Why You Need a Pre-Settlement Inspection: Complete Guide for Homebuyers

A pre-settlement inspection is not just a box to tick – it’s an essential part of home-buying. It’s your last opportunity to catch any issues and avoid nasty surprises when you move in. This guide will help you, just as an expert Sydney mortgage broker would, to understand pre-settlement inspection before buying a property. You’ll discover what to look for when you conduct one and the steps to take if you run into any problems.

What is a Pre-Settlement Inspection?

A pre-settlement inspection, sometimes called a final inspection, is your last property walkthrough before completing the purchase. This final inspection checks that everything is in the same state and condition as when the contracts were signed and exchanged, per the agreement. It’s about ensuring no surprises after you get the keys.

During this inspection, ensure that all repairs the buyer and seller agreed to complete have been done correctly and that no new issues have arisen. Also, confirm that all fixtures and fittings (such as light fittings, water heaters, window locks, or coffee machines) included in the sale are present and in working order.

When Should You Do the Pre-Settlement Inspection?

You should schedule your pre-settlement inspection close to the settlement date, ideally within the week before finalising the purchase. Settlement periods can vary, ranging from as short as 14 days to as long as 120 days. Typically, most fall between 30 and 90 days. 

Inspecting within the last week ensures that the property’s condition hasn’t changed and gives you enough time to address any issues beforehand. If possible, inspect after the occupants of the new property have vacated, as an empty property makes spotting problems easier.

Why is a Pre-Settlement Inspection Important?

A pre-settlement inspection is crucial because it’s your last chance to check for issues before settlement. For example, if you notice a broken window or cracked tiles, these issues will be your responsibility to fix after you move in, and then you’ll have to spend a fortune on renovations. So the final inspection isn’t just about ensuring the place looks good – it’s about confirming that everything works, from the plumbing to the electrical systems and any included appliances. 

You avoid unexpected renovation costs by addressing them before the settlement period ends.

In cases where the property is part of a corporate body, a pre-settlement inspection ensures there are no unresolved issues (like repairs, significant damage or fees) that could become your responsibility. If any problems are found, it gives you the leverage to negotiate repairs or compensation with the seller or their vendor’s solicitor afterwards.

Legal and Financial Significance

Skipping a pre-settlement inspection or conducting it carelessly can have significant legal and financial consequences. Once settlement occurs, any issues with the property become your responsibility as the new owner. If there are undiscovered damages, missing fixtures, or unfulfilled repairs, you could be left with the bill and no legal recourse against the seller.

Let’s say, for example, you find a broken window or cracked tiles a week after moving in. If you haven’t raised these issues, they’re yours to fix.

A pre-settlement inspection lets you identify problems and negotiate with the seller before finalising the sale.  If there are significant problems, you can request repairs before settlement day. If the seller doesn’t cooperate, you may negotiate for compensation or, in some cases, delay settlement to a reasonable time to ensure everything is addressed.

Common Issues Detected During the Final Inspection

It’s common to discover issues during the final inspection due to the time gap between signing the first contract of sale and the final inspection, which is important, however. Here are some common problems to look for:

• New damage: Look for new stains on carpets, damaged floors, or more significant problems like cracked tiles or a broken window.
• Incomplete repairs: Sometimes, sellers fail to complete agreed repairs, such as fixing a leaking tap or faulty air conditioning.
• Missing fixtures and fittings: Ensure that all included items, such as light fittings, window locks, and built-in appliances, are still there and in working order.
• Broken appliances: Test appliances to ensure they haven’t been damaged during the move-out process.
• Unapproved alterations: Check for changes to the property that weren’t agreed upon, like alterations to the garden or exterior paint.

4-Step Pre-Settlement Inspection Checklist

A thorough pre-settlement inspection requires attention to detail. Here’s a step-by-step checklist to guide you:

Step 1: Start with the Exterior

• Roof, walls, and windows: Inspect for any additional damage, such as cracked tiles, missing roof tiles, or damaged walls. Ensure doors and windows open and close smoothly.
• Garden, fencing, and outdoor amenities: Ensure everything, including the pool appliances, spa filters, and outdoor taps, is in working order.

Step 2: Move to the Interior

• Fixtures and fittings: Flip every switch, turn on taps, and test all appliances. Ensure door handles, window locks, and the security system are operational. Check power points and smoke alarms to ensure everything is functional.
• Floors, walls, and ceilings: Look for new stains, water damage signs, or pests.
• General cleanliness: Confirm the property is clean and free from leftover items unless it was agreed that some would stay.

Step 3: Inspect Utilities and Systems

• Plumbing, electrical systems, and gas connections: Test all taps and ensure no leaks. Ensure hot water, heating, and cooling systems, including air conditioners, are working correctly.
• Smoke alarms and safety features: Push the test button on each smoke alarm to ensure it’s functional.

Step 4: Check Agreed-Upon Repairs

• Ensure any agreed-upon repairs have been completed to a high standard. For example, inspect previously reported broken windows or leaky taps.

Who Should Attend a Pre-Settlement Inspection?

As the buyer, you should always be present during the pre-settlement inspection to protect your interests. Asking your real estate agent or buyer’s agent to come too is a smart move – they bring a professional eye to the table and can spot things you might overlook.

If your agent can’t make it, consider bringing another knowledgeable or experienced companion as a witness. If the house has undergone significant repairs, it is wise to have a building inspector come along. They can confirm whether those repairs meet the high standards you expect from a new home.

What to Bring to the Pre-Settlement Inspection

Before heading to the final inspection, make sure you’re fully prepared. Arrange a time with the seller that suits all parties. Then, get together everything you need to bring, including:

• Contract of sale: Keep this document handy. It lists everything included in the property sale and any conditions that need to be met.
• Pre-settlement inspection checklist: Use the checklist provided in this guide to ensure you cover all areas of the property.
• Camera or smartphone: Document any issues you find with photos or videos. This is crucial if you need to negotiate repairs or compensation.
• Notepad and pen: Jot down any concerns or items that need follow-up. These notes will be helpful when talking to your conveyancer or the seller.

What to Do if You Find Issues

If you find problems during the pre-settlement inspection, such as a leaky tap or broken appliances, notify your real estate agent or conveyancer immediately. They will help you negotiate with the seller for repairs or compensation. If the seller cannot fix the issue within a reasonable time, your agent may negotiate a price reduction or, if necessary, delay the settlement until the problem is resolved.

Legal Recourse if the Seller Won’t Cooperate

If the seller digs in their heels and refuses to fix significant problems, or negotiations break down, you might need to consider legal action. Your conveyancer can guide you through your options. This could include holding back funds at settlement, renegotiating the contract terms, or, more severe cases, pulling out of the sale entirely. If you need a good conveyancer, check out our top picks for the best conveyancers in Sydney, Melbourne, and Brisbane.

Conclusion

A pre-settlement inspection is the final inspection before buying your home. It’s your last opportunity to confirm the property is in working order and, as agreed before, you take ownership. You can avoid unpleasant surprises by using a thorough pre-settlement inspection checklist and seeking help from your real estate agent or building inspector. Stay proactive, address concerns immediately, and enjoy peace of mind as you prepare to move into your new home.

Pre-Settlement Inspection FAQs

What is a pre-settlement inspection?

A pre-settlement inspection is the final walkthrough building inspection of a property before the completion of a sale contract. It ensures that all contractual conditions have been met and that the property is in the same condition or agreed-upon condition.

Can I bring someone with me to the pre-settlement inspection?

Yes, it’s a good idea to bring your real estate agent for their professional insight. A knowledgeable friend or a building inspector can also attend a pest inspection, especially if extensive repairs were supposed to have been completed.

What should I do if I find damage during the pre-settlement inspection?

Document the damage with photos or a video and immediately inform your real estate agent or conveyancer. They will negotiate with the seller to fix the issues or adjust the contract of sale and price to cover all the items and costs.

What if the seller hasn’t completed the agreed repairs before the final inspection?

Tell your real estate agent or conveyancer who can delay settlement or negotiate compensation based on the unfinished repairs.

Is a pre-settlement inspection mandatory?

It’s not legally required, but it is highly recommended to avoid inheriting unresolved issues that could be costly.

How long does a pre-settlement inspection take?

Typically, it takes about 1-2 hours, but this can vary depending on particular conditions, the property size and the number of items to inspect.

What happens if I skip the pre-settlement inspection?

You might face unexpected problems after settlement, which could be expensive and troublesome as you would be responsible for resolving them.

Can I negotiate the price based on issues found during the pre-settlement inspection?

Yes. If you discover significant issues with a new house that weren’t disclosed, you have grounds to renegotiate the price or ask the seller to complete repairs before the sale proceeds.

What items should you check during a pre-settlement inspection?

You should check everything from structural integrity, such as roofs and walls, to the functionality of fixtures and fittings, as well as the operational status of appliances and systems. You should also inspect any repairs agreed upon in the contract.