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- In short: Significant and costly defects have been missed in building inspection reports that buyers rely on when deciding whether to buy a property.
- What's next: The New South Wales government is considering bringing in greater regulation and licensing pre-purchase inspectors.
Ultimately, it was Erika Vlasic's gut feeling that saved her from making the biggest financial mistake of her life.
In 2017, she came close to paying $700,000 for a house in north-east Melbourne that an expert later found would have been better suited to demolition.
"We had put an offer on a home that was lovely to look at, but clearly had some problems," she said.
When she first expressed interest in the house, a real estate agent informed her it had already passed a pre-purchase building inspection.
Such inspections are usually initiated by buyers, who engage an independent specialist to identify defects in the advertised property.
But Ms Vlasic said the real estate agent presented to her a report that had already been paid for by the vendor.
She said the agent told her: "Save your money, you won't need to spend the $800 — or get your own — we've already done one for you.
"Something just didn't sit right, so we just decided to get our own inspection done."
The two reports could not have been more different.
Ms Vlasic said the vendor's report was "pretty basic".
"It just highlighted that the house was fine, ready to go, no big issues," she said.
The second report, initiated by Ms Vlasic, came back with "terrible" findings.
"It was a complete 180 on the [first] report that we got," she said.
Among other defects, building inspector Mike Heathcote had found some areas of the house were assumed to contain asbestos, while others were prone to mould growth and conducive to termite activity, one of the rooms was "unsuitable for any form of habitation" and the verandah did not comply with the National Construction Code.
The report found the cost of repair far exceeded $100,000.
"Alternatively, the house may be better suited to demolition and replacement," it stated.
Immediately after receiving the report, Ms Vlasic called the agent to withdraw her offer.
The agent said they could not comment.
Inspectors 'shirtfronted' by agents
Victorian building inspector Mike Heathcote said some real estate agents had on "numerous occasions" proposed that he collude with them.
In return for delivering a favourable report, real estate agents would offer to bring him clients.
"We would be asked if we'd like to have more jobs," he said.
"It's not an open discussion, that's more of a suggestion — that if we would like to be very busy with lots of introductions from them to their buyers, they can arrange that.
"And providing we got on well together, we would have a flourishing business."
Mr Heathcote said other times, he would be asked to go easy on a property.
"They would say, 'This is an old home, we hope you don't exaggerate the report'," he said.
If he doesn't comply, some agents resort to intimidation.
"You & your company are no longer allowed to inspect any of our properties. You are totally out of line with your son (sic) called estimations of repair. Time to retire mate," a text message from an agent reads.
The Real Estate Institute of Victoria said it was important for all stakeholders to ensure the sale process was transparent and fair.
"If there is any doubt, a buyer should undertake a building inspection," a spokesperson said.
"We expect that any business offering building inspections will be covered by their own obligations and should provide a fair report."
Chris Short, who works as a building inspector in Adelaide, said he had been "shirtfronted" by some agents when turning up to do a pre-purchase report commissioned by a buyer.
"We've been locked out of a job a couple of times, where the land agent has said, 'We're just not interested in having you come through'," he said.
"On a basis that you've inspected one of their listings — another property that the same land agent has — and the outcome of that was a failed sale. So, they hold it against you."
Real Estate Institute of South Australia (REISA) said it was not aware of intimidation tactics, collusion between agents and inspectors, or agents withholding information about defects to make them more attractive to buyers.
"REISA conducts an extensive professional development program that focuses on issues of legislation and compliance. In addition, all REISA members are bound by the REISA Code of Conduct," CEO Andrea Heading said.
No licensing requirement for inspectors
Building inspectors say some real estate agents engage "pet inspectors" to deliver "soft" pre-purchase reports that downplay and miss defects in advertised properties.
"It seriously disadvantages buyers, many of whom are young and can only just afford their deposit," Mr Heathcote said.
"The last thing they want to hear is they've got termites, or that the roof leaks, or that there's significant distortion in the house — and this happens on a regular basis because of the soft reports that are commonly delivered."
Mr Short, who became a qualified building inspector in the 1970s, said the training and accreditation requirement for the profession had fallen by the wayside.
"In fact, in terms of being a private building inspector, anybody in South Australia can do that, with no training at all," he said.
"The government hasn't taken the opportunity to step into that and as a result there have been a number of consumer problems resulting from poor-quality building inspections.
"There's a business opportunity there for unqualified people to get into the profession and, sadly, that's what they're doing."
Most states don't require pre-purchase inspectors to be licensed.
While inspectors in South Australia do not have to be accredited, they could face disciplinary action if they act unlawfully or unfairly, a government spokesperson said.
The New South Wales government said the requirement for pre-purchase inspectors to hold a licence was dropped in 2009.
"A review into occupational licensing at the time found consumers should, with some guidance on the relevant skills to look for, be able to engage a suitably qualified inspector," a spokesperson said.
"However, as part of the government's commitment to modernise building and construction legislation through a new Building Act, re-regulation of pre-purchase and building defect inspectors will be considered."
Buyers in Tasmania and Western Australia have been left entirely to their own devices on a market that operates on the buyer beware basis.
"Buyers should do their own due diligence to make themselves aware of any issues associated with or impacting upon the property they intend to purchase," a Western Australian government spokesperson said.
Most of the states have brought in vendor disclosure, obligating sellers to unveil information about land titles, boundaries and illegal works.
The ACT government has gone a step further, requiring a building and a pest inspection report to be made available to a buyer before the property is offered for sale.
Mr Heathcote believes governments should be more proactive in regulating the industry — to level the playing field between sellers and buyers.
"They should be licensing pre-purchase inspectors because we give advice effectively on what is people's financial future," he said.