A heated property market has led to some expensive surprises once buyers step foot inside their new homes
Border closures and FOMO have led to buyers in the country’s largest capitals jumping in to purchase properties sight unseen without undergoing pest and building inspections. According to buyer’s agent Lloyd Edge of Aus Property professionals, interstate buyers and those in lockdown who have been unable to inspect properties in person have fallen victim to the hype generated by selling agents during a period of intense demand.
“There’s been a lot of heat in the market, but the agents have been putting a lot of hype in there, basically telling buyers that the property will be gone by the time they move,” he told MPA. “What that has been doing is that a lot of buyers are not only buying sight unseen, but they’ve also been foregoing getting a building and pest inspection done because they are so worried about missing out on the property. It’s creating a lot of FOMO.”
He said the fear of missing out was prevalent due to the ongoing media coverage of real estate topping new sales records in multiple locations across the country. This has meant buyers in the Sydney, Melbourne and Brisbane markets who have already missed out on properties due to the unprecedented level of demand throughout the pandemic have started jumping in without first undergoing due diligence.
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“Sometimes they’ll buy having seen a couple of photos or a video,” he said.
Edge echoed the concerns of Daniel Ball, a Melbourne property buyer who had uncovered several instances of properties listed with inaccurate descriptions. As reported in the Financial Review, Ball had walked away from several buying opportunities after discovering serious issues at a number of properties. As a pool cleaner, he was able to inspect properties in person at a time when most other buyers were bound by lockdown restrictions.
“We have been looking for about five months and house prices over that time in Victoria have jumped up $150,000,” he told the Financial Review. “We quickly realised that professional photos online were misleading, and [we] never thought we’d accept bidding for homes that we had not seen. However, as our budget is limited, we realised that we had to follow the rest of the market and bid or miss out entirely.”
According to the Fin Review, Ball had identified structural flaws, evidence of termite infestations, rotting floors and broken-down pools when viewing properties in person.
According to a recent survey by ME Bank, around one-third of buyers failed to arrange a pest and building inspection before buying their property. This has led to some costly mistakes. Out of the top post-purchase property problems identified by owners, construction quality was number one at 32% while paintwork (28%), gardens and fences (23%), fittings and chattels (21%) and neighbours (17%) followed closely behind.
ME Bank general manager John Powell told MPA that while around one-third of buyers didn’t arrange a pest and building report before buying, the benefits of doing so were clear.
“It pays to arrange one,” he said. “Buying a property is potentially the biggest purchase your client will make, and they will be extremely grateful for reminding them of the importance of getting a proper inspection. Buyers can also use inspection information as a tool to negotiate and get a better understanding of how much things will cost to fix or replace – and budget into their overall cost of buying.”
Edge agreed that organising a pest and building report before buying was crucial.
“It’s imperative to get a building and pest inspection done,” he said. “Even if you look at a property through a visual inspection on FaceTime, you can’t tell if it has got structural damage or termites. If that means missing out on a couple of properties because they do sell, you need to forego that. The few hundreds of dollars it costs to get a building and pest done, that could save you thousands or hundreds of thousands if you end up buying the wrong property.”
According to Powell, the results of ME Bank’s study revealed some clear insights around the impact of market pressures on homebuyers during periods of lockdown.
“Around 61% of Australian homebuyers discovered issues with their property after moving in,” he said. “About 18% of this group said they missed picking up these issues because they were ‘impatient and concerned by rising prices’ – rising to 37% among those who purchased since the COVID-19 pandemic.”
He said brokers could play an important role in helping their clients make the right choices when it came to buying their home.
“Brokers can educate their clients on the importance of inspections as part of the overall buying process,” he said. “Brokers are also well networked and can provide recommendations for professional building and pest inspectors to help their clients buy with confidence. Assisting customers avoid potential costly repairs can help brokers build trust and future business from their client and their client’s friends.”
Edge recommended buyers ask the selling agents to walk them through the property on video call if a physical inspection wasn’t possible.
“You need to be on a FaceTime call and ask the agents to show every part of the property,” he said. There could be areas the agent doesn’t want to show them. The bathroom might have leaks, there might be rising damp on the ceiling, there might be cracks in the walls - whether they are paint cracks or structural cracks, that really needs to be determined.
“Ask the agents, ‘take me through bedroom one, take me through bedroom two, take me through to the back of the house and show me every part of it.’ It is possible to buy sight unseen, but you’ve got to do it in a structured way rather than just jump the gun and buy the property because the agent said, ‘it’s going to be sold in five minutes if you don’t’.”
He said interstate buyers should also consider recruiting family or friends in the local area to go and view the property in person.
“It’s also really important to make sure you get your finance preapproved,” he said. “You don’t want to be in a situation where when you exchange on the property you find you can’t go through finance, and you end up not being able to settle on your property and lose your deposit - that could be a very costly mistake as well.”