You’ve got your heart set on a property. It ticks all the right boxes when it comes to location and features. Best of all, it also comes with a bonus, ready-made vendor report. Surely that means you can keep the money you were about to spend getting your own report done and confidently power on with the purchase? Hold your horses! You might just be about to fall for one of the oldest tricks in the book. A vendor report and building inspector report are two different things…..
The BIGGEST Difference Between Vendor Pre Sale Building Reports and Buyer Pre Purchase Building Inspector Reports
The difference between a vendor report and building inspector report is immense, and it’s one that could easily see you land a lemon! An inspection report provided by the vendor or real estate agent has been commissioned by, and paid for by, a party whose interests are in conflict with your own. Do you really want to rely on something that could potentially contain bias? As a purchaser, you should never trust a building inspection report provided by the vendor or the real estate agent.
Why a vendor might get their own report done
There are two key reasons why a vendor of a property might get their own report done:
- because they’re obliged to by law, or
- because they think it will help them sell the property.
Mandatory vendor reports
In some cases, if you’re selling a property, you must get a vendor’s report. In fact, in the ACT, vendors are obliged to obtain a building and pest inspection report in relation to a property they’re putting on the market. They’re called ‘building and compliance inspection reports’ and ‘pest inspection reports’. They must be obtained by a vendor for any previously occupied residential property in the ACT.
There’s no equivalent blanket obligation to get a vendor’s report in Queensland. There was a review of vendor disclosure obligations by the Queensland University of Technology in its Queensland Government Property Law Review: Issues Paper 1 (2014). However, Queensland vendors are not obliged to obtain and then supply would-be purchasers with a copy of their vendor report.
Optional vendor reports
So, all that begs the question that, if they don’t have to get a report, why would they? There are a few reasons.
- A vendor pre sale building inspection report might be commissioned with the sole purpose of zeroing in on the property’s discoverable faults. In other words, giving the seller of the property the heads up as to what might show up in a pre-purchase building inspector report. The vendor can then focus on rectifying the faults that will potentially erode the purchase price of the property. Vendors who obtain their own reports solely for this purpose aren’t interested in the wide range of issues that could potentially be identified in a thorough pre-purchase building inspection report. They just want to sell the property quickly.
- A vendor might also get a property inspection done to make a property appear more attractive to potential purchasers. Let’s face it: vendor reports are a relatively inexpensive investment when you consider the influence that a positive report may have over an inexperienced buyer. Vendors get better ‘bang for their buck’ by getting a cheap report done because it can lure a purchaser into a false sense of security about the property. If the vendor is lucky, it may influence a buyer to hand over their hard-earned money without getting their own report done.
In most cases, the vendor obviously wants a Building Inspector to provide them with a report that highlights very few, if any, faults of significance whilst undertaking the inspection for the least amount of cost outlay. The vendor is not acting in the purchaser’s best financial interests when they obtain a Pre-Sale Building Inspection Report.
In fact, in most cases the Pre-Sale Building Inspection is undertaken in an attempt to prevent a potential house purchaser from obtaining their own more detailed Pre-Purchase Building Inspection. It is a sad indictment of our industry that many Building Inspection companies are quite happy to provide watered-down, vague and misleading reports to accommodate the requirements of a vendor or real estate agent, simply to obtain an inspection fee.
You should also consider the fact that, by the time you receive a copy of the Pre-Sale Building Inspection Report, further deterioration and neglect may have occurred and would not subsequently be represented in the report.
Why it’s so tempting to rely on the vendor’s report and skip getting your own building report
When you’re squirrelling away every spare cent for a house deposit, a free report sounds like a tempting shortcut, saving you time, stress and money.
A vendor report feels as though the seller of the property is showing their hand by laying their cards on the table. Vendor reports are much cheaper than the cost of getting your own independent, thorough building inspection. Frequently, you can access them online for a small fee. As a purchaser you might feel they are saving you the time and hassle of teeing up a suitable time for your building inspector to carry out the inspection. Purchasers receive the impression that it allows you to move quickly and, in doing so, spend less time agonising over whether to proceed with the sale. With vendor reports, the reality is, you get what you pay for.
Why most vendor reports aren’t worth the paper they’re written on
If the vendor has already obtained a report on the property you’re looking to buy, isn’t that a good thing? The short answer is no. Don’t ever be lulled into a false sense of security by thinking that you don’t need to do your own due diligence on the property.
There are several reasons for this:
The seller’s inspection report may not be objective
You can’t assume that the seller inspection report is an objective one. The inspection may have been carried out by an inspector with a pre-existing relationship with the seller or with the seller’s real estate agent. The seller’s inspector might be under pressure to provide a favourable report or risk the vendor or their agent not using them again. Take a good hard look at just who is paying the piper when it comes to vendor reports.
The vendor’s report may downplay defects in the property
The vendor usually engages the cheapest and most lenient Building Inspector in an attempt to produce a report that will not highlight faults that could reduce their sale price. In many cases by the time the prospective purchaser organises their own Building Inspector the previously detected faults have been carefully camouflaged rather than rectified. The report might play down serious and costly defects in the property or only focus on minor ‘decoy’ defects. You won’t necessarily know the scope of the inspection carried out and whether it was a thorough or a cursory inspection
The report may not comply with the Australian Standards
A vendor report won’t necessarily comply with the Australian Standard applicable to a pre-purchase building inspection report. You can’t assume that the vendor report was carried out by someone licensed, qualified and sufficiently experienced to a thorough job.
You won’t have the same rights if there is a problem with the vendor’s report
The vendor paid for the report. This means that the contract exists between the vendor and the company that produced the report. In this case, you don’t automatically have access to the same complaints process, rights and remedies that you would be able to access if you commissioned the report; you’re a third party to that contract.
You can’t necessarily rely on professional liability insurance to cover you for errors on a vendor’s report
It can also have flow-on effects in terms of making a claim against the professional liability insurance of the person who authored the report. If they even have professional liability insurance, that is! For you to be protected from the sort of disastrous errors that are often made in vendor reports, the contract between the vendor and the author of the vendor report must expressly allow for the transfer of those rights to you as purchaser of the property. Not all do.
Need more information about the difference between
a vendor report and a building inspector report?
Talk to us at Action Property Inspections today on 1800 642 465
The proven benefits of getting your own building inspection report
Getting your own building and pest inspection report done on a property you’re looking to purchase is by far the safest way forward when you’re entering the murky waters of the property market. The biggest benefits are:
- With your own report, you can choose the person who carries out the inspection and, in doing so, ensure that they are a qualified, licensed and experienced property inspector. You’ll also have the peace of mind of knowing that they carry professional liability insurance in the unlikely event that they miss something of substance.
- If you commission your own building inspector report you can ask your building inspector to focus on the specific issues that are important to you. For example, you can explore the property’s potential for renovation or extension. You can get a much more accurate idea as to options for, and the cost of, rectifying the property’s existing defects.
- A pre-purchase building inspection report is usually prefaced by a verbal report and an invitation to ask questions or continue the conversation about the property in greater depth once the written report has been completed. That’s something you don’t get with a vendor report: friendly expertise that’s just a phone call away.
The difference between a vendor report and a building inspector report is that only one of these is totally independent and working in your favour!
Why a completely independent building inspector is so important
Don’t be convinced to rely on a vendor report – you’ll be taking the biggest gamble of your life. In order to protect your interests as a purchaser, you should obtain a completely independent Pre-Purchase Building Inspection Report.
You may be asking “As a home buyer, why shouldn’t I trust Pre-Sale Building Inspection Reports?”. Let’s assume for a moment that we live in a perfect world where deception is non existent, real estate agents are all honorable and $300,000 would buy you a castle in the suburbs. If this was the real world, the notion of relying upon Pre-Sale Building Inspection Reports would make sense. The purchaser would feel confident in purchasing a property knowing that a Building Inspector has undertaken a detailed inspection of the house and produced an accurate and unbiased report subsequently removing all risk and doubt as to whether they should proceed with the purchase.
Unfortunately we don’t live in a perfect world.
As the director of one of Queensland’s leading Building Inspection companies, Action Property Inspections, I can assure you that, as a buyer, you should not trust Pre-Sale Building Inspection reports as they are of virtually zero benefit for the purchaser.
A Real World Example
I recently undertook a building inspection for a lovely lady trying to purchase her first house whilst raising two small children. With her limited funds in mind, she briefed the estate agent of her house requirements. She simply wanted a modest three bedroom house that would require minimal up front repairs and maintenance.
We subsequently booked the inspection with the real estate agent whereby he proceeded to explain to us that our client was prone to panic and that we should treat her with kid gloves. He also stated that our services were not really required anyway as a Pre-Sale Building Inspection had already been undertaken and the report subsequently presented to the prospective purchaser. The agent also added that the house still had eight months of structural warranty remaining from the builder and subsequently any faults found would be rectified by the builder.
Barely an hour had passed after booking the inspection when we received a phone call from our client in a quandary as to whether our services were really required. It would appear that the estate agent was so concerned about our client’s welfare that he found it necessary to reiterate that given her lack of funds the money she was out laying for our Building Inspection Report could be better spent elsewhere. Thankfully our client stuck to the old adage that it is better to be safe than sorry and proceeded with the inspection.
After undertaking the Building Inspection we took the client aside to run through our findings. I was only halfway through my report run through when the client stopped me with a look of anguish and confusion on her face and simply said “I’m lost, this just doesn’t make sense”. She subsequently explained to me that the seller’s Pre-Sale Building Inspection Report she was presented on the day of contract signing not only failed to mention the most serious items but also downplayed the items that were mentioned. Whilst the house was still structurally sound, substantial cost would have been incurred by my client to maintain the house in a satisfactory condition if she had proceeded with the purchase.
Following the Building Inspection we received a phone call from the disgruntled vendor threatening various forms of action due to our report subsequently contributing to the termination of the sale.
Nearly six months later we were inspecting a house for another client. It wasn’t until the end of the inspection that my client confessed to being the same disgruntled vendor and profusely apologised. As it turns out, the estate agent presented them with the card for the Building Inspection Company that undertook their Pre-Sale Building Inspection. The estate agent told her that if she obtained a Pre-Sale Building Inspection Report it would eliminate most people wanting to obtain their own Pre-Purchase Building Inspection Report and would reduce the chances of any later renegotiation.
We would always strongly advise purchasers to obtain their own Pre-Purchase Building Inspection from a qualified and reputable Building Inspection company that is completely independent from both vendor and real estate agent. This is the only way to ensure you receive an unbiased Building Inspection Report.
Use this free checklist to help you choose a suitably qualified building inspector.
What you should do with a Vendor’s Pre Sale Building Inspection Report
Never rely on a report provided by the vendor or real estate agent. Because a Pre-Sale Building Inspection report is prepared at the request of the vendor, you will have little or no recourse against the Building Inspector who undertook the Pre-Sale Building Inspection should you find faults when taking possession of the property, as this report was commissioned in the name of the vendor and not the purchaser.
By all means thoroughly read the vendor’s Pre Sale Building Inspection Report if it is presented to you, however, ALWAYS source your own Pre-Purchase Building Inspection, ensuring it is independent from both vendor and real estate agent.
Book an independent building inspection with Action Property Inspections
to ensure you make a properly informed decision on your next purchase.