Why Skipping Due Diligence Can Cost Homebuyers.
When purchasing a property, even from someone you know, key steps should be taken to mitigate the risk of costly and unwelcome surprises in the future.
Howard and Hannah, first-time buyers, were frustrated with competing against other buyers in the market and missing out. Fortunately, Howard’s brother, Ian, was selling his home, making for an easy private sale. The property’s beachside location was ideal, and they assumed no issues existed since they were buying from family.
Skipping legal checks, they signed a private sale and purchase agreement without conditions, opting not to obtain a LIM, Building Report, or title review. They trusted that because the home had been in the family, there were no underlying issues to worry about. Settlement proceeded smoothly, and they enjoyed five years in the home without concerns beyond routine maintenance.
As they prepared to relocate to a new city, they decided to list the property with a local real estate agent. However, during this process, they discovered that the extension on the house that Ian had carried out did not have Council consent and had not been constructed in accordance with the building code, and due to the change to the building outline the cross lease title was defective. This impacted their ability to attract buyers and get the price they wanted.
Had they conducted due diligence before buying from Ian, they would have been aware of these problems.
Proper inspections and legal reviews, even in private sales, are crucial to ensuring there are no hidden complications that could lead to financial loss. Sadly for Howard and Hannah they had to sell the property at a loss after clearing their debts. A property purchase is one of the most important financial investments a person can make, and skipping essential checks can lead to severe consequences.
Ultimately, Howard and Hannah’s situation highlights the importance of being proactive and thorough in the home-buying process. A small investment in due diligence today can safeguard against significant financial distress in the future.
If you feel you could use some specialist advice, don’t hesitate to contact the Property Team.
