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You’ve found the property you want to invest in, but so have many other hopeful buyers. The pressure is on for you to move quickly to secure the sale and forego the pre-purchase pest inspection. Should you worry about buying without a pest inspection? Let’s look at the issues at play.
An independent pest inspection is a standard part of the due diligence process of any property investor. A bad investment can impact your entire portfolio, so identifying the risk of termite or other pest damage before you put in an offer is all about taking a business-minded approach to risk.
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Just because you’re buying a property doesn’t mean you should buy its pests. If an inspection reveals an infestation requiring costly extermination work, use this information to negotiate a discount on the purchase price.
In a hot market, you might be concerned that the seller will turn to the next buyer, but this doesn’t always happen if you look good as a buyer in other ways. Make yourself attractive to the seller by having financial pre-approval organised, offering a settlement period that works for the buyer and sticking to standard contract conditions.
As a condition of sale
Most contracts include a pest clause as a condition of sale so that buyers can get the inspection organised in the time between making the offer and closing the deal. But this doesn’t always mean you can pull out of the sale if you receive an unfavourable report. The wording of the clause might sound okay, but reading between the lines, the language might actually force you into buying the property regardless of the level of pest damage. Have your conveyancer or solicitor ensure the clause is written in a way that protects your interests.
If the property is selling at auction, you can’t change your mind once the hammer lowers, so check the sales contract in advance and don’t bid unless your due diligence is complete.
While all new homes and extensions are required under the Building Code of Australia to have a termite management system in place, there is no such requirement for older homes. Without a pest inspection, you are in the dark about any lurking infestations of termites, spiders, wasps, rats, ants and cockroaches that could cause you a raft of expensive problems down the track.
Sellers know that a hot property market tempts buyers to shortcut their due diligence. Unscrupulous sellers take advantage by putting their problem properties on the market when they see that they are more likely to get away with it.
A building inspection isn’t the same thing as a pest inspection. Although any visual damage done by termites will be included in a building report, it won’t tell you if any active pests are present. If your property is located where termites are a known problem, you’ll need a separate pest inspection report.
Not included in insurance
Most home, contents and landlord insurance policies don’t include termite damage. This means if you choose not to get a pest inspection done before property purchase, be prepared to pay for repairs out of your pocket, which could amount to tens of thousands of dollars.
Keep a record of the cost of the pest inspection. It can form part of the cost base of your investment property and reduce your capital gains tax when you sell.
The potential for damage
They might look innocuous, but pests can do considerable property damage. Here are some examples of the type of damage they are capable of:
- Termites: The number one offender, as they can eat away at roof trusses, architraves and walls of a house in a relatively short time, threatening the building structure. The Australian Environmental Pest Managers Association says that the risk levels of termites in homes have been rising since the 1960s because of concrete slabs with little clearance to the ground and the use of softwood timber for framing.
- Rodents: This year’s mouse plague in regional NSW has made us all too aware of the damage rodents can cause. Their need to constantly gnaw on soft materials means they are capable of chewing through your property’s electrical wires, causing a significant fire hazard.
- Cockroaches: Although cockroaches don’t cause structural damage, they carry disease and aggravate respiratory issues like asthma. They can also carry pathogens like Salmonella, and when an infestation occurs, they reproduce quickly.