Pre-contract and pre-settlement inspections

Their importance and common mistakes to avoid

Embarking on a property purchase journey? A property inspection is an important step. Whether it's pre-contract or pre-settlement, these inspections can be your safeguard against unforeseen issues and unexpected costs. Read below to understand their significance and how to navigate common mistakes that can sour the buying experience.

The pre-contract inspection

The Law Society's Standard Form Contract for Sale of Real Estate in Tasmania includes a warranty by the vendor that the property and the chattels will be at least as clean, tidy, and in good repair as when last inspected by the purchaser prior to signing the contract. Hence, inspecting before signing is crucial.

A pre-contract inspection provides a clear baseline of the property's condition. The vendor's warranty is tied to this baseline, requiring them to deliver the property and its chattels in the same (or better) condition at settlement.

Knowing the condition of the property and chattels enables you to make an informed decision when you make your offer, taking potential repair or maintenance costs into account.

Common mistakes...

• Forgetting to look behind furniture or under rugs for hidden damage.

• Not taking the time to make sure doors, windows, taps, heaters, appliances etc work properly.

• Not adding a clause to the contract when the vendor has agreed to carry out works before settlement. If you note it in the contract, it's much easier to hold the vendor to their promise.

• Not taking photos or videos for your own reference. Always obtain permission first.

• Leaving things for later. Take measurements while you can and jot down notes; you probably won’t get another look at the property before settlement time.

• Assuming the real estate agent represents your interests – they act for the vendor. Whilst agents are helpful towards purchasers, their duty lies with the vendor. If you need someone to advocate on your behalf, consider engaging a buyer’s agent.

The pre-settlement inspection

A pre-settlement inspection is a final walk-through and your chance to....

• Check the fixtures and chattels are still there. Sometimes, there can be misunderstandings about what is included in the sale. Make sure that everything that should be there, is there.

• Ensure the property and chattels are in the required condition. They should be in the same (or better) condition that they were in at your pre-contract inspection unless the contract states otherwise.

• Check rubbish and other unwanted materials have been removed. And if not, verify that they will be removed before settlement is complete.

• Raise any issues pre-settlement before you pay the vendor. If any damage has been caused to the property since the contract was signed, or chattels are missing, let your representative know as soon as possible.

Common mistakes...

• Assuming the vendor is required to provide a perfect property: they’re not! The vendor is not obligated to leave the property in perfect condition or have the property professionally cleaned. It's not like a tenancy agreement where the tenant is typically required to have the carpets cleaned at the end of the lease. The property doesn’t have to be any cleaner than it was when you inspected the property pre-contract.

• Using the pre-settlement inspection to identify pre-existing issues: If issues, like a broken window or a broken heater, existed during your pre-contract inspection (even if you didn't notice them), those issues can't be flagged now as reasons to delay the settlement or request a price reduction.

• Assuming the house will be empty: Whilst it is best to inspect a completely vacant house, vendors might only move out immediately before settlement (which is their right). Open communication between the vendor, purchaser and agent can help manage expectations and minimise potential friction that leaves a bad taste for all.

• Skipping the inspection: It's significantly harder to get the vendor to attend to any issues once settlement is complete, even if they are clearly in the wrong. Pursuing a claim through the courts is expensive and time consuming. If you can’t inspect the property personally, try arranging a friend or family member to inspect the property on your behalf

• Leaving it to the last minute to book: Don’t wait till the last minute to book your pre-settlement inspection. Agents are busy. Schedule it in advance.

Don't forget a building inspection by a qualified professional

Don’t rely on your own personal inspection of the property – include an Inspection Clause and engage a building inspector. They have a different set of objectives (such as identifying building defects, ensuring compliance and checking the property is safe) which you can't reasonably be expected to check during your own personal inspections.

All material on this site is provided for information purposes only. The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have. If there are any issues you would like us to advise you on arising from this material, please get in touch.