You’ve attended more than your fair share of weekend inspections whilst house hunting. But now that you’ve had an offer on a property accepted, you’re all done with inspections – right?!
Nearly, but not quite!
Here we discuss pre-exchange and pre-settlement inspections and what you should look out for at each.
What is a pre-exchange inspection?
So, your offer has been accepted on a property you like – and the lender has just issued Formal Approval for your finance. Congratulations! You can now exchange on the contract and officially commit to your purchase!
Before you give your solicitor your official authority to exchange though, you’re entitled to what is known as a ‘pre-exchange inspection’. The purpose of this inspection is to ensure that the property is in the same condition it was, when you made an offer. This gives you an opportunity to take a closer look at the property – to test the taps, check the electricals are working etc.
At the time the pre-exchange inspection occurs, you haven’t signed the contract yet. Which means that if you notice something faulty, you still have an option to add a condition to the contract to ensure the issue will be rectified by the seller prior to settlement. Whilst the seller doesn’t have to agree to this though, it never hurts to ask! If both parties can’t come to an agreeable solution, depending on the severity of the issue, you may even decide to withdraw your offer altogether.
If you placed a ‘subject to finance’ offer, there’s a better chance of this pre-exchange inspection actually occurring – because you have time to arrange it before you need to exchange. Alternatively with an ‘unconditional offer,’ you will generally sign the contract right away (just like an auction purchase) so this pre-exchange inspection step is often skipped.
What is a pre-settlement inspection?
The purpose of a pre-settlement inspection is to ensure that the property is still in the same condition as it was, when you exchanged on the contract and that all inclusions noted in the contract remain. If you had negotiated repairs to be completed pre-settlement, this inspection provides an opportunity to confirm these repairs have been done.
The pre-settlement inspection typically occurs a few days before settlement. If your real estate agent hasn’t mentioned it in the lead up to settlement, reach out to them directly and ask to book it in.
So, what should you be looking for at this pre-settlement inspection?
- Check taps are all working and aren’t making any weird noises
- Check all lights and appliances are working
- Ensure remotes to air-conditioning/heating units will be available
- Ask if there are manuals available for any appliances
- Check you’ll be getting all keys (to all doors/ windows/ sheds etc) and find out how you’re collect these on settlement day
- Ensure the agent is arranging to remove the ‘for sale’ sign – if applicable
- Ensure you know where the bins are located
- Whilst not always known, it can be handy to ask about the paint colour used in the property
If you identify issues at this pre-settlement inspection, there are a few options:
- Delay settlement until the issues are resolved – this is arranged through the solicitors
- Withhold funds on settlement to cover the estimated costs of repairs – this is arranged through the solicitors
- You settle on the property as-is, and take on the responsibility of handling the repair/fix at your own cost.
Which option you go with really depends on how big the issue is, and how keen you are to move in.
