Insurance in particular has moved from being a box to tick before settlement to something buyers need to investigate much earlier.
“If you’re buying a property by auction, you really need to get your insurance ducks in a row before you go and bid,” Foley says.
“If there’s a problem with getting the cover, you know, the hammer’s fallen, you’re obligated to buy, and you can’t get the insurance, you won’t be able to settle.”
Moisture risk is an area insurers scrutinise closely, but Foley says that scrutiny isn’t limited to homes with cladding known to be prone to leaking.
“When you take out a boxed shower and you replace it with a tiled bathroom … then that must have council sign-off because the council needs to ensure that proper moisture membrane was put in.”
If the LIM shows no consent for that work, she says, buyers need to disclose it to their insurer.
“If you have a leak in your bathroom and your insurer says, ‘Please provide evidence that council consent was obtained’, and you can’t, then once again they may refuse to cover you for that type of event.”
Natural hazards are also becoming a much bigger part of due diligence, with LIM reports now carrying more information about risks including flooding, inundation, liquefaction, tsunami zones and wind.
Foley says a natural hazard notice on the property’s title is “a big red flag”, because both banks and insurers may require further investigation.
Buyers should also be wary of relying on a building report supplied by the seller.
“If you rely on a building report that’s been provided by the seller and that building inspector has made an error in their building report, you have no right to sue that building inspector for that error,” Foley says.
While those extra checks can be expensive, she says cutting corners can prove far more costly.
“It always surprises me when people are buying one of the most expensive assets they’re probably ever going to buy, but they’re quibbling on doing the right things to ensure they are protected.”
Watch or listen to the full episode of The Prosperity Project for more.
The Prosperity Project is hosted by Nadine Higgins, an experienced broadcaster and financial adviser.
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