Prospective home buyers would be provided free building and pest reports under a state government plan to save the thousands of dollars often wasted by Victorians chasing their dream home.
Under the proposed mandate, sellers would be required to organise and pay for the inspections, and make the reports available to all potential buyers.
The state government maintains the plan will include safeguards to prevent conflicts of interest, but full details of how it would ensure the independence of vendor-provided reports were not immediately clear.
The announcement follows this masthead’s Bidding Blind investigation, which revealed prospective buyers were being misled by underquoted price guides, causing consumers to waste thousands of dollars for building inspections for properties they could not afford.
Premier Jacinta Allan said the status quo was not working, and the mandatory inspections scheme would protect buyers above all and leave more money for their deposit.
“Some buyers spend thousands on multiple reports. Some roll the dice and go without,” she said.
“When you buy a car, the seller pays for the roadworthy. It should work the same way when you look for a home.”
However, the government does not plan to introduce proposed legislation to parliament to enact the scheme until 2027, meaning the changes would take effect only if the Allan government wins November’s state election.
To develop the scheme, the government said it would consult the ACT – the only Australian jurisdiction which requires vendors to provide building and pest reports to prospective buyers – as well as the real estate industry.
In the ACT, vendors must pay for inspection reports, but the reports are not required for some properties, such as new builds. After the contract is signed, the vendor can recover the report costs from the successful buyer.
The inspections must be completed within three months of the sale, by professionals who meet key requirements, and in line with the relevant Australian standard.
Under Victoria’s scheme, home buyers would still be able to organise and obtain their own inspection reports ahead of sale if they chose to do so.
According to the Consumer Policy Research Centre, which has advocated for vendors to provide building and pest reports, about half of buyers pay for multiple inspections in the process of finding a home, with each costing about $500 to $600.
About 17 per cent of buyers pay for seven or more inspections, spending up to $4200, while 17 per cent are buying blind with no inspections. The centre’s survey found 11 per cent of buyers decided not to make an offer on a property after seeing a report.
“There will still be buyers who will want to get their own independent report, but this removes the cost and the double-up for a large portion of buyers, and it would directly remove the financial harm of underquoting,” the centre’s chief executive, Erin Turner, said last year.
The state government’s move to mandate building and pest reports has been called for by the property industry as a key way to shield home buyers from forking out thousands of dollars on properties they may never have been able to purchase.
The Real Estate Institute of Victoria called for free building inspection reports in January as part of its eight-point plan to tackle underquoting.
The lobby group’s proposal served as a rival policy to the government’s own pitch to combat the practice, and involved significantly watering down the Allan government’s bid to force sellers to disclose their exact reserve price before an auction.
Under the real estate lobby’s proposal, prospective buyers would be given building and pest reports through Section 32 documents, with the cost eventually passed on to the purchaser.
The group said it was consulting the Housing Industry Association to help meet potential market demand while delivering high-quality, reliable reports.
“Costs and resources associated with pre-purchase building inspections are an unnecessary financial burden for buyers,” the REIV underquoting plan said. “Delays in receiving such reports can also be disadvantageous for buyers, where a sale date may be close.
“From the perspective of vendors, building inspections are often used as a condition of sale by potential purchasers, creating uncertainty for all parties to a transaction.”
The lobby group said there should be exceptions for properties built less than seven years ago by a registered builder, and for strata-managed properties where a building condition report may be provided by the owners’ corporation.
In response to an online survey of almost 10,000 people, 70 per cent told the Bidding Blind investigation that they had spent time and money investigating properties they couldn’t afford.
Consumer Affairs Minister Nick Staikos said doing due diligence should be as simple and affordable as possible.
“We’ll do the work to make sure our scheme is watertight and protects buyers from conflicts of interest,” he said.
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