Buying guide
Why Kiwi home buyers should be taking building inspections seriously
Are we too reliant on low quality and unregulated inspectors?
2 August 2023
According to research by the Real Estate Authority (REA) published in November 2022, only 46% of home buyers said they had their homes inspected by certified (accredited or registered) building inspectors, with 20% saying they had their building inspection done by someone who wasn’t a certified building inspector.
Using a certified building inspector was too expensive or they didn’t have the time, they explained. Those consumers who got their building report from a non-certified building inspector believed they could spot any problems themselves and 41% said that the person they used was just as good as a certified inspector. Interestingly 25% of those getting building inspections by non-certified building inspectors felt that they didn’t want to jeopardise the offer with a certified inspection.
Rather than ask a qualified building inspector who’s insured to do the job, many Kiwi will still ask a friend or family member who’s a builder or a tradesperson, to have a look and give them a recommendation. And some will make their bid to buy based on their assessment.
For such a large investment, it's important to have a professional check the property before you buy.
This slapdash approach by Kiwi home buyers is partly about inexperience, if the REA figures are anything to go by. Fifteen percent of those homebuyers getting building inspections from non-qualified or uncertified people didn’t know how to get a building inspection, while of those who didn’t have an inspection done at all, 14% didn’t know how to get one.
How does NZ compare with other countries in its building inspection standards?
For a relatively mature real estate market Aotearoa New Zealand homebuyers should be doing better on their use of pre-purchase building inspections by qualified experts, says Jamie, who founded homes.co.nz in 2015.
He believes we should emulate the United Kingdom. There, building inspections are done by chartered surveyors, members of the Royal Institution of Chartered Surveyors (RICS) and the price for an inspection ranges from around £800 ($1668).
In Aotearoa New Zealand, on average, a building inspection will cost around $650 per property depending on the size of the house, he says.
Australia isn’t much better, apart from Queensland. “It’s got the same issues, anyone can do inspections, with a mixture of uninsured players and, again, the industry is unregulated.”
You can use the results of the building inspection to your advantage.
A thorough inspection gives buyers negotiating power
If peace of mind isn’t enough incentive for commissioning a certified building inspector to go through your home of interest with a fine tooth comb, a thorough building inspection will also give you excellent negotiating power when putting a bid in on the home. You’ll know whether the roof needs replacing, if there’s borer that’s bringing a wall down, for instance.
An inadequate building inspection can cost you in the years ahead too. One insurance industry insider points out that if a home has a pre-existing problem that isn’t found during the building inspection, and the insurer can prove it’s old, they won’t cover it.
Moves afoot for standardisation
At present, there’s a lack of standardisation in pre-purchase property inspection reports. These vary dramatically in scope, depth and detail, depending on who you’re using.
Lenders and insurers, who also rely heavily on these reports, find themselves walking a tightrope due to these inconsistencies.
The push for a nationwide standard is gaining momentum but its implementation will require cooperation across multiple sectors, including property inspectors, lenders, insurers and governmental bodies.
The Real Estate Authority (REA) strongly supports careful due diligence on a property before home purchasers buy.
REA Chief Executive, Belinda Moffatt says: “This includes obtaining a Land Information Memorandum (LIM), the council file, and a property inspection report from an inspector that is accredited and conforms to Residential Property Inspection Standards, and who holds public liability insurance.”
While reports provided by the vendor or another third party may be an indication of the quality of the property, REA doesn’t recommend buyers rely on reports obtained from third parties or the vendor, as the buyer can’t take action if the report has inaccuracies, says the CEO.
According to the 2022 REA Consumer Perceptions report, of those who didn’t get any kind of building inspection, 19% trusted the one the vendor had commissioned.
“Buyers need to have a contractual relationship with the building inspector whose report they are relying on,” warns Belinda. Details of organisations that have processes for registering and accrediting members are available on REA’s website.
Banks would like to see registered building inspectors used
Some say banks are beginning to want more reassurance that a property they’re lending on has passed a building inspection with flying colours. Anecdotally, one homeowner was told by their bank to get a proper building inspection done if they wanted their loan to go through on a particular property.
As the bank is, in effect, the owner of the home they’re lending on, they should want to know that it’s not going to have any problems down the track, one industry insider reasons.
Asked for their approach to building inspections, neither ANZ or Westpac were putting any undue pressure yet on home buyers. They did stress however that they would encourage building reports from licensed or registered building practitioners.
A Westpac NZ spokesperson says: “We strongly encourage customers to undertake due diligence when considering buying a property, and obtaining a building report from a licensed building practitioner as part of that process.”
ANZ meanwhile says there are a range of inspections and reports that home buyers can pay for to help them research a property they’re interested in.
“A registered building inspector can inspect the house and check whether it is structurally sound, the condition of the wiring and if there are any water tightness issues,” says a spokesperson.
Author
Other articles you might like
