You have exchanged contracts, waited patiently through the settlement period and now the keys have almost swapped hands. There is just one more thing to do: the pre-settlement inspection.
A pre-settlement inspection is the purchaser's opportunity to make sure everything in the property is in order before the final payment is made. Importantly, it must be in the same condition in which it was when the contracts were exchanged and the inclusions specified in the contract remain
Simply speaking, a purchaser is entitled to ensure the pool has not turned green, the carpets are still there and the vendor has managed the upkeep of the home. It also serves to reassure the purchaser that any conditions that were specified in the contract have been addressed by the vendor.
- Why are pre-settlement inspections important?
- Who arranges a pre settlement inspection?
- How many pre-inspections can a purchaser do?
- What do you actually need to inspect at a pre-settlement inspection?
- Are there mandatory fixes after a home inspection?
- Is it possible to lower an offer or negotiate after a pre-settlement inspection?
Why are pre-settlement inspections important?
A normal settlement period can run anywhere from 30 to 90 days after the exchange of contract. That’s a long time between visits and, as a purchaser, it should never be assumed that a property is in the exact same condition as it was when it was first inspected. This is especially true if the property has been lived in for the duration of the settlement period.
If the property is not in its agreed-upon condition, there is an expectation that it should be fixed prior to final payment being made. There’s nothing worse than turning up to take hold of a property, only to find a hole in the wall, plumbing issues or rubbish everywhere. In this situation, it’s up to the vendor to remedy the problems.
In a nutshell, a pre-settlement inspection ensures the condition of the property hasn’t changed since contract exchange, the contract obligations have been met, the fittings and fixtures are all in working order and that the house has been vacated accordingly.
Get organised: the who, when and how’s of pre-settlement inspection
We cover the top questions asked, designed to help you plan for this important step.
Who arranges a pre settlement inspection?
They are generally arranged by the real estate agent in question, and usually take approximately 30 minutes, which doesn’t seem like a lot of time so it’s important to have a list of questions ready if you have any. In an ideal world, the pre-settlement inspection should be done alongside your real estate agent. If the sale was a private sale, pre-settlement inspections can be arranged between vendor and purchaser. If this is the case, it can be a good opportunity for the purchaser to ask the vendor practical questions such as how the air conditioning works.
When should this inspection be carried out?
It’s important to understand that each state has different laws regarding pre-settlement inspections. As a general rule though, it’s a good idea to conduct the pre-settlement inspection several days before settlement so that if there are any issues, the vendor can make any necessary repairs.
When the pre-settlement inspection is taking place, it’s a good idea to have the contract of sale so everyone can make sure the inclusions are all still in the property and the exclusions have all been taken away. It also means you can check that any special conditions have been met, if there were any included in the contract.
How many pre-inspections can a purchaser do?
Remember, only one pre-settlement inspection can take place. If there are any problems identified that need rectification, purchasers are allowed one further inspection to ensure the matter has been dealt with.
What you need to actually inspect: a checklist
As a purchaser, it’s not just the walls and floors you need to inspect. It’s also the fixtures, the finishes and even the doorbell that needs to be checked. Essentially, you are checking every nook and cranny to ensure the property is in working order and that everything is up to the standards they were when you signed the contract.
This could include:
- Electricals - check the switchboard, the doorbell, any ceiling fans that are included, light fittings including any pendants or sconces that are included on the contract, exhaust fans, heating units and air conditioning (if applicable). This also includes the garage door and any external gates that need to be buzzed open.
- Appliances - make sure they all work, including every fixed appliance in the kitchen. Turn them all on and off and check that the gas works (if applicable). This includes the dishwasher, oven, stove top, rangehood and any other appliance such as fixed coffee machines that may be included.
- Landscaping - make sure the garden, garden beds, courtyards, terraces and anything else around the home have been maintained properly. Don’t forget the taps as well.
- Fixtures - turn on every tap and make sure they work for both hot and cold water, check the toilets and ensure they flush properly, pop your head under the basins and make sure there are no leaks in the cupboards, and check the washing machine taps.
- Window dressings - some window dressings may be considered exclusions, like some people who have specific curtains in their home which they want to take with them. Read the contract carefully and check that all window dressings that are ‘included’ are still covering the windows. Also check that any excluded window dressings have been taken down.
- Doors and windows - lock and unlock every door and window to ensure the locks are working properly, and that windows and doors close properly. It’s also a good idea to give every door handle or knob a turn to make sure they are attached properly.
- Rubbish bins - check that all the rubbish bins are present and that they are in good condition.
- Any items that were included in the contract as part of the sale of the property, like furniture..
- Other items to inspect include the hot water system, gas meter, telephone lines, pool pump (if applicable) and smoke detectors.
Still need answers?
We tackle a few commonly asked questions specific to the outcomes of these inspections.
Are there mandatory fixes after a home inspection?
There may be times when there is a problem. Don’t worry, these are easily solved, as long as you have a good understanding of the inclusions and exclusions on the contract. If there is a problem, it needs to be raised with the conveyancer. It’s important that you do not do this directly with the vendor as the conveyancer will negotiate it as a special condition added to the contract, meaning it needs to be fixed before settlement can continue.
Is it possible to lower an offer or negotiate after a pre-settlement inspection?
If the problem cannot be fixed, the conveyancer can negotiate on the sale price for the purchaser, in order to cover the cost of any necessary repairs. Importantly though, these breaches of contract must be proven by the purchaser in order for settlement to be withheld and it must be shown that the deterioration or damage is not a result of general wear and tear.
Breeze through your pre-settlement inspection with LJ Hooker
It’s absolutely critical to stay level-headed and neutral when conducting a pre-settlement inspection. If there is something wrong, it’s also important to be patient to ensure everything gets fixed in time for settlement. It’s tempting to rush through the process as the purchaser wants to move in quickly and the vendor wants to move out just as efficiently, but there’s nothing worse than settling into a home with problems.
Our team at LJ Hooker is waiting to assist you, whether you’re buying or selling. Whether you’re a seasoned investor or a first time purchaser, we have the expertise and experience to make every step, such as the pre-settlement inspections, go smoothly.
DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.
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