Are There Hidden Agendas in Proposed Mandatory Inspections? 1

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Friday, February 12th, 2016
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When it comes to building and pest inspections for purchase of property, there are often hidden agendas involved in the current process.

There is often a very strong relationship between an agent selling the property and the building and pest inspection companies carrying out the inspections. In the case of the agent and seller, they just want a sale, in the case of the inspection company, they just want the revenue generated from the work.

The suggestion in NSW of introducing mandatory inspections is likely to encourage the hidden agendas to continue. Recent stories reveal inspection companies champing at the bit to get their teeth into the “new market” that may be created.

“Great! Now I can just do the one report and sell it multiple times,” they think, or: “now every house that goes on the market has to have a report so my own market has just become very large.”

This becomes just like so many other things in the commercial world, with businesses simply wanting to flog product rather than provide something truly valuable and of high quality. Any process should include a direct relationship between the provider and the user, not one that is at arm’s length. As an industry, we should be all be looking to provide value to the consumer and this can only occur via a direct relationship between the inspection companies and the buyers of property rather than a process that is arranged by a selling agent and a home seller.

You have to applaud those such as our Minister for Innovation and Better Regulation in NSW, Victor Dominello, wanting to help consumers with this process, as it certainly can be a minefield. And let’s face it, they are about to make a very big commitment to a very big mortgage. But you have to ask yourself why there is a sudden interest from the Minister? Why is there no discussion around licensing? Why is there no discussion around lifting the standards of the industry?

Why is the focus on the supposed high cost of multiple building and pest reports rather than the real high cost of stamp duty and agents fees? How is this different to buying a car? I am sure that many consumers obtain multiple inspections on different vehicles before ultimately purchasing a vehicle of choice. The fees charged for building and pest inspections are not high at all, particularly in Sydney. However, the cost to a consumer of poor quality inspections and reports is very high over the period of home ownership.

Why is there a desire amongst many within the industry to simply resell a single report they have done? It appears this is all about an easy process for those wishing to sell a property and an easy sell of a product (a report in this case) for those carrying out inspections.

The idea of placing products (in this case reports) on the shelf for the consumer to buy is just laziness and greed by those that profit from the sale of properties.

Here’s a thought: what if we set up a system where when a property is about to be listed for sale, it has to be placed on a portal. Once the notice of intent to sell is placed on the portal, this automatically triggers the selection of an inspection company that is on a pre-selected panel (chosen by a rigorous public tender and regularly audited) to carry out an inspection and provide a report on the property.

The system would work through the panel and assign inspections by working through the list. When the list has been exhausted, it would go back to the start again to ensure a fair allocation of work. There are a number of items that would have to be covered off, such as a standardized report format, a set fee for inspection (based on house size or similar) minimum qualifications for inspectors carrying out inspections, professional indemnity insurance and so on.

That type of system could help eliminate the bias that currently exists toward selling agents and home sellers and provide a quality, valuable product to a buyer. It would also reward those agents and home sellers that put quality, well-maintained homes to the market rather than allowing poor quality homes to be sold to unwitting buyers.

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  1. Brett Bates

    A well presented argument and interesting suggestion. I remember back in 2007 (I think?) I got the required Building Consultant licence from NSW OFT as required to be able to legally perform pre-purchase building inspections. The process was actually more stringent than obtaining a building licence! Anyway that particular licence category got unceremoniously dumped less than 12 months later so anyone can tout for business to be a building construction 'expert' from a carpenter who cant nail two pieces of timber together to a real estate salesman.
    I too have very little confidence in government or its agencies in respect of creating better systems to improve the building construction sector and to protect consumers. However your comment "you have to ask yourself why there is a sudden interest from the Minister? Why is there no discussion around licensing? Why is there no discussion around lifting the standards of the industry?
    Well I can report that right now the OFT investigation into the HBCF (home warranty insurance scheme) has a discussion paper that includes a proposal to raise qualification levels in line with incremental licence categories to better reflect that larger, more complex construction projects requires more than the learning content delivered by a building trade level qualification. You can contribute your own views before the 18th February. Hopefully common sense will prevail and NSW drags itself into the 21st century with much higher standards for licencing to help build some integrity and trust back into the sector.