Login
Don’t buy blind: How to read building reports without missing red flags
From water leaks to termites, a building inspector has shared the worst property defects, highlighted the limitations of building and pest reports, and discussed how investors can interpret them.
The Smart Property Investment Show host Liam Garman has sat down with Aus Property Report founder Myles Clark to discuss building and pest inspections, highlighting the most common property defects and how property seekers can interpret the reports.
According to Myles, building and pest inspections inform property purchasers about costly damage before they decide to buy a home, with common issues including foundation problems, water leaks, and termite infestations.
He said that even though the inspections were thorough, they had some limitations, with further specialist checks required for nuanced matters such as asbestos.
Clark also argued that, given their lack of building experience, buyers should try to understand a building and pest report in detail by discussing the terminology with the inspector.
Most common and costly building defects
Clark said he often encountered a range of costly defects in properties that could be identified by an inspector, with one of the biggest being footing issues, often caused by drainage problems beneath the home.
“It is the biggest one that I find quite often because it's unseen. Water gets captured by the roof and goes into the drain, discharges next to the house for a period of time, and the house starts to sink.”
Similarly, he said hidden water leaks in the walls or under the subfloor were common and could lead to major structural damage if left unchecked.
“I've gone to houses before where you get under the house itself, and it's been leaking for years. It was rotten timber, rotten floorboards, the shower's about to fall through and collapse.”
“[Inspectors] have their moisture meters, they run them on the wall cavities and see if they can detect moisture under the tiles to see if there's any rising moisture coming through local areas.”
Clark said another common major issue in Australia was termite damage, which would require a thorough inspection of wall cavities to see the full picture.
“The next course of action is more or less you need to strip things back, you actually need an invasive inspection to see to the extent of how significant the termite damage is.”
According to Clark, the costs of fixing the defects would depend on the property and the extent of the issue, but in some cases could be hefty.
“There could be a minor fix under the shower, which costs you $200, and then you could have drainage issues that could cost you $20,000, $5,000, depending on the property itself.”
“Then, footing issues – is it just a localised area? Might be a couple of grand, a few grand. Is it half the house? It could be 30, 40 grand.”
Limitations of building and pest reports
Clark said that while the initial pest and building report will identify most defects, investors will need to consult other experts for more nuanced issues.
“We are the GPs, and then we have all these specialists in place, so we come in, provide that report based on what we usually see, and then we provide advice based on that.”
For example, he said a pest and building inspection may detect suspected asbestos, but the prospective buyer should arrange for an accredited inspector to confirm whether asbestos is actually present.
“To really know the details if it is or not, you should get it tested, and then you'll know the scope of where these hazardous materials are.”
Clark also advised prospective owners to have an additional inspection of the in-ground drainage and plumbing, given that the pest and building report may be limited in scope.
“You know exactly what you're in for because if we can't see it, we can't report on it – because when there's damage, there's usually signs associated with it.”
Finally, Clark said that basic limitations to pest and building inspections vary by property, such as when there is no access to the subfloor or the roof cavity.
“We can't get to the little poofteenth corner to try and find tiny defects because we don’t want to fall through ceilings obviously.”
Tips for buyers
To avoid misinterpreting a report and missing a good opportunity, Clark said investors should properly understand a pest and building inspection report by discussing the issues with an inspector.
“It's very common for people to just get a report and they read the report, and they don't buy the property, and they miss out on an opportunity of a really good home.”
He said two separate defects that cost $100 and $50,000 to fix may both be listed as major defects, and so the property buyer should have a phone call with the inspector to discuss the scope of the issues.
Clark also said that novice home buyers and investors with no experience in the building industry often had trouble understanding the building language and terminology in reports.
“For them to understand everything is very hard, and that's why that conversation is super important.”
“The way in which I approach it is, when I'm done on site, have that call with a client, educate them because it's an educational process,” he concluded.
Listen to the full episode here.