One of the best pieces of advice I ever received was that no question is too stupid. Often the most basic questions reveal the most important information. I’ve even read about people who are experts in their field but ask very basic questions because it’s always dangerous to assume you know the answer.
When you buy a property it is usually done in a sales environment. The real estate agent is trying to get a sale and they use their marketing and sales skills to maximise the chances of getting that sale. Some are better at it than others – and some would say most agents aren’t very good at all (a topic for another day).
In a sales environment the sales person asks questions to either find out more information or to steer you towards making a decision. They also create an environment of urgency, suggesting that if you don’t make a quick decision you might miss out on the property. As a result, property buyers are often consumed by the sales process and don’t think enough about the other aspects of their decision. Like inspection and other due diligence reports.
Due diligence reports can be a great circuit breaker in the sales process. They give you information about the price or condition of the property but also give you access to an independent sounding board for your decision. That means someone you can ask questions.
That’s not to say that you should ask a building inspector or valuer to make your buying decision for you. But they can help in putting your property decision in perspective and, importantly, they don’t (generally) have any conflict in giving you their view.
I say “generally” because some building inspectors routinely give a bad report to the first property they inspect for a client so they get a second or third inspection job from that person. Also, some inspectors rely on particular real estate agents for much of their work and can be tempted to give good reports to keep the work flowing.
You can avoid these issues by using a more established business that keeps client relationships at the office level and allocates work to inspectors who meet their standards. These businesses are also unlikely to feel pressure from individual agents looking for a smooth sales process.
It’s important to realise that there is no perfect property, despite what the marketing might say. The key thing is to compare properties with others that are similar in type and age. A good building inspector has seen enough properties to give you an informed view on this. Indeed this is how building inspectors are meant to rate properties.
Likewise, a good valuer is comparing properties every time they prepare a valuation. The value range they provide is the best guide to market value you can get.
Armed with this information, you can decide how much you are prepared to pay, taking into account the relative condition of the property, competition for the property, personal considerations that might make a property more valuable to you than someone else and how much you can afford (this includes how much you can borrow from a lender).
An important part of due diligence services is follow up with the inspector or valuer. This is where you get to ask questions. Remember, there are no stupid questions. And most of the best questions start with…. Why?