Due Diligence Expenses

What are due diligence expenses?

When you purchase a property you will incur a range of expenses as part of your decision making process.

Due diligence is research undertaken with the aim of inspecting the general state of the property and identifying possible issues before purchasing. These inspections are optional but highly recommended, and provide you with a report prepared by an expert. Due Diligence can include:

  • Building inspection
  • Pest inspection 
  • Strata report
  • Independent valuation

Your conveyancer will be able to assist you with which reports are required.

We’ve assumed an average cost of $1,400 for the purpose of this calculation.

Below you can read more about each item.

Building or Property Inspection

Building inspections carried out by professionals will help you detect possible issues in the property and avoid problems and extra costs later on. 

A thorough inspection report will detail the condition of several elements, including:

  • Plumbing
  • Guttering
  • Doors and windows
  • Wiring
  • Roof space and ceilings
  • Any illegal additions or alterations to the home
  • Retaining walls
  • Driveways

The report will list any significant building defects or problems such as rising damp, movement in the walls (cracking), safety hazards or a faulty roof. 

Always use a suitably qualified person such as a licensed builder, a surveyor or an architect to provide a professional building inspection report of the property. Ensure that the person you choose has adequate insurance cover, particularly for professional indemnity.

The cost of a property inspection report depends on the size of your property and can range from $200 to $1,000.

Pest Inspection

While the building inspection report should identify any visual damage caused by termites, it won’t include whether termites and other pests that destroy timber are still around. You should get a pest inspection done as well.

Pest inspections are less extensive and so tend to cost less. Expect around $100-$150 cost for a pest inspection.

Strata report

If you are buying a unit, the property will be administered by the Owners Corporation, also known as a Body Corporate. You will be required to pay levies to the Owners Corporation to contribute to the management of the building and grounds.

The purpose of a strata report is to review the books of the Owners Corporation to find out the levies you are required to pay, the present financial position, what amounts it may have set aside for future maintenance, and the insurance policies that are currently held. The Minutes of the Council of the Owners Corporation also indicates whether there are any issues or problems with the building or any disputes among the existing owners.

You should seek professional advice before buying a strata unit due to the complexities which include inspecting records.

There are companies that specialise in inspecting the records and your solicitor can arrange this for you. The owners corporation must make their records available following payment of the necessary fees which is usually done through the strata manager.

A strata report can cost around $250 to $350.

Independent valuation

A property valuation is a detailed report of a property’s market value. 

Undertaking your own valuation is optional. It may help you better negotiate the final price and reduce the risk of paying an overly inflated property price. As well as a good indication of the market value of a property a valuation can provide you with information like the market rental, similar sales in the area and information about the property, such as area, number of rooms, and any council and zoning restrictions.

Getting an independent valuation is optional, each valuation you do will cost money, and if you are unsuccessful at purchasing multiple properties the costs add up.

Your lender will also require a property valuation to ensure that the security value of the property covers the loan. Bank valuations are often not released to the purchasers and in many cases a bank valuation will agree with the purchase price. This can be explained as a valuation is meant to reflect the price that a buyer will pay for the property in the current market. This means you cannot count on a bank valuation to provide you information about the property, and even if it does, it is often done after you have committed to the purchase.

Property valuations can cost between $300 to $600.

This page was last updated on 19 September 2019.