Table of Contents
This guide will tell you everything you need to know about renegotiating the property price after a building inspection.
A building inspection can be a real eye-opener. While you might be hoping for a clean bill of health, sometimes it reveals problems you hadn’t even considered—cracks in the foundation, pest infestations, or maybe something a little less dramatic but still costly. And this is where things get really tricky. Should you walk away and possibly miss out on your dream home, or can you use the new Knowledge from your building and pest to your advantage and renegotiate the price?
Well, in this article, we’ll step through this exact situation and show you how you can turn the tables and use the building and pest report to your advantage.
Quick Summary
- A building inspection can reveal issues that impact a property’s value, giving buyers leverage to renegotiate the price
- Options include getting a price reduction or requesting repairs before settlement
- Focus on major issues like roof, electrical, pests, mold, windows/doors, plumbing, foundation, asbestos/lead paint
- For price reductions, change contract with deed of variation (saves on stamp duty) or make settlement adjustments
- Can withdraw offer before acceptance or during 5-day cooling off period in QLD, but may lose 0.25% of price from deposit
Why Should You Renegotiate the Price After the Building Inspection?
A building inspection gives you a powerful tool — leverage. Think of it this way: as a buyer, you made your initial offer based on the assumption that the property was in a certain condition. If the inspection reveals hidden problems, that equation will be changed. The issues that you’ve identified can directly impact the property value, and here’s where the renegotiation comes in:
- It protects you from overpaying. You shouldn’t have to pay top dollar for a house that needs significant repairs. Renegotiating lets you adjust the price to reflect the property’s true value.
- You can address future costs. Issues like termite damage or a leaky roof won’t just fix themselves. Addressing them now through a renegotiated price can save you even bigger headaches and expenses down the road.
- Fairness. Renegotiating ensures you get a fair deal, and at the end of the day, you deserve to know what you’re really buying into. A building inspection isn’t just about finding problems; it’s really just about empowering you to make the best financial decisions for your future house.
Red Flags in a Building Inspection Report
When reviewing your building inspection report, keep an eye out for these major red flags that could signal serious issues with the property:
- Extensive water damage:
Look for signs of water intrusion, such as moisture stains, warping, or soft spots in walls, ceilings, or floors. These could indicate leaks, poor drainage, or even foundation problems. - Structural issues with foundation/roof: Cracks in the foundation, uneven settling, or sagging rooflines could point to significant structural problems that may be costly to repair.
- Major electrical problems: Outdated wiring, overloaded circuits, or signs of electrical fires should be addressed immediately to ensure safety and avoid potential hazards.
- Widespread mould: While small amounts of mould are common, extensive growth could signal moisture issues and pose health risks. Professional remediation may be necessary.
- Severe pest infestations: Evidence of termites, carpenter ants, or other wood-destroying insects could mean substantial damage to the property’s structure and may require specialized treatment.
How to Choose a Qualified Building Inspector
Selecting a qualified building inspector is essential to ensure you receive a thorough and accurate assessment of the property’s condition. Here are some tips to help you choose the right professional in Australia:
- Check licensing and insurance: In Australia, building inspectors are required to hold a valid license or registration, depending on the state or territory. For example, in Queensland, inspectors must be licensed with the Queensland Building and Construction Commission (QBCC). Ensure your inspector is properly licensed and insured to protect yourself from potential liability.
- Look for membership in professional associations: While not mandatory, membership in professional associations like the Australian Society of Building Consultants (ASBC) or the Housing Industry Association (HIA) can indicate an inspector’s commitment to staying up-to-date with industry best practices and standards.
- Review sample reports: Request sample inspection reports from potential inspectors to assess the level of detail and clarity they provide. A comprehensive report should include photos, detailed descriptions of issues found, and recommendations for repairs or further evaluation. Look for reports that comply with Australian Standards, such as AS 4349.1-2007 for pre-purchase building inspections.
- Check reviews and ask for references: Research online reviews and testimonials from previous clients to gauge the inspector’s reputation and quality of service. Don’t hesitate to ask for references and contact them directly to inquire about their experience. You can also ask for recommendations from friends, family, or your real estate agent.
- Ensure they use the latest technology and techniques: Inquire about the tools and methods the inspector uses, such as thermal imaging cameras, moisture meters, or drone technology for roof inspections. Up-to-date equipment and techniques can help identify hidden issues more effectively, which is particularly important given Australia’s unique climate and building conditions.
Remember, a quality building inspection can save you thousands of dollars in potential repairs and give you peace of mind when making a significant investment in an Australian property. Take the time to choose a qualified, experienced, and thorough building inspector to ensure you make an informed decision.
Option 1: Getting a Price Reduction Following a Building Inspection
Let’s say the inspection reveals some legitimate concerns, and fixing them will cost a huge chunk of cash. In this case, you might want to renegotiate a price reduction. Here’s how to approach this:
Choose a Good Inspector: Having a skilled and properly insured inspector is key. Their work can make a big difference in how you talk about changing the price in the event that you find something. If there is doubt about the inspector’s credibility, then you may not be able to negotiate effectively.
Understand the Inspection Report: Don’t just skim through the report. Make sure you really understand what it says. If you are not sure, give the building and pest inspector a call. Are they major structural concerns, just cosmetic, or something in between?
Think About Costs vs. Value: Look at how much it would cost to fix the problems the inspection found and compare that to the house’s price. Get quotes from qualified tradespeople to get a realistic understanding of how much repair is going to cost. Having legitimate quotes is going to be your biggest bargaining chip, but you can always try and get an estimate over the phone to understand what it will cost you. If fixes are expensive, it’s fair to ask for the price to go down to cover those costs.
Seek professional advice. If you’re dealing with serious issues, it’s wise to consult a qualified builder or your mortgage broker to see if these repairs will impact the way the banks value the property.
Now, it’s time to negotiate with the seller. This is where the real conversation begins. You’ll probably be negotiating with the seller’s agent. If you don’t feel comfortable with that, you can do it via your own conveyancer. It’s entirely up to you whether you go via your conveyancer or speak directly to the real estate agent, but just be prepared for a bit of back and forth.
Remember, smaller cosmetic issues could be worth fixing yourself, so they aren’t going to be a fantastic bargaining tool. If the wall is missing a bit of paint or there are some chipped Balustrades, it’s probably not going to help compared to bigger ticket items that would actually reduce the sale price and risk losing their sale.
Know Your Rights with the Contract: Remember, you might be able to back out of the deal if the inspection is really bad. This can be a strong point when you’re trying to get the price lowered.
Option 2: Requesting Repairs to the Property Prior to Settlement
Sometimes, asking for a price reduction might not be your ideal situation. Maybe the repairs are essential for the home’s safety or functionality, and you just prefer the seller handle them so that it’s all sorted out before you move into the home. Here are a few things you want to think about:
Firstly, prioritise the major repairs. Focus on the repairs that are crucial and could significantly affect the quality of life or the property’s actual value. These include
The Roof: If the roof feels spongy, looks worn, or has signs of leaks, it might need some serious work. Roof problems can be expensive, so it’s important to get them sorted out.
Electrical System: An old or badly updated electrical system can be a hazard. Look for outlets that don’t work, messy wiring, or fuse boxes too full.
Bugs and Pests: Seeing termites, rodents, or other pests in the house is a big warning sign. They can cause damage and indicate other hidden issues.
Mould: Mould often comes from leaks or bad roofing and can grow without you noticing. If you spot mould, get it checked out to see how bad it is—it could point to a bigger problem.
Windows and Doors: Problems like foggy windows, doors that won’t open, or broken locks might seem small, but they’re important for your comfort and safety. It’s worth asking the seller to fix these.
Plumbing: Leaks in pipes can hide and cause big problems down the line. Make sure there aren’t any leaks that could turn into major headaches later.
The Foundation: If doors and windows are jamming or there are cracks in the walls or floors, the foundation might be shifting. This is serious and needs a professional’s opinion.
Asbestos or Lead Paint: These are dangerous, especially in older homes. If the house was built before 1978, ask if there’s any lead paint or asbestos and check if it has been updated since then.
Secondly, try to be realistic. Not every minor imperfection warrants the seller’s fixing. You want to be a bit selective here. If you put out requests that aren’t overly demanding, they might derail your negotiations.
Thirdly, know your rights. Research local regulations or talk to a conveyancer to understand if the issues you’ve identified are breaches of contract and if the seller is legally required to fix them. Remember to document everything. Keep records of your conversation. Chatting with the real estate agent doesn’t count for anything. Make sure to send an email or a text message. These records are going to be crucial if ever a disagreement arises.
Remember, successfully negotiating repairs often depends on how motivated the seller is to complete the sale. So you’ll need to consider that angle when you ask for these requests. If there is no rush or there’s an unconditional backup offer, you might have less leverage.
How to Arrange a Price Reduction
All right, so you’ve had your inspection results and repair estimates. You’ve spoken with the agent and negotiated a $10,000 price drop. What actually happens now? Do they give you the $10,000 in settlement? This is where there are two actual Pathways to follow for your solicitor to update the contract price.
Changing the contract with a Deed of Variation: If you are aiming for a significant price drop, you might go for a contract variation. This is where lawyers draft a deed of variation, which officially lowers the purchase price. The big benefit here is that this new lower price is what your stamp duty— a tax based on the property price— will be calculated on. For instance, if you’re buying a house in Queensland for $1 million and manage to get the price down to $950,000, your stamp duty could drop by over $2,000.
The downside to getting a deed of variation is the legal fees. Solicitors usually charge money to draw up the deed of variation. But it’s worth considering the difference in Stamp duty.
Settlement Adjustments: For smaller price changes, you can adjust the numbers at the time of settlement without altering the contract. Instead of changing the contract, you and the seller agree on a reduced amount and adjust it at settlement. Different states have different rules about this. Some lawyers won’t let you make a bigger settlement adjustment than $500. Speak to your solicitor or a conveyancer about this and see what they can do. The downside of a settlement adjustment is you’re still going to be paying stamp duty on the original purchase price. So, if the original purchase price was $600,000 and you got a $10,000 reduction, they will still calculate stamp duty on $600,000.
Informing the Bank: Whichever route you take, you must tell your bank about the price change. The main reason is your home loan is based on the property’s value. So the lender will need to know if that’s changed because it could affect their LVR, lender’s mortgage insurance and other assessments. Just remember, changing the loan amount could affect any previous loan approvals you’ve had.
The Bottom Line: Whether you opt for a contract variation with a deed of variation or a settlement adjustment, it’s crucial to work with your conveyancer and legal advisors. They’ll help you navigate these options, ensuring that you understand the financial implications and that everything is documented correctly for a smooth transaction.
Handling Seller Objections During Renegotiations
When renegotiating with sellers after a building inspection, be prepared to address common objections:
- “The issues aren’t that serious.”: Rely on the inspection report and professional opinions to emphasize the significance of the problems found. Explain how these issues could impact the property’s value, safety, or future maintenance costs.
- “I’ve already come down on price.”: Acknowledge the seller’s previous concessions, but reiterate that the inspection has revealed new information that affects the property’s value. Be willing to compromise, but stand firm on the need to address major issues.
- “I have another buyer lined up.”: Remain polite and professional, but don’t let this pressure you into accepting an unfair deal. If you’ve done your due diligence and the inspection results support your requests, be prepared to walk away if necessary.
Remember to stay calm, focus on the facts, and be open to finding a mutually beneficial solution. If negotiations stall, consider involving your real estate agent or a mediator to help facilitate the discussion.
Withdrawing Your Offer After Building Inspection
Sometimes, after inspecting a property, you may need to reconsider your offer. This could be due to serious issues found or if the seller isn’t open to renegotiating the price after the building inspection. In Queensland, there’s a set way to go about withdrawing your offer or ending a contract:
Before the Seller Accepts: If your offer is still on the table and not yet accepted, you have the right to take it back. Just make sure to put it in writing and get it to the seller or their agent before they sign off on the contract.
Setting a Deadline: You can put a time limit in your offer, like 48 hours for the seller to accept. If they don’t sign by then, your offer is off the table.
Cooling-Off Period: Once your offer is accepted and you’ve signed the contract, you get five days in Queensland to change your mind. If you do, you might lose 0.25% of the purchase price from your deposit.
Get Expert Advice: It’s smart to talk to a conveyancing solicitor when you’re thinking about withdrawing an offer or ending a contract during the cooling-off period. They can help make sure you’re doing everything right and protecting yourself.
In short, you can withdraw your offer, but it’s important to know how it works and to act quickly. Whether you’re pulling your offer back before it’s accepted or cancelling a contract during the cooling-off period, make sure you handle it properly to avoid any trouble.
Case Study: How Sarah and Ben got $15,000 off the purchase price after building and pest inspection.
Sarah and Ben were over the moon when their offer was accepted on an awesome older Queenslander. But their excitement turned to worry when their inspection report revealed a leaky roof with potential water damage. Now, this is obviously a costly fix, and they didn’t want to overpay for the property. So here’s how they handled it.
Firstly, they got the facts. Sarah and Ben went online and got two quotes from a few local roof repair agencies. The estimates for the repair, including fixing any internal damage, were $12,000 and $18,000, respectively.
Next, they presented their findings to the seller’s agent along with a clear request for a $15,000 price reduction. The good thing is that it wasn’t just a random number—they gave them the two quotes. They said it would cost somewhere between $12,000 and $18,000, so $15,000 was fair.
Now, as is always the case, the seller was hesitant. They only wanted to reduce it by $10,000, and after some back and forth, they agreed on a price reduction of $15,000. Sarah and Ben spoke with their conveyancer and their mortgage broker. The conveyancer drew up a deed of variation to reduce the purchase price by $15,000, which saved them a bit on stamp duty. A few weeks later Sarah and Ben moved into their home with a new roof and a few thousand dollars worth of savings.
Frequently Asked Questions
What if the seller refuses to budge on price or repairs?
If the seller is unwilling to negotiate, you have a few options. You can choose to accept the property as-is and handle the repairs yourself, attempt to meet in the middle with a partial price reduction or repair credit, or walk away from the deal if the issues are too significant to overlook.
How much of a price reduction is reasonable to ask for?
The amount of price reduction to request depends on the extent and cost of the issues found during the inspection. Obtain quotes from contractors to estimate repair costs and use these figures to support your request. Generally, asking for a reduction that covers the majority of the repair expenses is considered reasonable.
What if issues are found after the cooling-off period ends?
If problems are discovered after the cooling-off period, your options may be limited. Review your contract and consult with a real estate attorney to determine if you have any legal recourse. In some cases, you may be able to negotiate with the seller or pursue compensation if the issues were not disclosed properly.
Should I still get an inspection if the home is new construction?
Yes, even new homes should be inspected. While they may have fewer issues than older properties, new constructions can still have defects or problems that need to be addressed. An inspection can help identify any potential warranty issues or construction deficiencies.
What if my lender won’t approve the loan after a price reduction?
If your lender won’t approve the loan after a price reduction, you may need to renegotiate with the seller or find alternative financing options. Work with your mortgage broker or lender to determine the best course of action and keep the seller informed of any changes to the financing timeline.
How do I ensure repair work is done properly before settlement?
To ensure repairs are completed satisfactorily before settlement, consider including a clause in the contract that requires the seller to provide documentation or receipts for the work performed. You can also request a re-inspection to verify that the repairs meet industry standards.
Can I do the building inspection myself to save money?
While you can conduct your own visual inspection of the property, it’s highly recommended to hire a professional inspector. They have the expertise, experience, and tools to identify issues that may not be apparent to the untrained eye. Skipping a professional inspection to save money could end up costing you more in the long run.
Should I share the full inspection report with the seller?
In most cases, it’s best to share only the relevant sections of the inspection report that pertain to the issues you want to be addressed. Providing the full report may reveal minor or cosmetic problems that could weaken your negotiating position. Consult with your real estate agent or attorney for guidance on what to share.
What if multiple major issues are found during the inspection?
If numerous significant problems are discovered during the inspection, you’ll need to weigh the costs and benefits of proceeding with the purchase. Consider the time and money required to address the issues and whether the property will still meet your needs and expectations after repairs. If the challenges are too substantial, it may be best to walk away.
How can I protect myself from buying a “lemon” property?
To minimise the risk of purchasing a problematic property, take these steps:
- Hire a reputable, thorough building inspector
- Review the inspection report carefully and investigate any red flags
- Obtain repair quotes from licensed contractors
- Negotiate with the seller to address major issues or reduce the price accordingly
- Consider purchasing a home warranty for added protection
- Trust your instincts and be willing to walk away if something doesn’t feel right
Summing It All Up
If you find problems with a house after an inspection, you have options that could save you cash and ensure you’re making a smart buy. You can talk down the price or ask for fixes, but it’s key to know what you can do and how to do it. If it all seems like a lot to handle, don’t sweat it — help is just a phone call away. If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
Our team at Hunter Galloway is here to help you buy a home in Australia. Unlike other mortgage brokers, who are one-person operations, we have an entire team of experts dedicated to making your home loan journey as simple as possible.
Start again
