You found your dream house, your home loan is approved, and you’re waiting for the settlement day to finally receive the keys to your home. There’s just one more thing left for you to do – a pre-settlement inspection to ensure you receive the house in the same condition you signed up for.
What is a pre-settlement inspection?
A pre-settlement inspection is the final inspection of the property that takes place closer to the settlement date but after the contract of sale is signed. As per law, home buyers are entitled to one pre-settlement inspection before finalising their purchase. This helps ensure everything is in order and that the property’s condition matches what is described in the contract.
Why is it important to carry out a pre-settlement inspection?
A pre-settlement inspection is your final chance to check that the property is in the same condition that you agreed to when you signed the sale contract. It is an opportunity to check that everything listed in the sale contract is still on the property and working as expected. If you find something missing or spot some sign of damage that didn’t exist when you signed the contract, you can ask the seller to fix these issues before the deal is finally through. Your conveyancer can even ask the seller to push the settlement date if the repairs cannot be completed by the settlement date. Alternatively, a lower price may be negotiated if you plan to do the repairs on your own after settlement.
A pre-settlement inspection also allows you to check if the seller has met all the conditions laid out in the sale agreement. For instance, the seller may have promised to fix a defect before settlement, but you need to be sure that this has been completed and that you’re satisfied with the result.
To sum it up, a pre-settlement inspection is important to ensure:
- The property is in the condition that was agreed upon in the contract of sale.
- All contractual obligations have been met.
- The fittings and fixtures listed in the contract are working and in order.
- No rubbish is lying around in the house (read boxes, cartons and other waste material left behind by the residents of the house), and it can be immediately occupied.
When should you organise a pre-settlement inspection?
You should organise a pre-settlement inspection as close to the settlement date as possible. Most homes usually have a 30 to 90-day settlement period, and a lot can change during this time. Organising a pre-settlement agreement towards the end of this period can help you check whether the house is in the condition you agreed upon when signing the contract.
Homeowners generally organise the pre-settlement inspection a week before the settlement date. This is close enough to the settlement date but gives the seller a few days to make any last-minute fixes or repairs. However, it’s worth checking with your conveyancer if there are any specific rules in your area regarding pre-settlement inspections. For instance, in South Australia, you can only carry out a pre-settlement inspection if it was agreed upon in the contract of sale. (source)
What to look for in a pre-settlement inspection?
Here’s a list of some important things you should check in a pre-settlement inspection to ensure the property is in working order and can be occupied immediately after settlement.
1. Visible signs of damage
The seller must fix any visible damage to the property (unless agreed otherwise in the sale contract) before handing it over to you. This may include cracks in the walls, broken plumbing or fixtures, door knobs that don’t work, or even broken doors and windows.
2. Fittings and fixtures
Your sale agreement will typically have a detailed record of the fittings and fixtures in the house that come with the sale. For example, the carpet may be a part of the sale, but the seller takes the curtains with them.
The pre-settlement inspection is the time to check whether all the agreed items are present on the property or not. Similarly, you should check if the seller has removed the things that were supposed to be removed in the sale agreement
3. Electricity and plumbing issues
You don’t want to move into a house with power or water issues. While it may sound exhausting, you must confirm that the switchboards, power outlets, heating and air conditioning systems, and even gas stoves in the house are working properly.
It’s also worth checking the water flow in tubs and sinks. Keep your eyes open for any water leakage or seepage marks, which could indicate plumbing issues.
4. Any agreed repairs
You may have found some defects in the house during the previous inspections and flagged them to the seller. If the seller agreed to fix these defects in the contract of sale, this is the time to check whether the repairs were completed or not. If not, you should request the seller to complete the work as agreed to in the contract.
5. Garbage or junk
Any garbage or junk left on the property becomes your headache after the settlement is complete. Therefore, it’s important to confirm that the seller has removed any unnecessary items and rubbish that the occupants of the property may have left behind.
You can use this list as part of your pre-settlement inspection plan but remember that this is not an exhaustive list. It’s important to consult your sale contract to make sure you don’t miss out on anything important. If you find any defects during your final inspection, you should immediately notify the seller and ask them to fix things before the settlement date. You can also ask your conveyancer to renegotiate the terms of the contract if you find significant issues with the property or if the seller refuses to cooperate.