Pre-settlement inspection: what you need to know

You’re nearly there. You’ve won the auction or negotiated terms, signed the sale and purchase agreement to buy a home. It’s just the pre-settlement inspection to go.

Buyers often feel super excited at this point. Make sure, however, you do a pre-settlement inspection, says property lawyer Albert Vaka of Smith and Partners Lawyers. “Contact the real estate agent (ahead of time) to arrange this,” says Vaka.


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When can you carry out a pre-settlement inspection

The inspection usually happens about two days before settlement day.

It’s your chance to inspect the property to check that the home and “chattels” are there, and are in working order, says Vaka. This can be especially important if the property is tenanted, he adds.

It’s the vendor’s obligation to keep the property in the same condition it was at the time the sale and purchase agreement was entered into. You also need to check that the vendor has met any conditions of purchase.

When you’re buying a house it’s a good idea to take someone experienced with you for the house inspection such as a builder or a member of the family who is more experienced at buying property. They may spot potential issues that you didn’t.

Never ask the real estate agent to do it for you. They work for the vendor.

It’s always important to take copies of sale and purchase agreements with you, says Vaka, so that you can refer to them when carrying out inspections. Take a home inspection checklist with you as well. Your checklist will help ensure you don’t miss anything.

“We recommend if you (find) any issues in the pre-settlement inspection that you contact your lawyer immediately,” says Vaka. “Your lawyer then would deal with the vendor’s lawyer on your behalf in respect of whatever the particular issue is.”


What are you looking for in a pre-settlement inspection?

• Make sure the property is in the same condition as when you signed the sale and purchase agreement. Drill down into fine details and make sure everything is in working order.

• Check: do the sinks drain? Can you see leaks on the ceiling? Are all the electrical outlets working? Are any windows cracked? Flush the toilet with paper, run the water in the showers, turn all the heating on for a check. Make sure all the ventilation fans are working.

• Look for any new damage to the property that wasn’t there before. This could be vandalism, storm or earthquake damage or something the tenants have done.

• Make sure the previous owners have done any maintenance or repairs agreed upon in writing.

• Look at all the chattels listed in the agreement to ensure they’re there. Chattels are property included in the sale but not fixed to the property such as stove, floor coverings, blinds, curtains and drapes, light fixtures, dishwasher, heat pumps and heated towel rails.

• Check that any rubbish or belongings have been removed.

• Ensure the keys, alarms, garage door openers and security alarm codes are available.


What issues can you raise with the vendor after a pre-settlement inspection?

The pre-settlement inspection isn’t there for problems that existed when you made an offer on a house. It’s not for the items found in the building inspection earlier. It's for issues or defects that have arisen in the property between your offer and the inspection.

Don’t be rushed when you're inspecting your new home, especially with an older house. If you find anything wrong, let your lawyer know immediately, says Vaka. Your lawyer will negotiate with the vendor’s lawyer and agree for repairs to be made or the cost of rectifying the problem deducted from the final payment on settlement day.

Pre-settlement inspections and therefore settlement can be deferred if you have a Covid-19 clause in your agreement or both parties are willing to negotiate, says Vaka. Pre-settlement inspections can take place in level three, unless the purchaser is living in an area that is still at level four, says Vaka.

Curious about any other part of the house-buying process? Come have a gander at our first home buyers hub. We've got information on everything from how to handle your deposit to what information is in a property file and why you might need it.