Toshi spent $3,000 on building inspections house hunting in Melbourne. Should sellers cover the cost?

The Victorian government plans to make vendors provide property and pest reports, while also requiring sold prices to be made public in a bid to tackle underquoting

When Toshi began the search for her first home in Melbourne, she had spent years saving for the deposit and even had a small buffer for unexpected costs. What she didn’t expect was to spend more than $3,000 on building and pest inspections before she’d even bought a place.

“To be honest, I never thought it was going to be that expensive,” she says.

“But I eventually understood that paying $600 for an inspection helped me make the right decision and saved me from buying a property that would’ve cost a lot more than that to fix.”

Toshi, who asked that her surname not be used, paid for six inspections – costing between $300 and $600 each – over a period of 18 months.

One report came after she had already made an offer on a house, subject to its findings. It revealed structural damage.

“I was about to put all my savings towards the purchase of this house, so I was very lucky to have that clause in the contract,” she says.

Another property, a “lovely weatherboard home”, appeared “perfect” at first glance. But the inspection revealed a serious drainage problem.

Buyers like Toshi are exactly who the Victorian government had in mind this week when it announced plans to introduce mandatory building and pest inspection reports if re-elected in November. Under the proposal, vendors would be required to organise and pay for the inspections and make the reports available to all potential buyers.

“When you’re selling a car, the seller needs to provide a roadworthy certificate to all of the interested buyers,” the premier, Jacinta Allan, said on Thursday. “The same approach needs to be taken for interested buyers looking at buying a home.”

The government cited a 2022 Consumer Policy Research Centre report showing almost half of buyers pay for multiple inspections while searching for a home. About 17% obtain seven or more reports, while another 17% buy without any inspection because of cost and hassle.

Bronwyn and her husband spent about $2,400 on building and pest inspections during a “whirlwind” three-month hunt for their first home.

“If you get lucky the first time, you just pay for one but we had to do three,” she says.

Bronwyn has “no regrets” about the money they spent on reports and admits to being skeptical about the government’s plan, worrying it may “give people a false sense of security” as vendors have a “vested interest in a clean building inspection”.

Victoria’s consumer affairs minister, Nick Staikos, says consultation on the proposal will begin this year with stakeholders and the ACT government, currently the only jurisdiction in Australia requiring vendors to provide building and pest reports.

What will be contained in the reports, who will be accredited to complete them, and safeguards against conflicts of interest are yet to be finalised – but Staikos says it would include whether the property is structurally sound, contains mould or termites or leaks.

Robert German, director of Full Circle Property Advocates and a 40-year veteran of the industry, says the reform is “long overdue” and should be followed by other states.

A building and pest inspection typically costs between $500 and $700, German says, and he is aware of buyers who have spent up to $7,000 on reports while bidding at multiple auctions.

But German argues the issue is partly a symptom of a larger problem: underquoting.

“Some people might get 10 of these reports because they have rocked up at an auction assuming the property was within their price range when it isn’t,” German said.

“They may not have spent the money on a building and pest inspection if they had known the property was going to sell well above the quoted range.”

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Another Victorian government reform announced this week aims to address that issue. Staikos on Friday said new underquoting laws to be introduced to parliament in June would also require sold prices to be made public.

“The price of a home in large part is based on the property sales of comparable properties in the area and that is why non-disclosure of the sale price can distort the market. It makes it more difficult to tackle underquoting,” Staikos said.

The reforms have been welcomed by the Real Estate Institute of Victoria, which recommended both in a report released in January. But they aren’t supportive of the centrepiece of June’s legislation – the government’s proposal to force sellers to disclose their reserve price seven days before an auction. They are calling for three business days instead.

In New South Wales, which similarly committed to cracking down on underquoting, the minister for better regulation and fair trading, Anoulack Chanthivong, said the government would consider mandatory inspections.

“We are open to considering policy options that make buying a home easier for first home buyers and help ensure people are getting what they pay for,” Chanthivong said.

After a year and a half of inspections, auctions and near misses, Toshi’s search ended unexpectedly one Saturday afternoon when an agent texted her about a pre-market opportunity nearby.

“I parked in front of that house and I fell in love,” she says.

She made an offer three days later after getting a “good report” that only showed up “normal wear and tear”. She gets the keys next week.

Additional reporting by Penry Buckley