I recently heard a cautionary tale about a couple who got stuck with a $50,000 repair bill when they sold their home, and it is a warning to buyers and sellers alike.
The story goes like this: couple sell a lovely, albeit old, home, unaware of any problems.
On the first weekend they accept an offer that is subject to a fairly standard building inspection.
The building inspector claims to uncover all manner of major structural problems, with repairs later valued at $50,000.
The sellers get their own advice which indicates the buyer-commissioned report had overstated the major structural defects, with the home requiring only half the repairs, at half the cost.
But, under WA law, the seller has no right to officially challenge the findings in the original report.
The sellers’ only options in this scenario — according to the Real Estate Institute of WA — is to pay for the $50,000 repairs, or end the sales contract.
About half of the readers of this column right now are probably thinking they would just pull out of the contract and sell to someone else with a different building inspector. However, it is not that simple.
Had the couple ended the contract they would have been legally obliged to tell new househunters about the report in question, and this could have driven the price down tens of thousands of dollars anyway.
The couple ended up, reluctantly, meeting the full repair demands.
The case highlights that the law is clearly in favour of the buyer, and in most cases, it is a good and reasonable protection to ensure our houses are safe.
But that does not mean building inspections are fair and accurate in every situation.
There is however a way for sellers to protect themselves from any surprises. One way is to sell to someone making an unconditional offer, which means the offer is not subject to any particular standards.
Homes can also be sold “as is”, which means the vendor will not do any repairs, even if an inspection reveals major structural defects.
Auctions commonly — though not always — sell on an “as is” basis. Of course, these conditions are not acceptable to everyone, driving house-hunters and competitive tension away.
Those selling at auction can opt to strike an agreement of sorts over the extent of major structural defects by providing a building and termite inspection report to prospective buyers ahead of an auction.
Those who opt to do this however are legally obliged to divulge all their findings, even if they do not agree with them.
Sellers who find structural problems before a home hits the market probably have the best chance of rectifying them in a satisfactory way.
They can shop around for competitive quotes to fix them, before commissioning a new building report once the repairs are done.
The warning to buyers is to make any any offer they make on a home subject to a building inspection report.
The warning to sellers is to be prepared for it.