Opinion: why does the burden of proof fall on the buyer when you buy a house?

By Anushka Britto

August 7, 2020

Adobe

Buying a house during a pandemic is not something I had ever planned to do, but when I found myself back in a share-house unexpectedly, I knew that I had to bite the bullet and buy something in the next six months. COVID-19 just happened to occur at the same time. Bit inconvenient that, but viruses have little to no care-factor for the world economy, freedom of movement, nor the civil liberties and ambitions of a 28-year-old first home buyer.

Luckily, I had already been salary sacrificing for the past six months, with plans to buy a house with my partner, when our relationship abruptly ended and I found myself taking the plunge on my own. Applying for my money through the First Home Super Saver scheme was easy. I ticked all the boxes, submitted my application online through the ATO website and the money was in my bank account in the next week. But that’s where the easy part ended. As a single first home buyer, the process of buying a house is unnecessarily convoluted, with more hoops to jump through than a tiger at the circus.

Where before I had the advantage of having two incomes on an ongoing basis to pay off the mortgage, I was now down to one. Never mind that I had never missed a credit card payment and cancelled my credit card anyway, had paid off my NZ student loan years ago, and had a 20% deposit saved for the price range in which I was intending to buy. To banks, I am a single woman under 30 without the luxury of a partner’s income to fall back on and a walking baby-making factory. What would happen if I fell pregnant and couldn’t make mortgage repayments?

Then again, there was the question of do you go direct to banks, use a traditional mortgage broker who earns a commission off your loan from the bank, a cash-back loan mortgage broker, or pay a flat fee for independent advice from a financial adviser on different mortgage options? First-home buyers have to go digging for these options with information not readily available. They rely on membership and awareness of podcasts such as The Property Couch, She’s on the Money, Barefoot Investor to gain access to information of non-traditional options to obtain a mortgage. Nevertheless, I had a wonderful cash-back mortgage broker with whom I had been in discussions over a few months and who offered me lots of helpful advice in reducing my perceived liability to banks well before I applied for my pre-approval. There were a few embarrassing questions about ill-named descriptions of reoccurring bank transactions but getting my pre-approval turned out to be the least of my worries in the end.

I spent almost four months of Saturdays looking at houses before I finally put an offer down. Being reluctant to buy at auction meant that I had narrowed down the pool of houses significantly. But I was not prepared to spend money on a building and pest inspection on every house I planned to bid on, or worse, not bother doing one. And so I found myself off at Bunnings buying a spirit level and checking the base of the houses for a damp course, scratching the cement between the bricks to see if it was drying out, looking for signs of water damage on ceilings and in wardrobes with the nose of a bloodhound. I, who had agonised over putting together a Kmart pedestal fan and didn’t know what an allen key was two years ago, now ran a critical eye over fixtures and drainage maps. I made my offer conditional on an acceptable building and pest inspection and got these professionally done, but why this significant cost? I had only put an offer on one house — but there are buyers out there trying to purchase their first home under the threshold of $600,000 in Victoria, spending say $500,000-$550,000 on a house, who then spend approximately $350 on every building and pest inspection they do. For every house that they miss out on, that would add up very quickly.

With a house purchase, which is significantly expensive, the onus is on the buyer to conduct all the due diligence. If the government was truly supportive of first home buyers entering into the property market, should this dynamic not be flipped? Perhaps we should implement a reviewed and approved membership into a panel of house due diligence providers, and shift the responsibility onto house sellers to provide a building and pest inspection from this approved panel to all prospective buyers, to get a seat at the table and be considered for sale.

There are a number of costs currently incurred by a house-buyer that we have accepted due to this historically being the case. Is this an opportunity to challenge the status quo and shift the onus of providing this information and bearing these costs onto the seller? A website called yourmortgage.com.au has provided the following estimate of one-off property costs borne by the buyer:

  • Valuation of property: $200
  • Conveyancer fee: $1000
  • Research and property advice: $6000
  • Removalist costs: $1000
  • Building inspection report: $300
  • Pest inspection report: $200
  • Connecting telephone and internet: $100

This comes to a total of $8,800. While a lot of these costs will be a one-off cost for the buyer upon moving in, e.g. removalist costs, connecting telephone and internet and conveyance fee, a number of these costs are borne by every potential buyer for every house they are looking at. I didn’t pay for research and property advice myself, I did my own research on different suburbs, and factors that would influence future buyers when I decided to sell, such as crime rates, hospital ratings, public schools in the area and ATAR scores, and proposed infrastructure plans for the suburb by the state government. However according to this website, if you were to pay for it, that could cost approximately $6000.

If every potential buyer is purchasing this information and inspection reports separately, the same information is being bought for and paid for by multiple people for multiple houses. Should this be the case? Should these information and inspection costs be borne by the seller to avoid these barriers to entry into the housing market?

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