Over the next 5 days the buyer will complete the inspection process. This usually involves Building and Pest inspections as well as an inspection by a valuer (if the buyer requires mortgage finance) – but, if the buyer suspects there may be problems with other aspects (plumbing, electrical wiring etc.), then these will be conducted also.

After all of the hard work to get to this point, the buyer is still not across the line until the inspections are complete and all is confirmed as “OK”. Here is what to expect during the inspection process (and what to do if problems arise): -

Pest and Building- It’s a good idea for the buyer to attend the inspection(s). This enables the buyer to learn a fair bit about the property and any issues can be discussed, or potential issues, first-hand. Typically the Inspectors will tell the buyer on-the-spot whether there are any problem areas and will then follow through with a written report. Two types of problem may be raised: -

Major structural or pest problems. If unlucky, the inspection may identify a major problem. If this occurs the buyer will usually have the option to pull out of the contract (on a 5 day "cooling-off") or re-negotiate the price and/or terms - reduce the price, or delay the settlement date until the problem has been fixed. 

If the buyer chooses not to proceed with the purchase, then they may be liable to forfeit 0.25% of the purchase price. If, however, they had the pest and building inspection done prior to contract exchange they are not liable to forfeit any money (one advantage to not exchanging prior to carrying out inspections). 

Minor structural or pest problems. Minor problems are commonly identified during the inspections. It is the job of the inspector to report potential problems and not to report on the positive aspects of the property. Again the options to rescind or re-negotiate are available to the buyer. The buyer should use their own judgement and common-sense. If a property is 24 years old it is bound to have some minor issues associated with it. This situation is commonplace and even occurs in newer homes.

Finance Inspection - It’s most likely the buyer’s financial institution will want to conduct a valuation of the property. This is their protection against a buyer over-paying for a property or defaulting on loan repayments, (potentially placing them in a position where they may not be able to recover their $s). If the lender refuses the loan application, then the buyer has the following options: -

Rescind the contract. As above – unless the buyer has a contingency in the contract, they will be liable for 0.25% of the purchase price.

Determine what the lender is prepared to lend. The lender may still offer finance, just not the original amount. The buyer may be able to contribute more finance themselves and still borrow a reduced amount from the lender allowing the sale to proceed.

Source funds from another lender. It’s possible that another lender may be prepared to cover the loan amount, though this may be difficult to organise within the "cooling off" window. If the buyer chooses this option, then they may look to extend the cooling off window based on extenuating circumstances.

Assuming the lender is happy with the valuation they will provide written confirmation of an “unconditional offer” – which is a guarantee that funds are available.