.

Girder Truss: A truss that runs in the opposite direction to other trusses and has brackets (shoes) to carry and support the other trusses. The girder truss is often a double truss, made of hardwood in part or has bigger elements than other trusses.

Going: In a stair the horizontal distance from the face of one riser to that of the next.

Ground fault interrupter (GFI): a safety device that interrupts surges of electricity in appliances and other electrical components found in a home


Grout: mortar used to fill the joints and cavities found between pieces of masonry or ceramics.

Hanging Beam: A beam above the ceiling used to support ceiling joists.

Hardwood: wood harvested from broadleaf trees (such oaks, maples, ashes and elms).

Head: The upper horizontal member at the top of an opening or frame.

Header: A brick laid with its greatest dimension across a wall usually used to tie two skins together or under a door sill or window.

Hearth: The floor of a fireplace and immediately adjacent area.

Herringbone bond: A brick bond giving a diagonal pattern in the form of a series of vees or inverted vees.

Heartwood: more durable wood from the centre of a tree.

Hip: The meeting line of two inclined surfaces

Hip Roof: A roof which is pyramidal in shape with sloping surfaces and level edges all round

Hoop Iron Strap: A strip of thin steel (usually about 25mm wide) which is usually built into brickwork or nailed to frames as a tie-down for wind

Hopper window: Window in which the sash is hinged at the bottom and moves inward at the top

HVAC: an abbreviation for heating, ventilation and air condition system.

Insulation: Materials resistant to heat energy loss.

Jamb: a vertical member that forms the side of a window or door frame.

Joint: the area where the ends of two surfaces are joined together by some kind of fastener.

Joist: horizontal timbers that provide the main structural support for a ceiling or floor.

Lagging: Thermal insulation material used around pipes and duct work

Laminated timber: layers of timber glued together to increase rigidity or create a multi-coloured effect.

Lathing: strips of wood or other materials used as a base for plaster and similar materials

Lintel: Horizontal structural member spanning an opening, for example at top of windows and doors; some older buildings may have timber lintels hence termite damage to window/door frames may have structural implications.

Liquidated damages: the amount of money you are entitled to if your home is not practically completed by the end of the building period.

Lintel: a horizontal structural member that supports the load over a door, window or other opening.

Load-bearing wall: a wall that supports weight from a floor or ceiling above it.

Louvre: a parallel slat in a window (usually adjustable) that allows air and light to enter a building while excluding rain.

Low-emissivity glass: specially coated glass that prevents the transfer of heat.

Masonry: Refers to structural units that are laid in mortar, for example brick, concrete block, stone, terracotta etc.


Monolithic slab: when a continuous concrete pour is used to create the floor surface and foundation walls. This makes the foundation very strong and also protects against termite attack.

Mortar: A mixing of bush sand (white or yellow), cement (grey or off-white) and water for brickwork. Usually at the rate of 6 part sand to one part cement (by volume) and if required one part lime

Mould: growth of miniature fungi.

Moulding: the material used to cover joints in building components

Mullion: A vertical member dividing a window or door frame into sections; exterior (and possibly interior) base of window mullions sometimes sustain localized fungal decay damage caused by rainwater ingress.

Newel Post: A post at the top or bottom of a stair flight to support the handrail and/or winders in the stair treads.

Niche: a hollow recess or indent in a wall.

Nogging: A horizontal timber member fixed between joists, studs or trusses to provide stiffening or to support linings or future fixtures

Occupancy permit: issued by a building surveyor after the final inspection of a new home or renovation.

Owner-builder permit: in some states you must have this permit before you are allowed to carry out building work above a certain value by yourself

Parapet: A low wall to protect the edge of a roof, balcony or terrace. Often built on a boundary line

Particle board: a plywood substitute made from coarse sawdust and resin pressed into sheets.

Parting (Party) walls: The wall between two adjoining buildings.

Patch panel: the central hub in a home automation system. All the cables are plugged in and 'patched' together here.

Patio: a paved area normally in the back of front of a home.

Penetrating damp: The lateral movement of moisture from one side of a wall to the other, for example from exterior walls or leaking shower recess walls to interior surfaces; can cause staining and deterioration of wall finishes and possibly fungal decay damage to timbers in direct contact with excessive moisture.

Pergola: An outdoor structure with an open roof.

Perp: A vertical joint in masonry construction

Planning permit: councils place restrictions on building activities in their jurisdiction. Planning permits are needed for most large projects and many smaller ones.

Plans: technical drawings completed by an architect or draftsperson and used in the construction of a house.

Plywood: a piece of wood made from three layers of veneer wood bonded with glue. For strength, the middle layer is usually laid with the grain perpendicular to the layers above and below.

Pointing: The replacement of deteriorated mortar between bricks with new mortar.

Practical completion: the stage when the works have been completed in accordance with the contract apart from minor defects and is reasonably suitable for habitation.


Prime cost items: this allowance is a reasonable estimate for fixtures and fittings that you select after the contract is signed and may include special kitchen and bathroom items.

Progress payments: payments made to the builder at specified stages during the building process.

Provisional sum items: amounts your builder has determined as 'best estimates' of the cost of certain work.

Quoins: The corner stones at the angles of buildings

Rafter: roof structural members that slope downwards to the eaves.

Registers: help regulate airflow.

Render: usually a cement or plaster type product applied to brick or masonry walls.

Reveal: The vertical sides of an opening (e.g. of window or door).

Riser: The vertical face of a step in a stair flight

Rising damp: The vertical movement of moisture up a masonry wall often causing staining and deterioration of wall finishes; usually cause by failure of original damp course; usually can travel as high as about a metre; can lead to fungal decay damage to adjacent timbers (e.g. skirting boards).

Roof pitch: the incline or slope of a roof.

Rot: Common reference to fungal decay of timber that results from high moisture content that may be caused by a variety of circumstances.

R-value: a measure of how effective a material (glass, for instance) is at resisting heat flow.

Sapwood: the outer layers of a tree which are still living and contain nutrients.

Sarking: a reflective foil laminate that is installed inside roofs. It has many benefits including weather proofing, insulation and reduction of dust and sound.

Shingles: roofing material installed in an overlapping manner. Shingles can be made from wood, cement, tile, asphalt or metal.

Sill: a window's lower horizontal framing member.

Skillion: a sloping roof without a ridge or peak.

Skirting: a moulding that covers the join between wall and floor.

Soil tests: tests on the building site that determine the stability of soil.

Soffit: the under surface of a beam, arch or stair. Often refers to the underside of the eaves of a roof.

Softwood: wood harvested from trees that have needles, such as pines, firs and cedars. Does not necessarily refer to how hard the wood is.

Soldier course: A course of brickwork laid on its end.

Specifications: A detailed description of work to be undertaken including the type and quantity of materials and fittings that will be used.

Stainless steel: An extremely durable metal alloy that resists corrosion.

Stamp duty: A state government tax paid on the value of property.

Storm mould: Small moulding (usually timber) fixed over the joint between a window (or door) frame and the reveal of an external wall.


Strata title: grants ownership over a section of a larger building.

Stretcher bond: The most common masonry bond in Australia in which all bricks are laid with half overlaps and not using half bricks or cross bonds

String(er): Stairs component, the inclined structural members that support the treads(/risers) on each side; in exterior steps, base of stringers may sustain fungal decay damage and/or concealed termite entry, if in direct contact with ground.

Stucco: Traditionally an external render to provide a decorative finish.

Subcontractor: a person, partnership or company who contracts with the builder to carry out part of the building works.

Subfloor: A floor that will serve as the base for another floor; for example, a concrete floor that is covered over with floating floorboards.

Subsidence: occurs when a building component moves in a downward direction. Typically used to describe settlement of intermediate piers and or footings

Surveyor: an engineer who carries out surveys of property elevations and boundaries.

Terrazzo: A material consisting of irregular marble or stone fragments set in a matrix of cement and mechanically abraded and polished after casting to produce a smooth hard surface

Thermal mass: a concept in architecture that relates to the amount of time it takes for a material to gain or lose heat. Materials with a high thermal mass are energy efficient.

Threshold: The strip of metal, wood, brass or other material that is placed on the floor under a door

Timber: wood that has been refined into a form suitable for use in carpentry or joinery.

Tongue and groove timber: boards that have a groove on one side and a tongue on the other so they can be joined together.

Tread: The horizontal section (which is stepped onto) of a staircase

Truss: a structural support unit of three or more members, usually arranged in a triangular shape. Trusses are often used to support roofs and floors.

Undermining: used to describe missing foundations under footing and or piers, this can occur by physical excavation, significant ground subsidence or erosion by leaching

Underpinning: The construction of new footings or concrete piers under an existing footing to prevent its collapse or failure.

Unshielded twisted pair (UTP): telephone-type cables. The industry standard UTP cable for home automation is CAT-5e, which can transmit very large amounts of data.

Variable rate loan: the amount of interest owing on the loan changes according to the rates set by the reserve bank.

Variation: is an omission, addition or change to the works, or a change in the manner of carrying out the works and should be outlined in the contract. A variation can be made at your request or at the request of the builder.

Vendor: a person who offers a property for sale.

Veneer: a thin layer of high-quality wood that is glued on top of other wood for aesthetic purposes.

Warranty: a statement that guarantees the material and workmanship of a product is defect-free and will remain so for a specified period of time.


WC Water closet: Toilet

Weatherboard: overlapping boards for external surfaces that keep out rain.

Weather stripping: Composed of various materials like rubber or foam, this is used to reduce the escape of heat or air conditioning from a home, also used as draft seals around windows and doors.

Weepholes: small holes in brickwork that allow for expulsion of moisture from beneath the house.

Winders: Wedge shaped treads in a staircase landing.

Wiring closet: a special room set aside in a home automation system where all the wires terminate.

Works: means the work to be carried out, completed and handed over to you in accordance with what is set out in your contract documents including the variations.

Work triangle: A concept used to design functional kitchens.

X10: a simple home automation system that operates using your regular power lines.

Zoning: council rules regarding the uses that an area of land may be put to.

Glossary of Terms – Plumbing and Drainage

Absorption Trench: A trench, pit or well excavated from permeable ground filled with broken stone, bricks or large granular materials and covered with earth to dispose of the discharge from a septic tank, sullage system or stormwater by absorption into the ground.

Gully Trap (GT): An assembly in a sanitary drainage system, consisting of a trap and other fittings.

Floor waste gully: A disconnector gully with a floor grate or waste outlet fitting located inside the building and, where required, with provision for the connection of waste pipes from sanitary fixtures.

Invert: The lowest point of the internal surface of a pipe or channel at any cross-section.

Junction: A pipe fitting incorporating one or more branches.

Manhole: A large chamber or opening on a drain, sewer or equipment to permit access for inspection, testing or clearance if obstruction.

Stack: A vertical sanitary drainage pipe, including offsets, which extends more than one storey in height.

Sullage: Domestic waste water other than from soil fixtures.

Sump: A pit at or below the lowest point of a structure to collect unwanted water and facilitate its removal, usually by means of a sump pump. Also called a drain pit.

Trap: a) A fitting usually in the shape of the letter P or S which retains water to form a "water seal" so as to prevent the passage if gases or foul air into the building. b) A fitting for the interception of silt, acids, grease, oils or fats.


Boundary trap: A trap in the property service drain, usually near the boundary if a property and below the lowest inlet, to prevent the entry of air or gases from the sewer into property service drain. Also called an interceptor trap.

Grease trap: A device in the shape if a box with baffle plates to slow the flow of liquid waste and prevent the passage if greasy substance into the drainage system. Also called grease interceptor trap.

P-Trap: A trap in which the inlet leg is vertical and the outer leg inclined below the horizontal to specified limits, with or without inspection opening at the lowest point.

S-Trap: A trap in which the outer leg is vertical and parallel with the inlet leg, with or without inspection opening at the lowest point.

Silt trap: A trap containing a removable container for the collection if silt, sand or grit.

Valve: A device for the control of liquid or gas flow, having an aperture which can be wholly or partially closed by a plate, disc, door, gate, piston, plug ball r the flexing if a diaphragm.

Ball valve: A valve having a turning ball with a port or ports to control the flow of fluid.

Float valve: A valve actuated by a float (floating ball) to control the flow of liquid, used in tanks or cisterns to maintain a minimum water level. Also referred to as floating ball valve.

Flush valve: A control devise for water flow at mains pressure to a WC pan; used instead of a cistern.

Gate valve: A water control valve which closes like a sliding gate over an opening.

Mixing valve: A valve which is designed to mix separate supplies of hot and cold water and direct the maximum.

Non return valve: A valve which prevents the reversals of flow by means of a flap or mechanism. Alco call a check valve.

Pressure reducing valve: A valve designed to reduce or limit the pressure of a fluid to a predetermined valve in the downstream side. Also called a pressure limiting valve.

Pressure relief valve: A spring-loaded or weight-controlled automatic valve to limit the build-up of pressure in pipe work, fittings or vessels by discharging excessive pressure to the atmosphere.

Safety valve: A pressure-relief valve for a boiler or unfired pressure vessel.

Stop valve: A valve, such as a gate valve, which can be operated to stop flow in a pipeline. Also known as an isolating valve.

Temperature relief valve: A temperature activated valve to relieve excess pressure in water heaters in the event of a thermostat failure and overheating.

Vent: A pipe provided to limit pressure fluctuations within a discharge pipe system by the induction or discharge of air and/or to facilitate the discharge of gases.


Trap vent: A vent pipe from an individual trap to the open air or to a main or branch vent pipe, for the prevention of loss of water seal in the trap. Also called an anti-siphonage vent or back vent.

Glossary of Terms – Real Estate and Finance

Abatement: A covenant in a lease or a right to rent reduction because of a certain happening (fire, water damage, structural repairs etc

Abutting: Properties that share common boundaries

Abstract of Title: A short version of the full history of title to the property, this can sometimes be called a title extract or extract of title.

Acceptance: Usually, acceptance of an offer, according to the terms of the offer, creates an enforceable agreement or contract.

Adverse Possession: If after 20 years (12 years in SA) of occupying another's land, that person’s ownership rights are extinguished. The reason for this is that land is valuable and if it is not looked after, the law is not very sympathetic to this.

Agent: A person authorised to act on behalf of another person in the sale, purchase, letting or management of property.

Agistment: A right to graze stock on the land of another (usually for a fee)

Agreement for lease: Formal written agreement for lease but generally part oral and partly embodied in exchange of letters between solicitors for the parties. Determined by the ordinary rules of contract.

Allotment: When a larger area of land is subdivided into smaller pieces, these smaller parcels of land are known as allotments. Also referred to as a "lot", "building block" or "block of land".

Amenity: Is a characteristic or feature of a neighbourhood.

Amortisation: To pay off your debt by regular instalments over a period of time.

Apartment: See Home Unit.

Appraisal: The amount that an appraiser says your property is worth. This is not a valuation.

Appreciation: The increase in the value of property caused by economic factors such as inflation, or an excess of demand over supply for that property type.

Architrave: A moulding surrounding a door or window opening.

Assignment: The sale or transfer of a lease to another party. Right to assign or prohibition of assignment is a critical factor in leases. A guarantee usually accompanies the assignment of the balance of the lease

Auction: A public sale in which property is sold to the highest bidder. Sale by public outcry subject to

any reserve decided by the owner.


Balloon Payment: A large lump sum paid at the end of a loan to clear a debt.

Base Rent: a set sum or series of set sums from which rent is determined generally using turnover provisions.

BASIX: Building sustainability Index System. (Green building practices).

Battleaxe: A block of land shaped like an axe, where the handle is in the approach. Generally situated between other blocks, thus having no apparent street frontage.

Beam: A horizontal load-bearing structural member.

Bearer: A sub-floor timber supporting the floor joists.

Binding: Legally enforceable.

Body Corporate: All of the owners collectively of the common property in a block of units. The council of the Body Corporate, which is elected by the members, meets regularly to discuss various matters relating to the administration of the building (for example, upkeep of common property).

Bond: A sum of money paid by a tenant and held by the Rental Bond Board to protect against losses from non-payment of rent and damage done to the rental property.

Boundary: A line separating adjoining properties.

Breach: Failure to honour a contractual agreement or an equitable duty.

Breach of contract: Breaking the conditions of a contract.

Brick Veneer Construction: In housing, a system in which a structural timber frame is tied to a single brick external wall.

Bridging Finance: Finance obtained over a short period, as a "bridge" to long-term funding. Higher interest rates may be charged for bridging finance.

Building Certificate: Basically a certificate of “non-action” issued by the Council or a private building surveyor

Building Code of Australia: (BCA), is the sole mandatory building regulation for the State

Building Inspection: In real estate terms this phrase can have several meanings from a building surveyors compliance inspection, Pre-purchase inspection, pre-sale inspection, a defects inspection, a dilapidation report, or a maintenance inspection.

Building Regulations: Rules of a legal or statutory nature by which local councils control the manner and quality of a building. They are designed to ensure public safety, health and minimum acceptable standards of construction.

Buyers Advocate or Agent: An agent who acts solely for the buyer by sourcing suitable properties and representing the buyer during the buying process.


Capitalisation: A method of valuing property base on the net return of the property and the current yield expected by the market for this type of property.

Capital Gain: Capital gains tax (CGT) is the tax that you pay on any capital gain you make and include on your annual income tax return. It is not a separate tax, merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate. This would apply to the sale of an investment property.

Caveat: "Beware" – if a caveat is lodged on a title to land, it warns a person buying the property that a third party (the party that lodged the caveat) has some right or interest in the property.

Caveat Emptor: "Let the Buyer Beware" - this principle of law requires the buyer to be satisfied with the item they wish to buy before buying. The buyer purchases the property "as is".

Certificate of Classification: A certificate issued by the council or a private building surveyor which indicates the class of classes of buildings (whole or portion of). It is an offence to use a building for a class not approved

Certificate of Title: A document identifying the ownership of land. It shows who owns it and whether there are any mortgages or other encumbrances on it.

Charge: A security over property

Chattels: Property other than real estate, such as moveable possessions that may be included in a sale, e.g. furniture, curtains, light fittings (shades).

Civil Action: Any legal action other than criminal

Clear Title: A vendor has a clear title when there are no interests (like an outstanding mortgage) on the vendor’s title. (no debts or liens against it)

Cluster Housing: Detached group of houses that share open space.

Collateral: Assets that secure a loan

Commission: A fee or payment made to a real estate agent for services successfully rendered (for example, someone who hires an agent to sell his/her home pays the agent a commission when the home is sold).

Common Area: An area that is available for use by more than one person (for example, home units have common areas like stairs, driveways, store rooms).

Common Law Title: Usually referred to as "old system title", it consists of a series of title documents called "a chain of title". The title to a property held under this system is “clear” only if every document in the chain is available and complete (ie, the chain of title is unbroken). Legal costs associated with a purchase of Old System Title land are higher than those on a purchase of Torrens Title land, because making a thorough investigation of the chain of title can be complicated and time consuming. Old System Title may be converted to Torrens Title, and often can be automatically converted to Torrens Title following a sale.

Compulsory Acquisition (resumption): The power of a government authority to purchase resume) property from an owner without the owner agreeing to sell.


Contract: An agreement made between two or more parties and intended to be enforceable at law

Contract of Sale: A document that sets out the terms and conditions of sale between the vendor and the purchaser (referred to as a "Contract").

Conveyance: The process of transferring the ownership of property from the vendor’s name to the buyer’s name.

Conveyancing: If you want to buy or sell a home, land or investment property you’ll have to sign a contract. The legal work involved in preparing the sale contract, mortgage and other related documents, is called conveyancing. Conveyancing work can be done by- a licensed conveyancer, a solicitor, or do it yourself

Cooling off period: (Residential Sales). A pre-set period generally available to a purchaser to withdraw from a

contract for the purchase of residential land or property.

Covenant: An agreement noted on the title to a property requiring the property's owner to adhere to certain terms, conditions or restrictions regarding the property. The nature of any covenant over a property should always be established before you enter into a contract to purchase the property.

Covenant Chargee: The holder of a positive covenant which requires the owner of the land burdened by the covenant to do some act (repair) or make an expenditure of money.

Cover Note: A document issued by an insurance company to temporarily insure a property until a formal policy is issued, following payment of the requisite premium.

Curtilage: The area surrounding the main dwelling on the same title

Damages: Generally liquidated damages for non-performance

Decrement: A decrease in a properties size. This could be caused by erosion on a creek, river or beach.

Deed: A formal document including special signing requirements recording an agreement, obligation or conveyance of property.

Default: Failure to carry out a duty or obligation

Deposit: the buyer normally pays a deposit at the time of exchanging contracts. It is normally between 5-10% of the total purchase price.

Depreciation: The diminution in value of land, generally buildings, through any cause. May be actual or an accounting or taxation exercise.

Developer: A company or person who purchases a property to redevelop it and sell for a profit.

Discharge is when a home loan mortgage has been repaid in full. The borrower will receive a discharge document from the lender stating that the mortgage has been repaid.

Discharge Fee charged by the home loan lender to cover the administration costs of finalising and discharging a mortgage


D.S.E.: Dry Sheep Equivalent is a term used to indicate carrying capacity or the ability of the land in normal conditions to support a given number of sheep, cattle or beasts per hectare (1cow = 3 dry sheep)

Dual Occupancy: A block of land or existing dwelling that is zoned in a way that allows the owner to erect a building that has two distinct living arrangements (for example, a duplex or a house with a granny flat attached).

Duplex: A two-storey block of apartments with one apartment covering each floor.

Easement: A right to use all or part of the land owned by another for a specific purpose. Your property may border a river or creek and may therefore have an easement to allow Council workers access. Other examples include a Drainage Easement or other service easements for power, gas or water. Economic Obsolescence: A fall in your property value due to factors out of your control. For example when a rubbish dump is built next door.

Ejectment: Legal remedy to recover possession of land

Encroach: To intrude upon other land

Encroachment: Part of a building, fence or overhand incorrectly erected on or over the land of another (will be established in the survey.

Encumbrance: Any type of disability or burden that affects land (Crown reservations, easements, covenant or restriction – generally recorded on the title) Enduring Power of Attorney: Written authorisation for one person or person(s) to act legally on behalf of another. A person may become incapacitated or sick and require someone else to make financial and legal decisions on their behalf.

Fittings: Goods or articles that can be removed from a property without causing damage to it.

Fixtures: Items such as built-in cupboards, bath, toilets and stove that are intended to form part of a property and that usually cannot be removed from a property without causing damage to it.

Forfeiture: The taking away of the Lessee’s interest generally by the lessor exercising a right of re-entry provided in the lease for some specified breach of the lease.

Free Standing: A dwelling that stands independently of others.

Gated Communities: Restricted access to a fenced off development or mini-suburb.

Gearing: Negative Gearing occurs when you borrow to invest in an income producing asset and the cost of borrowing exceeds the returns (income) from that asset. Negative Gearing on a rental property, for instance, occurs when the annual interest payable on the loan used to acquire the property, plus other expenses incurred in maintaining the property, exceeds the annual rental income the property generates. Positive Gearing occurs when you borrow to invest in an income producing asset and the returns (income) from that asset exceed the cost of borrowing.


Gazumping: Gazumping may take different forms:

• The intending buyer believes that the property has been secured by payment of a holding deposit, and proceeds to arrange finance, legal and other matters. When ready to exchange contracts, the intending buyer finds that another buyer (of which he or she was unaware) has exchanged contracts with the vendor on the same property.

• The vendor or real estate agent accepts two or more deposits and then before contracts are exchanged, tells the intending purchasers that the price has gone up. The intending buyers are then left to outbid each other as if it were an auction.

Goodwill: A value attributed to the business separate form the real estate which revolves around the continuity of operation on the same site and the customer support which is this available

Heritage Act: An act to provide for the protection of works, buildings or places

Home Equity Loan: A Home Equity loan could be a line of credit account secured by a first registered mortgage over your residential property.

Home Unit: A residential dwelling grouped with others, having shared common areas and owned under Strata Title, Company Title or other group title system.

Interest: When someone lends money to someone else, the borrower usually pays a fee to the lender. This fee is called 'interest'. 'Simple' interest, or 'flat rate' interest. The amount of simple interest paid each year is a fixed percentage of the amount borrowed or lent at the start. Variable Interest is interest that is varied throughout the term of the loan, this can be tied to economic fluctuations, CPI (Consumer Price Index), or just the whim of the lender. Compound Interest is Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. This is sometimes referred to as the miracle of compound interest.

Interest only loans: The principal amount borrowed is not repaid until the end of the term of the loan. Generally, repayments consist of interest only.

Inventory: A list of items included with a property, usually furniture, furnishings and movable items.

Investment: The purchase of an asset (like real estate) in order to produce capital gain on resale or to earn income or both.

Joint Tenants: Joint tenancy is the holding of property by two or more persons in equal shares.

Judgement: An order or decision of a court

Land: The Australian Definition of Land is generally- "The giant carrot definition": Whatever the surface holder owns they have up to the heavens and down below the Earth. EXCEPTIONS- Mines and Minerals are owned by the State and air space is limited to what is reasonably needed to make use of the surface.

Land Tax: A State government tax payable by owners of property based on the unimproved capital value of the property.


Lease: A lease is a document granting possession of a property for a given period, subject to the payment of rent, without conferring ownership. The lease document specifies the terms and conditions of occupancy and rent payable.

Lender’s Mortgage Insurance: There are a number of variables that influence whether or not lender's mortgage insurance is required. Generally, it is required if you are borrowing more than 80% of the value of the property, however this condition varies depending on property type, location of the property, loan type, etc. Lender's mortgage insurance protects the lender, not the borrower(s), against loss in the event that you default on the loan. This should not be confused with mortgage protection insurance for borrowers. In the case of foreclosure, if the property is subsequently sold by the lender at a price that does not cover the outstanding amount of the loan in full, lender's mortgage insurance will cover the difference in the debt still owed to the Bank after the sale of the property.

Lessee: A person who obtains possession of a property under a lease.

Lessor: A person who owns a property and allows another to occupy it under a lease.

Leverage: When you borrow money to purchase an investment to magnify the rate of your profits from capital growth or your income from the investments. (Investors often leverage the equity from one property to purchase another)

Lien: In law, a lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. A monetary claim against a property

LVR: Loan to Valuation Ratio, the ratio of the amount lent to the valuation of the property

Mortgage: A legal document that gives a lender an interest over a property to secure the payment of money, or the performance of an obligation owed, to a lender.

Mortgagee: Someone who lends money on the security of a mortgage.

Mortgagor: Someone who borrows money offering the security of a mortgage.

Mortgage Indemnity Insurance: Your credit provider can insist you take out or pay the cost of types of insurance specifically allowed by law. These are compulsory third party personal injury insurance, mortgage indemnity insurance or insurance over property covered by any mortgage. Otherwise, you can decide if you want to take out insurance or not.

Mortgage Insurance, or Lenders Mortgage Insurance, protects the lender against potential losses should you default on your home loan, and the proceeds from the sale of the property not cover the remaining home loan amount. A lender will often require you to take out Mortgage Insurance if you wish to borrow more than 80% of the value of the property. It is usually a one off fee payable when the home loan settles.

Mortgage Offset Accounts: Many Banks have a system as follows:- If you had $10,000 spread over three sub-accounts, and $100,000 owing on your linked home loan, you would only be charged home loan interest on $90,000. And, because interest is calculated daily, you benefit every day by keeping your income and savings in Everyday Options sub-accounts.


Negative Gearing: Negative gearing is a form of financial leverage where an investor borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan. (When the income does cover the interest it is called positive gearing.)

Negligence: Absence of reasonable conduct (duty of care)

Net return: The sum left from the gross return when all outgoings and costs have been deduction (usually on a per annum basis) (Does not include interest on funds borrowed)

Neighbours: The people who live next door or in your immediate vicinity.

Obligation: A legal duty

Old System Title: See Common Law Title

Open House: An Open House is when a real estate agent opens up your house for an inspection for prospective buyers. It may only be open for an hour or less.

Open listing: Where a property is listed with more than one agent (only one commission is paid)

Option Fee: A deposit you offer a real estate agent to hold an option period that allows you to consider your purchase without others being able to purchase the property. If you do not purchase the property this option fee is paid to the vendor.

Option to buy: A legal document giving a person a right to buy. The price of the option and the period in which it must be exercised are specified in the option. Usually, a fee is paid and if the person proceeds to buy, the amount paid for the option is deducted from the purchase price. Where the person does not proceed to buy the property, the option fee is not refundable.

Over Capitalised: You may have paid such a high price or over renovated so that the property is either worth a lot more than other similar properties in the area or worth a lot more than you can recover.

Pest Report is similar to a building report but carried out generally by a qualified person to check that the building is not infested and at risk of damage from any pests such as termites, white ants, rodents, borers etc.

Power of Attorney: A written authorisation to another person, or persons, to perform certain acts for the signer, as if they were the signer.

Pre-Purchase: An event or activity that occurs before the purchase is finalised; usually referring to a pre-purchase inspection.

Pre-Sale: Also known as Pre-Listing, an event or activity that occurs before a sale is agreed or before a property is listed for sale.

Principal: Principal is the amount you borrow

Principal and interest loan: A loan made under a principal and interest repayment condition is the most common form of housing loan. The repayments are calculated so that over the term of the loan, both the principal amount borrowed initially and the interest payable over the term of the loan, are repaid in full by the end of the loan’s term.


Private Sale: The seller (vendor) does not engage a real estate agent, but acts for him or herself and so avoids paying agent’s commission. The seller deals directly with the buyer.

Private Treaty Sale: Sale of property through an estate agent, other than by auction.

Property Trust: Unit trust which invests unitholders money in real estate. Different property trusts specialise in various areas of real estate (commercial, retail, industrial or residential).

Progress Payments: Payments/instalments advanced on a construction loan which during the construction period, are paid by the lender to a builder as the building progresses. Progress payments are made on completion of pre-determined and agreed stages of construction.

Property Management: The management of a property on behalf of the owner.

Rates: The amount charged by the local council or water authority to provide services to a property.

Real Property: Land with or without improvements on it.

Repayments: A Repayment is an estimate of the minimum repayment you need to pay to pay off your home over the full term of the loan.

Reserve Price: This is the minimum price a seller has specified that they will accept to sell their property at auction.

Restrictive Covenant: A promise to refrain from doing something. This can be enforced against a third party.

S.A.V.: Stock of Value. When purchasing a business you pay so much for the business (goodwill and/or profit rental) and then for the stock at wholesale price.

Search (title): The process of investigating or examining title to land, to ascertain if the vendor has the right to transfer ownership. A title search reveals the names of the owner and other precise details of the property, like the existence of any restrictive covenant, encumbrance or caveat on the title.

Semi-detached: Two houses joined together by a common wall.

Settlement: When the sale of a property is legally finalised.

Stamp Duty: A State Government Tax. For contracts of sale it is calculated according to the sale value on the contract. For mortgages, it is calculated on the amount to be advanced and secured by a mortgage.

Strata Levies: Strata levies are fees payable by the unit owner to a body corporate as a share of maintenance costs for the upkeep of the common property areas and can vary widely depending on the age and condition of the building and facilities provided

Strata Title: A system of title that allows the owner of a unit, in a block of units, to have separate title for that unit.

Surety: Person who makes themselves responsible for another persons payment of debt; also know as the guarantor


Survey: Shows dimensions and boundaries of land and location of buildings.

Tenancy: The right to occupy land or buildings as provided by the terms of a lease or other agreement.

Tenant: The person who helps you pay off your property. In Australia most tenants go to real estate agents to find themselves a place to live or do business.

Tenants in Common: This is the holding of property by two or more persons in specific shares. If one person dies, their share does not automatically pass to the surviving owners, instead it is passed on according to the terms of their will.

Tender: Invitation to submit offers in writing, generally in accordance with terms of the tender documents

Terrace: One of a row of houses joined together with common walls.

Title: Ownership of real property as evidenced by documents

Torrens Title: The name given to the government system of recording ownership of land. It’s by far the most common land title in Australia and the cheapest title to buy or sell. Once you are registered on the title you are taken to be the owner.

Tort: A civil wrong which is not contractual

Town House: Two-storey attached dwellings usually registered under Strata Title.

Transfer: A document registered at the Land Title Office recording the change of ownership to a property.

Trust Account: A bank account into which an agent must pay all monies received on behalf of another person

Turnover: Total gross sales and a criteria used in shopping centre leases

Unencumbered: Usually describes a property free of mortgage interests or liens.

Valuation: A written opinion of a property’s value by a valuer.

Vendor: A person who offers a property for sale.

Villa: Single-storey dwelling usually registered under strata or community title.

Warranty: Since 1 May 1986 every vendor of residential land is deemed to have included in the contract the prescribed warranties referred to in the regulations (as with vendor disclosure it limits the concept of caveat emptor

Zoning: Description of the allowable uses of land, as set out by local councils or planning authorities.


Common Real Estate Abbreviations The real estate industry is like any other with many idiosyncrasies’ and jargon specific to the industry, so here I’ve put together some of the more common abbreviations you will often see in their advertising and promotions and the properties. I hope this will give you a better understanding of what it all means. (Note; capitalised letters are inconsistent) 3 Bed 1 Bath a home with three bedrooms and one bathroom 3/4 Bath toilet with sink & either a shower or bath AC acres (an imperial land area measurement A/C air conditioning (& ‘C/A’ or ‘CAC’ is central air conditioning) Adj adjacent Adv advance AEK all-electric kitchen Alc alcove Amen amenities Appls appliances Apt apartment Appt appointment Apprx approximately Assmt assessment Att Gar attached garage Att Crpt attached carport Ava available BA bath B/A building Approval Balc balcony BBQ barbeque Bch beach Bd or br bedroom Bics built-in-cupboards BIR built in wardrobe Bk back Bkfst breakfast (‘Bkfst Room”) Bldrs Reno builder’s renovation Blt built-in B/I/DW built-in dish washer BR bedroom Brk brick BT brick with tiled roof BV brick veneer Bsmt basement Cath Ceil cathedral Ceiling CBD central business district C-d-s cul-de-sac Cfan or c-fan ceiling fan Cl close Cnr corner Col colonial Cond condition Cons conveniences Cont contemporary Cpds cupboards


Cple couple Cpt carport Crk creek Crpt carpet CSD cavity sliding door Dbl double Dbr double bedroom Dep deposit Det detached DF double fronted D/h ducted heating Di area dining area Din or dr dining room Dist distance DIY do it yourself DTE down to earth D/W dish washer Elec electricity Elf electric light fittings Elv elevator Encl enclosed Ens ensuite Ent entry or Entrance Est established Exc excellent Exec executive Exp expenses Exr exercise room Ext external Facs facilities Fam family Fdr formal dining room Ffbr first floor bedroom Fib fibro cement Feat feature (as in ‘feat a patio) Fncd yrd fenced Yard Fin w/o finished walkout Flr floor FOWS/D face of wall sliding door FP or Fplc fireplace Frnt prch front Porch FROG finished room over garage FSBO for sale by owner Ftgs or ftts fittings FB full bathroom (toilet, vanity, bath & shower) FR family Room F tld fully Tied F/Fin bsmt fully finished basement Furn furnished Gar garage, also Gr or Grg GHW gas hot water GLFP gas log fireplace


Gmt Kit gourmet kitchen Grt loc great Location HB half Bathroom (toilet & vanity) Hbr harbour HDWD hardwood Hi ceil high ceiling Htg heating HVAC heating, ventilation & air conditioning HWH hot water heater HWC hot water cylinder HWS hot water service Inc includes Igsp in-ground sprinkler Ingr pl in-ground pool Insp inspect or inspection Int intercom Intl internal Kit kitchen K’ette kitchenette Ldry laundry Lge large Liv living room or area LL lower level Lndscp landscape Locn location LU lock-Up LUG lock-up-garage Lux luxury M/A mature Age m2 square meters Mbr master bedroom MEIK modern Eat-in-kitchen Mins minutes MK modern Kitchen Mod modern Mstr ste master suite Mtg mortgage Mt vu mountain View Neg negotiable N’hood or nbd neighbourhood Nr schls near schools Ocn vu ocean view Ofc office OH open House Oilhtr oil heater ONO or nearest offer O/O or Offer Orig original Osp on street parking OYO on your own Pa personal assistant P/A per annum


Pcm per calendar month Pdr powder room Pkg or prkg parking Pnt paint Pol flr polished Floor Pos position Pref prefer Prq parquet Prtl partial Pwk or PW per week Pvt or Prvt private Qual quality Rc reverse cycle Ref references Rem remote control Rend rendered Reno renovation or renovated Res residence Rf roof Rm room Rms rooms R/O room only ROI return on investment ROW right Of Way SB solid brick SC self contained S/D sliding door Sec Sys security system Semi semi-detached Sep separate Sgl single Sgle fr single fronted Shr shower Sm small Spac spacious SQM square meters Sq’s the old imperial squares = 10ft X 10ft or .929sqm S/S stainless steel S.S.Kit stainless steel kitchen appliances STCA subject to council approval Stry storey Sty style Sun or Sunrm sunroom Tct,tc tile terra Cotta Tiles Tf timber frame Tld rf tiled roof TH or Twnhse townhouse Thbr timber T’out throughout Trad traditional Trans transport Txs taxes


UC under cover UCP under cover parking U/f un furnished Updtd updated Upstrs upstairs U/g sprk underground sprinkler System Ven blds venetion blinds Ver verandah Vltd ceil vaulted ceiling VP vacant possession Vus views WB weather board WBFP wood burning fireplace WBS wood burning stove WC water closet or toilet W/D washer/dryer Wi wrought iron Wi pant walk-in pantry WIR walk-in-robe W/R wardrobe Wks weeks Wlk walk W/W Cpt wall to wall carpet WD FLR wood flr Win window Yrd yard Yo years old

from the secret diaries of a frustrated ......between buyers and sellers, real estate agents,...

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