Vendors ... know your product

One of the things that consistently amazes me, yet often delays the formal exchange of a Contract of Sale of Real Estate, is that many vendors just don't seem to be ready to sell their property.

Just as you would probably have a mechanic check over a car before you decide whether or not to buy it, you can be confident that most house buyers will want to get reports about the property from qualified building and pest inspectors.

Whilst the Contract of Sale of Real Estate published by the Law Institute of Victoria and Real Estate Institute of Victoria include general conditions providing that a purchaser can end the contract (within 14 days from the day of sale) if the building or pest inspection reports dlsclose a major building defect or a major current pest infestation, we find that in their haste to "get the sale" most real estate agents will facilitate building and pest inspections for a prospective buyer before the contract is actually signed and exchanged.

When acting for vendors, most of the delays we encounter are a result of this - the real estate agent has negotiated a price, and the purchaser (armed with the knowledge of the building and pest inspection reports), through their lawyer or conveyancer, begins to renegotiate additional terms of sale - essentially requiring the vendor to fix all the minor issues that the building and pest inspection reports disclosed. This state of affairs is frustrating:

  • for the vendor, who wants the certainty of the sale so they can make decisions for their future;
  • for the real estate agent, who doesn't want to lose the deal (or, a cynic might say, their sales commission); and
  • for us, as we have to re-work the contract.

There are two, seemingly, very simple solutions to these issues:

  1. the first would be for the vendor to not allow the purchaser to have the property inspected by building and pest inspectors until after a contract is formed. In doing so, the vendor is ensuring that the purchaser only has recourse if there is a "major building issue" or "major pest infestation" and the only recourse is to end the contract - which may be unlikely as many purchasers decision to buy is as emotional as it is financial. The possible downside to taking such a hard stance is that it may, in fact, cost the sale. The prospective purchaser could be scared away from the property wondering "what is the vendor trying to hide?"

  2. the second solution is for the vendor to properly prepare for the sale of the property. Obviously, the property needs to be made, and kept, presentable throughout the marketing campaign. But given that a purchaser is going to get building and pest inspection reports, it makes perfect sense that a vendor would, before marketing their property, forearm themselves by obtaining their own reports and rectifying any defects (no matter how minor) that that inspectors identify.

By attending to any building and pest defects before they are identified by the purchaser, a vendor will minimise (if not avoid) any delay to the exchange of the contract that would otherwise be caused by the re-negotiation of the contract to provide for the rectification of such defects.