Sharing the cost of B&P inspection among prospective buyers

Hi all,

I'm new here, but there sure seems to be a lot of discussions and passionate members!

I'd like to get some feedback on a potential idea.

I bought my first property last year. At the time I found it weird that each prospective buyer would independently purchase their building and pest inspection report from separate companies.
That sounds like a waste.
Since only a single bidder will win the sale, why not share the cost?

Of course, that would only make sense for areas where it is likely that there would be several bidders. So it may not apply so much for private sales but it would make a lot of sense for hot auction areas...

As I'm a software developer and aspiring entrepreneur, I'm considering building an online platform that would do just that.

After doing some research, I quickly found a few websites that do this already.
Some have died but a few are still around. Many inspection companies also have a search capability on their own website where one can purchase an existing report.
However, it appears that there is no clear "go to" website at this point.

The platform would work as follows.
The user simply enters the address of the property.
If there is no report found then the user can select among various inspectors covering the area, and pays the full price. The inspector performs the inspection and uploads the report, which is sent to the buyer.
If an existing report is found, the user can purchase it at a discounted price. Previous buyers receive some cash back such that everyone ends up paying the same price. The inspection company also takes it cut on each resale.

I'd love to hear any thoughts you may have.
Would it work? Not work? Why?

ps: if there are any real estate agents / B&P inspectors out there that would like to be involved in this project, feel free to get in touch with me directly.

 

Hi Clement

I have considered this concept before, my idea was along the line of :

1) The seller commissions and pays for a B&P from a provider at cost price.
2) thats available to download at a reasonable fee (say $100)
3) The B&P provider, host site (and possibly the seller) share in the revenue earn't

Cheers

 

Each person would need to contract with the writter of the report - for legal reasons

But this could be done like you suggest with the report company sending out the same report to different people with you getting a commission.

 

Hi ...

I work in Real Estate in Adelaide and I have heard of some asking about splitting costs before.

The main issue I would see, if building report was done previously for a property there would want to be a expiration on it as report may differ after a short period of time.

The buyer who orders and pays for the report technically owns it and agree with Building Inspector to its terms. I don't think building inspectors would have it available for others to buy in case of legal issues, but just my thought. We, as agents don't even have right to ask for a copy neither does the vendor. Of course if something needs discussing with owners they may need to provide some evidence of issues.

A buyer would not want to pay for a report (if there was several offers on the table) if they were not accepted as the purchaser first (of course differ in auction as it must be done prior to auction).

 

The legal problem with this is the contract with the building inspector will be with the person who ordered it. If the report is onsold and someone else relies on it and something is missed they do not have a contract with the inspector so won't be able to sue for breach of contract unless the contract specifically allows assignment of the report.

 

Sounds very much like
BeforeYouBid | Pre Purchase Building Inspection Reports, Strata Reports & Contract Reviews

 

Each to their own, sure there is merit in the idea.

However for me, I don't want either:
1. A B&P done by anyone other than my inspector
2. If the seller commissions the report then to me there is a conflict of interest with the inspector doing that report (regardless of who signs what) not to disclose or elaborate on defects or issues with the property, thus putting the property in s more favourable light.

I have seen this before. Property we bought in loganlea, seller already had a report done and offered it to potential buyers. Then didn't want to allow our inspector through because the report was already done. long story short there was a list of additional significant issues that our inspector picked up that the original report (possibly conveniently) omitted.
So to me the extra $4-500 of getting my own report vs getting a $100 online copy is an investment in itself.

Although if the price point is reasonable, $100 is a minimal outlay to kick off the due diligence procedure, possibly before you then bring in your own inspector?

Just playing devils advocate...

 

Thank you for your comments.
After researching the idea a lot more, I came to the conclusion that it would be pretty hard to make it work. The legal reasons that you mentioned are a big problem and are preventing a completely automated solution...
I talked to a number of experienced property inspectors and they were all very skeptical or even suspicious of such a model.
I still believe in the idea, and I hope someone will be able to pull it off, but it won't be as easy as I thought it might be...

 

I know of some B&P inspectors that will ask the listing agent for permission to go in and do an inspection. They then put a card on the bench indicating prospective purchasers can buy a copy of the report for a reduced amount. Nobody at all pays the inspector up front. He hedges his bets that enough prospective buyers will have an interest in the property that he'll earn enough from the report (selling the same report to a bunch of people). I doubt they'd do it on a property they thought would attract little interest.

 

This happens already in Canberra. The vendor does the b & p, the potential buyers all get access to it. The successful buyer then reimburses the cost of it on settlement day.

 

This issue comes up from time to time. Always from a buyers perceptive. How about from the inspectors POV.

What would be more profitable for an inspector? Doing one inspection and charging multiple parties full price or doing one inspection and charging multiple parties a discounted price (and paying a commission)? Of course, a given inspector may/will not get contracted to do all inspections.

If there is reform I expect it to be more along the lines of inspectors cooperating and sharing revenue with other inspectors they trust. eg. Four buyers all order inspections from four different companies. The first inspector does the inspection and the other 3 buy the report and onsell it to the customer without doing an inspection at full price.

 

So when you buy a car it has a road worthy certificate, do you trust this? What if the mechanic has missed something? Same same.

I would be okay with having a report at a reduce price and if I wanted to (which I most likely would) still get my own building inspector. Same as I still get RACV to check the car even with a roadworthy.

@JacM When I worked as a REA there was a guy who did do this for me the properties the building inspector will do for free or willing to gamble on is the one that the agent and building inspector feels there are no issues and younger in age (that was his brief of the ones he would consider doing it for). When issues start arising that is when it requires them to do more work and then doesn't become viable, however I would argue this is when more people would want a report . IIRC it was 50% of his standard fee to distribute it to each party, so if he sold one it was eh two he would be at the same dollars and 3+ he is making more.

 

Not same same.
1 is a car, the other a very illiquid asset which costs a tremendous amount more.
But to answer your question, the same thing applies, I would trust the roadworthy if MY mechanic prepared it..
I would still get my mechanic to look over the car even if it had a Roady from the seller.

The comfort you obtain via a sellers Roady entitles you to go back as a method of recourse, good luck with that on a purchase of a property.
Hence I stand by my original comments, sellers building inspection report is a useful reference, but I would never purchase the property relying solely on it.

If you B&P inspector is worth his crust he will be apart of your team, advise on condition, but also value for money if he knows the area well, ability to value add and also areas of the property which are outside the scope of traditional b&p.

Given most only buy a handful of properties in their lives, why rely on someone else's information when spending big digit coin for the sake of a couple hundred dollar saving..

To reiterate, the cheap cost of $100 into the sellers b&p report is worthwhile on its own, but shouldn't supersede your own b&p, or replace the need for one..

 

Completely agree with you and I have mentioned before in another thread I would still get my own advice.

What is a couple hundred dollars in a hundred/s thousand or million/s?

It would be interesting for someone in ACT such as a MB or REA to know how many people do B&P inspections after they changed the ruling for vendors to provide.

 

@Big Will ... indeed.

I know "of" inspectors that do it. I don't hire them for my inspection needs. I'm also not overly convinced it's a good model for the buyer, both from the impartial advice perspective, and from the legal perspective (as @Terry_w has mentioned in several threads now.)

 

I think vendors should supply them for all auctions, no charge, they are wanting you to buy unconditional.

That way you can easily decide if it is worth more time and effort & your own inspections.

It should be done in a random way, similar to how valuations are doled out to valuers, by some official body, this could be public or private. No selecting Stevie Wonders B&P on purpose by vendors.

There are so many outs for B&P inspectors, the only thing they are probably suspicious of is someone who may lower total income, if they all stick to the scheduled fee, more money for them all.

 

But getting a b and p from a seller is a dodgy b and p. I've seen that in qld. The agent connects up the owner to a mate.

 

@Whitecat I totally understand the scepticism, sadly, it's warranted, And it may have been the case years and years ago but from my experience It really doesn't happen like that now - not in this litigious word !

Of course, If someone asks I would recommend certain B&P guys over others but thats because they are commercial in the way they do it . Ie,They're professional, They turn up on time, they are not alarmist in they way they report things and they are good at explaining not just the problems but the options.

 

I'm talking the last 12 months.