Woodards Real Estate Due Diligence Advice

Due Diligence - How much is enough?

Interesting for: Buyer

Once you've signed a contract, if you later discover "issues" with the property that you didn't know about at the time of signing, you're not necessarily able to pull out of the contract. (Section 32 of the Sale of Land Act provides a discrete list of things that must be disclosed, failing which a purchaser will have a right of rescission. It does not cover everything, so you are far better off making your own enquiries prior to signing a contract. Do not solely rely on what is in the Section 32 statement.)
 
How far you take all of this obviously depends on the time available, and your budget. But you should at least consider the steps below before signing the contract.

Read it!
Read the full contract and section 32 statement thoroughly and carefully. There is no excuse for not doing this. Pay particular attention to the plan of subdivision, and precisely what you are buying. Look at any easements and covenants. If there is common property, understand where your lot starts and ends (laterally and vertically).
 
If it’s at all unclear to you, sit down with your lawyer and go through it with them. Tell them what your intentions are with the property. Do you intend to live in it? Rent it out? Demolish and redevelop the site?

Building Inspection
Your run of the mill building inspection will cost around $500 and won’t give you a lot of information. If it looks like any building work has been undertaken within the last 7 years (even if there is already an inspection report included) consider asking your lawyer for a referral to a more experienced building consultant (or a structural engineer if it looks like structural work might have been undertaken). They will spend more time looking at the building, and give you a more detailed report. The costs vary, but around $5000 is not uncommon.

(This step can be undertaken after signing the contract, if your solicitor provides you with an appropriate special condition making the contract subject to passing a building inspection.)

Land Survey
Standard sized residential properties can be “desktop” surveyed for around $500 to give you an initial view of whether or not the title boundaries are in the right spot. If they’re not, you will need a more detailed survey, but the important point is that you get legal advice immediately. You may be entitled to make an adverse possession application, and in that case, you will most likely need a “deed of assignment” from the vendor, as part of the contract of sale.
 
Neighbours
Have there been disputes with neighbours in the past? Ask the Agent, or even better, ask the neighbours. You may feel a bit awkward doing this, but if there’s an ongoing issue, neighbours will usually be pretty upfront about it. The last thing most people want to do is buy into a legal dispute.
 
Title Insurance
Sometimes things just aren’t discovered until further down the track. Title insurance is a fairly new product in Australia, and can cover risks including:

  • illegal/unapproved building works;
  • encroachments;
  • unpaid rates and taxes;
  • fraud and forgery;
  • dealings with the property by third parties after exchange but before the incoming purchaser settles and is registered on title.

Title insurance generally costs under $1000 for most properties.

Conclusion
If you did all of the above with bells and whistles attached, it would probably cost about $15,000. Whilst we would not suggest you do things that are unnecessary, $15,000 is a drop in the ocean compares to what some spend in legal and repair bills down the track, if issues do arise.
It is easy to get caught up in the excitement when purchasing a property, but before you sign a contract please at least consider the above matters.

Related Articles

Property Investment Update v3
Investing in Melbourne Property

Melbourne’s property investment market has definitely showed signs of recovery to start 2025 after a somewhat turbulent ride over the last couple of years

Read full article
Metro Melbourne v3
Melbourne Property Market

While the winter months traditionally see a quieter and more subdued real estate scene thanks to rainy days and chilly temperatures, all indicators are pointing to a continued rebound in the market across property sales and house prices.

Read full article
master bedroom the rise of the private retreat LR
Master Bedrooms: The Rise of the Private Retreat

The modern master bedroom has evolved far beyond the basics. No longer just a place to rest, it’s now a space to recharge, escape, and indulge.

Read full article
The front facade LR
The Front Facade

The front facade of a period home does more than greet the street - it sets the tone for what lies beyond.

Read full article

Find an Agent

All of our agents have the experience and local knowledge to guide you

Book an Appraisal

Whether selling or investing, an appraisal of value will give you the confidence to make an informed decision

Manage my Property

Switch to Woodards Property Management

Sign up to our mailing list
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.