Why First Home Buyers Should Inspect Before Buying

Property Inspection Protects Your Deposit and Your Loan

A thorough building and pest inspection before you sign a contract is the difference between a secure purchase and a settlement problem that threatens your finance. Lenders rely on valuation reports, but those reports are not designed to uncover structural faults or concealed defects. If significant issues surface after you exchange, you may not be able to renegotiate the price, and in some cases, your lender may reduce the assessed value or withdraw approval altogether.

Consider a buyer who secured pre-approval and found a renovated Edwardian in Camberwell's Hartwell precinct. The property presented well at inspection, and the buyer moved quickly to exchange. The building report, ordered after signing, identified sagging floor joists, extensive restumping requirements, and concealed termite damage in the rear extension. Rectification quotes totalled $48,000. The lender's valuer noted the defects and revised the property value downward, which meant the buyer no longer met the 90% loan-to-value ratio required under the Australian Government 5% Deposit Scheme. The buyer could not proceed without an additional cash contribution they did not have.

In our experience, buyers using low deposit options are particularly vulnerable to valuation adjustments because they are already operating at the upper limit of what lenders will support. A single adverse finding can reduce the assessed value enough to trigger Lenders Mortgage Insurance recalculations or disqualify the transaction entirely.

Camberwell's Housing Stock Requires Targeted Inspection

Camberwell's established housing includes a substantial number of early 20th century homes, many of which have been renovated or extended over several decades. Properties in streets around Riversdale Road, Burke Road, and the Hartwell precinct often feature period exteriors with modernised interiors. Inspection priorities in these homes include restumping condition, electrical rewiring, roof tile integrity, and undisclosed asbestos in wall linings or eaves. Buyers should also confirm whether renovations were completed with council permits, as unpermitted work can affect resale value and insurance cover.

Properties closer to the Canterbury Road corridor and Glen Iris border often sit on larger blocks and may include secondary dwellings or outbuildings that require separate structural assessment. Termite risk is moderate but not negligible, particularly in homes with poor drainage or timber in contact with soil.

Building and Pest Reports Are Separate Inspections

A building inspection assesses structural integrity, weatherproofing, and compliance with building standards. A pest inspection identifies termite activity, timber decay, and conducive conditions such as moisture penetration or poor ventilation. Both reports should be completed by licensed professionals. In Victoria, building inspectors must hold registration with the Victorian Building Authority, and pest inspectors should hold certification under Australian Standard AS 3660 or equivalent.

Buyers sometimes assume a combined inspection covers both areas comprehensively. It does not. A building inspector is not required to assess for termites, and a pest inspector is not qualified to assess structural adequacy. Order both reports separately and ensure the inspectors attend site at the same time where possible to cross-reference findings.

What the Reports Should Include

A building report should identify major defects, minor defects, and safety hazards. Major defects include structural movement, roof leaks, rising damp, electrical hazards, and non-compliant building work. Minor defects include cracked tiles, worn flooring, and paint deterioration. The report should also note any limitations, such as areas the inspector could not access due to furniture, floor coverings, or locked rooms.

A pest report should confirm whether active termite infestation is present, identify previous termite damage, and note conducive conditions such as timber stored against the building, poor subfloor ventilation, or leaking downpipes. The report should state whether a chemical barrier or physical termite management system is in place and whether it is current.

Both reports should include photographs and be provided within 48 hours of the inspection. Buyers should read the full report, not just the summary page, and follow up on any item marked for further investigation by a specialist.

Use the Inspection to Inform Your Finance Application

If the building or pest report identifies defects that require immediate rectification, discuss the findings with your broker before proceeding to unconditional exchange. A lender's valuer may not identify the same issues, but if they do, the impact on your borrowing capacity can be immediate. Buyers who have already committed unconditionally have limited options.

In some cases, it may be appropriate to renegotiate the purchase price to account for rectification costs, particularly where those costs exceed $10,000. In other cases, it may be appropriate to walk away. First home buyer loans at high loan-to-value ratios leave little room for post-settlement surprises, and rectification work completed after settlement cannot usually be added to your home loan without a formal refinance or construction loan variation.

Buyers using the Australian Government 5% Deposit Scheme should be particularly cautious. The scheme allows you to borrow with a smaller deposit, but it does not adjust for defects discovered after settlement. If you proceed with a property that requires $30,000 in restumping and rewiring within the first year, that cost must be met from savings or personal loans. It cannot be rolled into your mortgage without triggering a full reassessment of your borrowing position.

When to Walk Away From a Property

Not every defect justifies walking away, but some do. Structural movement that indicates foundation failure, active termite infestation with widespread timber damage, illegal building work that cannot be retrospectively approved, and asbestos in poor condition all warrant serious consideration. Buyers should also be cautious where the seller refuses to provide access for a full inspection or where the inspection is subject to unusual restrictions.

If you are uncertain whether a defect is manageable, obtain a quote from a licensed builder before you proceed. Builders can provide a scope of works and a cost estimate that allows you to assess whether the property remains within your budget once rectification is factored in. Buyers who skip this step often underestimate costs by 30% to 50%, which creates financial pressure within the first year of ownership.

Inspection Timing and Contract Conditions

In Victoria, most residential property contracts include a building inspection condition that allows the buyer to terminate or renegotiate if the report identifies major defects. The condition is typically drafted with a period of 10 to 14 business days. Buyers should order the inspection within 48 hours of signing and ensure the report is received with enough time to review findings, obtain quotes if necessary, and provide formal notice to the seller's agent before the condition expires.

Buyers who exchange contracts without a building inspection condition, or who allow the condition to lapse without acting on adverse findings, proceed at their own risk. Lenders are not obligated to adjust loan terms to account for defects discovered after unconditional exchange, and sellers are not obligated to reduce the purchase price.

How Inspection Findings Affect Your Home Loan Application

Lenders assess two values when approving your loan: the contract price and the assessed market value. If a building report identifies defects that reduce the property's market value, the lender's valuer may adjust the assessed value downward. This adjustment can reduce your maximum borrowing capacity and may require you to increase your deposit to maintain the same loan-to-value ratio.

Buyers who have budgeted to the dollar often find this adjustment difficult to accommodate. If you are borrowing 95% of the purchase price under the Australian Government 5% Deposit Scheme and the lender's valuer assesses the property at $50,000 below contract price, you will need to find that $50,000 in additional deposit funds or negotiate a price reduction with the seller. Low deposit options are not designed to cover valuation shortfalls.

In some cases, the lender may decline the application outright if the defects are significant enough to affect the property's saleability or if rectification costs are likely to cause financial hardship. This outcome is more common where the buyer's income and expenses leave little buffer for unexpected costs.

The Role of Pre-Approval in Managing Inspection Risk

Pre-approval does not protect you from valuation issues, but it does establish your maximum borrowing capacity based on your income, expenses, and deposit. Buyers who attend auctions or make offers without pre-approval often discover they cannot borrow enough to proceed, particularly where inspection findings reduce the lender's assessed value.

Buyers in Camberwell should obtain pre-approval before attending inspections. This allows you to bid or negotiate with confidence and ensures you have time to address any lender queries before the contract becomes unconditional. Pre-approval typically lasts 90 days and can be extended if necessary.

Call one of our team or book an appointment at a time that works for you. We assess your borrowing capacity, review your deposit structure, and ensure your finance is structured to accommodate the property types and price points you are considering in Camberwell and surrounding suburbs.

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