Vendor Reports – Let the Buyer Beware

What reports might a vendor supply?

They comprise a number of important pre-purchase property inspection reports, including:

  1. Building inspection report
  2. Pest inspection report
  3. Survey report

For more information check Fair Trading NSW website … 

http://www.fairtrading.nsw.gov.au/ftw/tenants_and_home_owners/buying_property/property_inspections.page.15404997_l4-300x225

The usual protocol is for the potential Purchaser to commission these reports by independent inspectors prior to settlement, in fact even prior to making an offer on a property as the results of the reports may influence either the decision to purchase or the purchase price.

However, new changes to the real estate sector that came into effect in July 2016 require real estate agents to disclose all reports taken out by a vendor or potential buyer and this has lead to some agents and vendors supplying reports that have been found to be not accurately reported.

New Changes

According to the Minister …

“Prospective homebuyers in NSW will soon have greater access to discounted pre-purchase inspection reports, with reforms announced today by Minister for Innovation and Better Regulation Victor Dominello. 

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Mr Dominello said amendments to the Property Stock and Business Agents Regulation 2014 would help to reduce duplication of inspection reports, promoting peer-to-peer services that offer discounts to consumers.

The changes will require real estate agents, when listing a property, to disclose all inspection reports taken out by a vendor or potential buyer.

Agents will need to provide buyers who take out a sales contract with the names of companies which have recently completed inspections of the property.

The register will also need to indicate which firms enable peer-to-peer sharing discounts.”

Refer to the report …

https://www.finance.nsw.gov.au/about-us/media-releases/promoting-innovation-property-inspection-report-market

Let the buyer beware – Caveat Emptor…First home buyer

No doubt due to the changes (as above) some agents are having pest and building reports carried out for the vendor and made available to a prospective purchaser at ‘discount prior to sale’ that are NOT accurate.

While these ‘discounted’ vendor supplied reports may be considered an advantage for the purchaser to reduce pre-purchase inspection report costs, it is a very dangerous practice to rely solely on them.

Of course not every agent or vendor may supply an inaccurate report but the reality is that unless the purchaser ensures the report is accurate through their own due diligence and using their own inspectors then they are leaving themselves open to a potential ‘can of worms’ AFTER settlement.

Potential problems with a vendor supplied support…

Agents may use inspectors who ‘go easy’ on properties and not report defects as critically as they should be reported.17048600_l-264x300

If the inspector does not highlight an issue that deserves to be taken seriously and makes the inspection report look better than it should be then this type of report will favor the vendor and not the purchaser.

Recent stories have emerged from the industry about purchasers who initially opted to rely on discounted vendor supplied reports but then decided to have independent reports carried out being advised that the first reports did not list major defects as major but only minor and in fact some significant defects where not even reported.

Obviously these purchasers were spared after settlement problems, but how many other purchasers are opting to rely on discounted vendor supplied reports and are being caught?

PLEASE NOTE: Vendor (supplied) Reports are not the same as:

1. Vendor Disclosure (refer Brown & Brown eNewsletter October 2015),
http://www.conveyancers.net.au/enews2015/october.htm

2. Prescribed Documents (refer Brown & Brown eNewsletter November 2016)
http://www.conveyancers.net.au/enews2016/october.htm

from Property UpdateProperty Update http://propertyupdate.com.au/vendor-reports-let-the-buyer-beware-2/

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