Part 1. Caveat Emptor – Buyer Beware: What Makes a Defect a Dealbreaker?

Buying a new home is up there with life's most exciting things, but?it is devastating if you move in and all sorts of things go wrong.?We reveal the most common issues home buyers face and explain steps you can take to manage them.?

For most people, settling in a new home feels like a dream come true, especially after the burden of the buying process, from sorting the finances to finding the house and making your final offer. Imagine how you would feel if the wheels started to fall off.?

If you've found a home you could love and had it professionally checked, you would know whether or not there were major issues. So, what do you do if the inspection has unearthed issues that, frankly, you can't cope with??

UK Studies reveal that two in three people who bought a home in the Covid-19 laced years experienced problems. Closer to home, ME Bank surveyed 1000 average Australian home buyers in 2021 and found fifty-eight that cent spent less than sixty minutes checking out the house they then went on to live in. That was up against months and months of searching, 100 plus hours of research, and flitting between one to two dozen properties before finally settling on a purchase.

When asked about the numerous defects they missed, around 40% of this group said they missed picking these up issues because they ‘lacked the skill or experience in inspecting the property’ while 33% simply ‘fell in love with the property and overlooked them’, and 18% were ‘impatient and concerned by rising prices’. More than one-third responded that they had bought with their heart, not their head. They had 'fallen in love with the property and overlooked them. Another third said they lacked the experience or knowledge base to understand the process.?More than a quarter of those found issues with it after their purchase.

If any of that resonates with you - there is still time to educate yourself about the importance of having the home professionally inspected and then taking the time to understand the report and the consequences it represents for you and your family.

If you find problems before closing

You should be celebrating, not commiserating, when you unearth undisclosed issues in a property you could grow to love. Although, that's not always how it feels at the time. Finding the problem before signing your life away gives you ammunition—knowledge is power, and it puts you in control, whether or not you wish to proceed.

While rules around the nature of seller disclosure vary from state to state, most states require that vendors list material defects in a property and discuss them with potential buyers. In some situations, not doing this can result in the buyer cancelling the transaction. Generally, quite a bit of cash has been spent up to that point.

Referring back to Step 1 of our Home Buyer's Guide, there is a comprehensive list of what to look for on the first inspection. The first thing you might notice once you start paying attention is a freshly painted wall or ceiling with an ever-so-slight watermark. Or it could be that the doors don't open and close properly, the ill-shoddily fitted windows have gaps the size of a small animal, or the air con needs to be replaced. Whatever it is, it is victorious to discover any flaw, especially those which are serious or even dangerous, before losing your head. With this knowledge, you can decide what to do about it. It's always better to identify the problem or scope of issues before moving in.

Material Defect

A material defect is typically an infrastructural issue that can pose unreasonable risks, lead to problems and negatively impact the property value.?

When people buy a house, they often hire a home inspector to come in and look for any major or minor issues. While this isn't a required step in buying a home, it's a good idea. If you don't know what to look for, you can't see it.?

Natural wear and tear doesn't count, for example, if a system is towards the end of its useful life or if the life expectancy of an item breaks down.?

The inspector typically focuses their inspection on material defects, not cosmetic ones. For some owner-occupiers, structural defects may be enough to frighten them away, but for others, flaws and problems can represent a powerful negotiation tool.?

Listing Agent

A listing agent may be liable if they did not disclose problems they had a) either seen in the home or b) that had been discussed with the vendor. They are obliged to be forthright about their knowledge of the home. It is a breach in some states to use deceit to sell a property where agents may lose their licenses.

Who is responsible for repairs after transacting??

At the end of the settlement, it is unlikely that the buyer will receive a refund as compensation from the seller for any emerging issues. Some states rule that the buyer may cancel the transaction before closing if severe defects are discovered. There are statutes of limitations after closing on the home, typically within two to ten years.

What happens to problems after a sale goes through

If you have yet to close on the property, you are within your rights to negotiate a deal where the seller is responsible. They may agree to handle the repairs or cancel the sale, but the responsibility lies with the buyer in carrying out due diligence in the first instance to avoid these issues. That is the reason for carrying out the home inspection. The cost, heartache and time involved may not feel viable, but the money you spend now could save you tens of thousands later.?

In terms of compensation for defects, it is unlikely for the buyer to recover money once the settlement has gone through. Each state has laws regarding whether the seller is responsible for repairs after settlement.

Where to seek help

After the rollercoaster of emotions securing the property, it can be devastating to discover time-consuming and costly defects.??

Regarding who's responsible for the necessary repairs, that may require some research. It's essential to act quickly. Immediately seek legal advice if you unearth a defect that you suspect may be the responsibility of any member involved in the transaction from the seller to the agent. Understand your rights in your state and what your next steps will be.

Part 2 of this series examines what to do if you unearth a defect that presents a very real and deep-rooted psychological fear or phobia.

If you want to explore market value, please get in touch. We know the Sydney market well and understand it. If you'd like advice about the property market, whether you want to sell, buy or lease, we're here to help. Email: [email protected]