Providing a pre-sale builders report when selling – A critical need to know

If you are putting your home up for sale, should you consider having your own building inspection? Should this be part of your “sellers info pack”?

Based on the rapid increase in seller’s info packs with pre-sale builder’s reports – the answer would appear to be “Yes.”

Realistically, the last thing that you want is to have your deal fall through because of an unknown problem uncovered by the buyer’s building report. This is especially true if it is a minor problem and could easily have been repaired ahead of time — if only you had known about it.

Real estate agents often bemoan how many transactions can fall over because of building inspection surprises.  Not only can it cause one purchaser to withdraw, the agent must now disclose to any future purchaser this has occurred.

By the same token, do you want your sold home sold, or do you want to receive notice of legal action a few years down the line because your house had issues that weren’t disclosed?  Click on the following link if you want to read about a current Auckland High Court case against a vendor and a building report in Edwards vs. Cull [2014].

So if the answer is “yes” to providing a pre-sale builders report than here are some things to consider before commissioning a report.

In a perfect world, every house being sold would be sold with a building report from an industry assessed building surveyor.  Right now that only leaves you a BOINZ Accredited Building Surveyor, like Realsure surveyors, or an NZIBS Registered Building Surveyor.

All buyers would know every home will have maintenance and would know to focus on the report Summary where the significant or urgent matters only would be laid out.

Owners could choose to repair, provide quotes, or merely supply the report and let the purchaser choose.  Homes could be advertised accurately to attract the best matched buyer and genuinely well-maintained homes could rightly achieve the premium price they deserved.

Alas we are not in that world yet; rather the quality of reports vary dramatically and for every competent building surveyors report there is an “expert” house inspector ready to provide a report so different you would wonder whether it was the same home.

Finn Collins, a partner at Gibson Sheat Lawyers, offers the following tips:

  • Only use a BOINZ Accredited Building Surveyor or an NZIBS Registered Building Surveyor. They are likely to be more expensive but they have the training to do a better job.  If the writer of the report does not have these qualifications then the report is likely to be no better than a raffle ticket;
  • Check that the disclaimers and limitations in the report are comprehensive. For example, the report should state that it is based on a non-invasive visual inspection only, that there may be latent defects that were not visible at the time of inspection and the report cannot be relied upon by third parties.  The latter point may seem odd if you are trying to sell your home to a third party but it is really up to them to carry out their own due diligence and to rely on their own experts if they have any concerns.
  • Do not provide either verbally or in writing assurances of a general nature about the condition of the house.  Let the house and the report speak for themselves.
  • Do not enter into a debate if any questions are raised are about weathertightness issues. Suggest they satisfy themselves by obtaining their own report.
  • Amend the listing agreement with your agent so that it states that they are not authorised to provide any assurances to prospective purchasers about the structural or weathertightness condition of the house or to comment on or endorse the report but will limit any comment about these issues to simply referring prospective purchasers to the report.

We are aware of homes on the market being sold with pre-sale reports that fail to identify significant issues with the home.  These reports are not prepared by Accredited or Registered Building Surveyors yet are being upheld as providing you with peace of mind, allowing your potential purchaser to make a buying decision, when in fact they are failing to properly inform on the true condition of the home.  Poorly prepared reports also present a legal risk to you. That is because a buyer may argue that you misrepresented the true condition of the house by omitting key information or using a cheap pre-sale report prepared by someone without the relevant qualifications to warrant that the home was in good condition.  In New Zealand a claim for misrepresentation can be brought against you as the vendor even though statements of fact made by you or your agent were innocently made.  You are also arguably liable if the report which you disclose makes statements of fact about your home that turn out to be incorrect.

Providing a report can set you above the rest and increase the number of buyers because you have provided the information.  However, if that information is not up to industry standard and misleading, you could find yourself in hot water.

So choose carefully, be realistic about the condition of your home, and happy sales.

This publication is necessarily brief and general in nature. We are not lawyers and we recommend you always seek legal advice regarding matters of property transactions and building reports.