Buying property is one of the biggest purchases you will make, and it can be very scary and stressful.
Some states have a short cooling off period so you can get out of the contract if you change your mind or find an issue, but the states that do have this provision have a penalty for doing so, which could add up to a few thousand dollars.
Once a contract becomes unconditional you are committed to completing the transaction, even if you find major flaws with the property. So ensure you have checked the property as much as possible to avoid any costly issues.
There can be so many hidden dangers when purchasing a property. How do you find out everything about the property so you can make an informed decision and work out the most accurate value for it? Will the agent always tell you everything you need to know, or even the truth? Is your family or friend really that qualified to check it over and tell you if there are issues?
A friend of mine bought a property then later found out that there was a right of way for vehicles through the land. This meant they were not able to secure their property or put up any fences or gates over the easement area as other vehicles had the right to drive through their property. After many years (and costly court battles) they were finally able to get the right of way revoked.
This is just one of many horror stories that I have witnessed and which can be easily averted with proper due diligence.
As a minimum, I teach my students that the basic due diligence checks that every home buyer must undertake includes, but is not limited to:
- Building inspections- to check structures and building issues
- Pest inspections- to check for termites (current or previous damage) or other pest infestations
- Owners’ corporation audit- for apartments and townhouse complexes, to check for any building/complex issues or upcoming expenses
- Land Survey- to check the boundaries of the property, to ensure there are no encroachments or issues
- Flood checking- to check if the land is subject to any flooding
- Overlays- to check if there are any overlays on the property that will restrict what can be done with the land or if modifications can be made
- Easements- to check if there are any areas of the land that are allocated to an easement, meaning you cannot build over or block them
- Development applications- to check if there are any pending applications for the local area that might affect your property (eg an apartment complex which might look into your back yard)
Sometimes running through due diligence checks can be daunting, and if anomalies pop up, it can be very nerve wracking. It’s crucial that you have experienced property professionals on your team to help you through the minefield.
It’s also important to get contracts checked by a qualified conveyancer or solicitor before signing anything. They may find issues in the contract that unfairly penalise you, and therefore they will recommend any changes. Ask your conveyancer or solicitor is they offer complimentary contract reviews, prior to signing the contract.
You should also always have clauses in your contracts to ensure you have some time to do all the checks before the contract becomes unconditional, that way if you find an issue you can pull out of the contract without penalty or renegotiate it to make provision for the issues to be rectified before settlement. We have clauses we always use when buying property, or your conveyancer/solicitor can also give you advice on these.
So remember, DON’T buy property without doing the right Due Diligence. Making mistakes can be costly – we’ve seen it and experienced it!
If you want to learn more ways to buy property like a professional, download our free property investor guide or contact us if you want more help to avoid the pitfalls.