Should I ask a builder friend to inspect a property for me before buying?

Saturday, 24 August 2024

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Belinda Moffat is the chief executive of the Real Estate Authority. She answers your house buying and selling questions.

QUESTION: My partner and I are buying our first home. We have found the perfect home and are planning to put in an offer.

My friend who has worked as a builder for years said he could come inspect the property for us at no cost. Is this a good way to learn about the property without spending extra money?

BELINDA: Congratulations on making it this far in your home buying journey.

Now that you’ve found a property that you’d like to make an offer on, it is important that you gather as much information as you can about it, including about its current condition and future maintenance requirements.

While your friend has made a kind suggestion, I strongly recommend you engage a qualified property inspector (sometimes called a building inspector) to produce a professional property inspection report (commonly called a building report) for you.

We spoke to seven mortgage advisers to get their top tips for first time buyers.

The Real Estate Authority (REA) recommends that the inspector also be accredited by one of New Zealand’s accreditation organisations.

Why get a property inspection report?

A comprehensive property inspection report will contain valuable information about the condition of the property. This can include both known and hidden defects, potential hazards or issues that can worsen over time, and areas of the home that are likely to require ongoing maintenance or repair.

A property inspection report can cost between about $400 and $1000.

A qualified inspector can expertly assess a property’s structure, plumbing, electrical systems and other areas where issues can arise, such as roofing, cladding and joinery.

There is a cost for these inspections, but given your home is likely to be a significant personal asset it is worth the investment to protect against the costs that could be incurred if an issue arises with the property that is not picked up before you buy it.

The last thing you would want is to regret your decision to buy a house if faced with unexpected repair bills.

Belinda Moffat, chief executive of the Real Estate Authority, says their advice is to use a qualified property inspector.

While obtaining a property inspection report is not a legal requirement when buying a house, some lenders and insurers may require one.

As a buyer, a property inspection report also helps you make well-informed decisions about the price you’re prepared to pay for a property. If a report identifies issues or defects that are likely to cost you money to deal with, that may not be a deal-breaker for you (you could be looking for a house you can repair/renovate), but you will want to factor those costs into your planning and the price you are prepared to pay.

Builders may know a lot, but unless they are also a property inspector, they won’t necessarily work in accordance with the New Zealand Property Inspection Standard.

Where to find a qualified property inspector

At the Real Estate Authority (REA), we recommend consumers use a qualified property inspector who understands the strict legal requirements of their role and carries out their work in accordance with the New Zealand Property Inspection Standard.

The New Zealand Institute of Building Surveyors (NZIBS), Building Officials Institute of New Zealand (BOINZ) and the New Zealand Institute of Building Inspectors (NZIBI) are professional organisations with processes for registering and accrediting members.

You can find qualified inspectors by searching the databases of those organisations.

Make sure that any inspector you are looking to hire has a good level of professional indemnity insurance, that may apply if an issue arises in the reporting process.

Once you’ve selected an inspector who meets your needs, you should request a comprehensive property inspection report that meets the residential property inspection standard NZS 4306:2005. The standard was produced to introduce consistency and reliability to the inspection of properties.

Real estate agents must disclose any known defects about a property they are marketing.

What to do with your property inspection report

Once you’ve received your report, review it carefully with your property inspector. They can help you understand the implications of any issues, as well as give you an indication of the costs of any repairs (you may need a quote from a builder for more exact costings).

It is also a good idea to talk to your lawyer about the impact on the property’s value of any issues identified, or if they could affect your insurance or finance arrangements.

Remember that you are entitled to make any offer conditional on the outcome of a property inspection.

Property Checker, an initiative of the Real Estate Authority, asks you to enter key information about a property so it can produce a list of potential issues to look for at a viewing and to ask the seller or their agent about.

What must the seller and the real estate agent provide?

One of the rules REA set for licensed real estate professionals (licensees) (Rule 10.7 of the Code of Conduct) requires that licensees must disclose any known defects with any property they are selling to a customer, but that they are not required to discover hidden or underlying defects (unless it would appear likely to a reasonably competent licensee that a defect might exist).

They do need permission from their seller (client) to pass on this information, but if the seller won’t give them permission, rule 10.8 says they must walk away from that listing. These rules do not apply to private sales.

While property sellers in New Zealand are not required to provide a professional property inspection report to potential buyers, some do. They may have had the property inspected as part of their own due diligence before putting it on the market.

If you are presented with a property inspection report commissioned by the owner selling the property, this can certainly be useful information. However, it’s important to check how recent the report was written and – most importantly – to understand that if there is something not identified in that report which later costs you money to fix, you would have no direct recourse against the inspector because their contract is with the seller, not with you.

REA’s Property Checker tool

At REA we have also designed an online tool to help home buyers who are beginning to think about the condition of properties they are interested in. Called Property Checker, it’s free to use on our consumer information website Settled.govt.nz.

Property Checker asks you to enter key information about a property (including when it was built, what materials it uses and whether there have been extensions or renovations), which it uses to produce a list of potential issues to look for at a viewing and to ask the seller or their agent about.

This is a useful starting point when you’re taking first looks at properties, but once you find yourself progressing towards making an offer, it’s time for a professional inspection. This is not a substitute for a professional property inspection.

Remember, when it comes to pre-purchase property inspections, essentially you get what you pay for. Low-cost options like getting a friend to look through the property may be appealing in the short term, but if you want the confidence and protection that comes with a thorough understanding of a building’s condition issues and risks – there’s really no substitute for professional expertise.

I wish you the best of luck with your house hunting.

For more information about the process of buying or selling property – and what to expect when working with a real estate professional – visit settled.govt.nz. Have a question for Belinda? Email homed@stuff.co.nz.