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What Can Be Hidden from an Unsuspecting Buyer?

The buyers of property are often buying without their eyes wide open. So what are the traps for buyers? Real estate agents and the sellers are often hiding problems, so what should we be looking out for?

  1. A recently painted property could have been prepared for presentation purposes or could it have been done to hide defects like wood rot, termite damage, water damage and mould.
  2. Has the property been recently rendered? Could they be covering up cracking in the building?
  3. Termites are a big problem that everyone tries to hide. People will go to great lengths to hide termites or termite damage.
  4. Beware locked subfloors so no access can be gained.
  5. Likewise, be wary of locked man-holes so no access can be gained.
  6. Watch out for marketing claims. For example, are you buying a four-bedroom house when it’s only approved for three bedrooms? Has a garage been converted to a bedroom and is it approved? Did you know that you are paying for a four bedroom house? Secondly, did you know that some insurance companies will not cover unapproved rooms or structures in the event of a claim?

Did you know that if a real estate agent or seller is aware of a significant defect that may cause a safety issue or has a major expense associated that these parties are to disclose it to a buyer? Despite this, such information is often not shared with the buyer.

The traps of an open house

  • All the lights are on to create brightness
  • Curtains are closed to hide hidden objects outside the window
  • Pleasant smelling scents permeate the property to hide damp smells
  • The open house is carried out at a certain time of day to avoid high traffic parts of the day, plane flyovers, and noisy neighbours
  • Is the stylish furniture selectively placed against the walls? Could this be hiding something?
  • Think about your furniture in place of the stylish furniture – is it still going to look as nice?
  • There are lots of people at the open house, which implies lots of interest. Assess if for your own needs and don’t feel the pressure of other buyers.
  • Only having 15 minutes to view a property and make a large financial commitment is not acceptable. Always ask for a second or third viewing.
  • Are the heaters or air conditioners running? Is this because it has a bad aspect and is either a really cold or hot home? What is the real energy efficiency of the home?

Agent disclosure

We have had a situation with an upcoming auction in Canberra where reports had already been prepared and attached to the contract as part of the ACT legislation. A potential buyer wanted an independent termite inspection outside of the report attached to the contract. We found significant termite damage in the house, but what was more concerning is that the agent told the inspector before the inspection that he didn’t want to know about anything we may find.

Why? Because as soon as he had any additional knowledge, he would have to disclose it before the auction commenced. Our client didn’t proceed with attending the auction based on our information, the agent did become aware of the termite damage from our client, and the agent didn’t disclose it at the auction. So, unfortunately, another unassuming buyer who didn’t get an independent inspection bought a house which needed approximately $50,000 of termite damage repairs.

Many property inspectors are referred clients by real estate agents. Inspectors feel pressure to report in a certain way to ensure continued work; they are often compromised in their inspection and reporting. They won’t report accurately or with the same genuine intent, and will hold back on the severity of a problem.

Always use a property inspector that isn’t referred by the agent and make sure you engage someone who is going to look for hidden defects; otherwise you might as well not bother. You need someone who cares and is going to spend a minimum of two hours at the property. A good inspector will be a good communicator who is happy to explain things clearly, and will preferably meet you at the property after the inspection.

The facts

  1. Agents will always create urgency. This is one of the most common tactics, and it means that you may pass on a building and pest inspection so that you can sign a contract quickly. Did you know that up to 79 per cent of first home buyers rely on their own checks like running taps, looking inside a cupboard, or checking a few lights? This won’t disclose the hidden issues that a professional will disclose. First home buyers are the least experienced and should never forgo a property inspection. When you are spending $700,000 on a property, and the building and pest inspection investment price is $800, that’s only 0.01142 per cent of the purchase price. It’s a small price to pay for peace of mind.
  2. Some agents with dubthe property as a mortgagee sale or deceased estate when it’s not.
  3. Photos which have been Photoshopped are often used, misrepresenting things such as room sizes, power lines, and water tanks.
  4. It is essential for your financial and emotional safety that you obtain an independent building and pest inspection. Don’t feel the pressure of “there is someone else interested, so you need sign contract now.”
  5. The real estate agent is not a buyer’s friend. They are working 100 per cent for themselves and their seller.

As the old saying goes, “buyer beware.” Buyers need to surround themselves by buyers’ advocates and be diligent in their processes.

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