This does not necessarily mean that the building is a bad investment. When you know exactly what you’re getting into, you’ll be in a better position to negotiate a fairer price for the property and to prepare for the added costs of repairs and renovations.
Even newly constructed properties will not always pass a building inspection with flying colors. And if you’re looking to buy a pre-owned and/or and older building, you can expect some issues with the property.
Older or period properties were built based on standards and using materials and methods that are usually already outdated and no longer ideal for current times. Having weathered many years, even decades, damages and other potential issues are just normal.
Your building inspector will be able to advise you on common issues that you might find unsatisfactory, but which are actually to be expected. Whatever the case may be, a thoroughly conducted building inspection will help you decide whether or not to go ahead with the investment and how much you’ll be willing to pay if you do.
So what are your options when the building inspection “fails”?
A contract with seal the deal when you purchase a property. The conditions stated in the contract, of course, will have to be mutually agreed upon by both the seller and the buyer. In most contracts, provisions for financing and building and pest inspections are included. In the case of a pre-purchase building inspection, the buyer has the option to back out of the contract without penalty if the property fails the inspection.
What constitutes a “failed building inspection,” however, will depend on what the buyer and seller specified on the contract.
The Conditions of the Contract
The wording of a legal contract can be intimidating and confusing, so much so that you might find reading through it tedious. But you will have to carefully study it before signing it. You will also need to sit down with the seller to talk over the details of the contract. In particular, you should specify the kind of damages or issues you’ll find acceptable and unacceptable after a thorough building inspection has been conducted, and what will constitute a “failed building inspection” that will allow you to back out of the purchase without penalty. The seller will, of course, have to agree to your stipulations.
Examples of stipulations for a pre-purchase building inspection are:
- Cancellation of contract only when major defects are found.
- What kind of repairs will be shouldered by the seller.
- A contract period extension if the seller is willing to correct major defects.
- Renegotiation of price depending on the type and extent of damages and costs of repair.
It may also be a good idea to seek legal advice, especially if you are not confident about your understanding of the contract. Hiring a legal professional is something you should not avoid because having a guarantee that you’ll be making a worthwhile investment far outweighs the added legal costs.
Here are a few more reminders to help you make the most of a pre-purchase building inspection:
- When you book a building inspection, specify the areas you want to be inspected, as standard inspections only include certain areas and structures. It will help to find out beforehand which areas will be looked at, so you can add those that you also want checked.
- When you receive the inspection report, find out as much as you can about the building’s foundation and drainage system – as these are key areas and any problems with them are often major. If you also had a pest inspection done, ask the inspector if there is serious structural infestation and damage, as these are often nearly impossible to resolve.