Don't let 'FOMO' get in the way of a property inspection

author-avatar By
on March 18, 2021
Don't let 'FOMO' get in the way of a property inspection

Buyers agent EPS Property Search has warned home buyers to be cautious of renovated properties and to do all the necessary inspections.

EPS director Patrick Bright urged buyers to resist rushing in and skipping a building or pest inspection report.

“I am deeply concerned by the number of properties I’m currently seeing which are being sold without buyers undertaking a building and pest report,” he said.

“It’s often what you can’t see that is the cause of most concern and in my 20-plus years’ experience, renovated properties often have the most expensive hidden problems."

The fresh calls come after a Domain report found home buyers were increasingly ignoring big negatives on the inspection report for fear of missing out on the property.


Buying an investment property or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for investors.

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Rates correct as of January 21, 2022. View disclaimer.

Mr Bright said structural, pest, damp, electrical and plumbing issues with repair bills in excess of $100,000 are not uncommon in properties that when visually inspected looked fine.

“A wise person would not buy a $20,000 used car without a pre-purchase inspection, yet I see people spend a hundred times that amount without one, on a property where there’s a far greater financial downside," he said.

He also found an increase in people staying at home due to COVID-19 has contributed to a surge in renovations.

“When I see renovated properties I am always concerned as to whether the work has been done by a professional or a Bunnings weekend warrior, particularly after the recent lockdowns,” he said.

“Have they tarted up the property and essentially painted over the dodgy bits leaving unsuspecting buyers to eventually pay the price to fix it?"

No deterioration in lending standards, despite increase in risky lending

Prudential regulator data released yesterday showed a notable uptick in lending to borrowers with a deposit as little as 5%.

Loans written for 95% loan-to-value ratio borrowers increased by more than a quarter in 2020 and interest-only loan funding also increased by nearly a third.

However, CoreLogic's head of research Eliza Owen said there had not been any "major deterioration in lending standards".

"[This suggests] there is no need for interventions in the form of tighter credit policies," she said.

"The December 2020 quarter is of particular importance, because it marks a positive turn in Sydney and Melbourne dwelling values coming out of COVID-related restrictions."

Loan-to-income ratios equal to or greater than six-times made up 7% of loans in the December 2020 quarter, which is the highest since records began in March 2019. 

Despite this, the risks are still down on what was seen in the mid-2010s, according to Ms Owen.

"Interest only lending was noted as a potential risk to broader financial stability in the years to 2017. At that time, it was becoming more common for borrowers to originate their loans on interest only repayment terms, or refinance and extend their interest only term period," she said.

"This was leading to a delay in the paying down of loan principals, at a time when house prices and household debt were rising."

This data comes when the Government is considering loosening lending standards to place more of the onus of documentation on the borrower, rather than the lender.

Right now, however, Ms Owen said the risk is relatively low.

"The latest data from APRA indicates there is no blow out of risk in mortgage lending, despite the recent surge in property prices across Australia," she said.

"A deterioration in lending standards can be mitigated, as we’ve witnessed before. This could be achieved by tightening serviceability assessment rates, loan sizes relative to incomes or debt (LTI or DTI ratios) or loan sizes relative to home valuations (LVR)."

New Zealand's case study

New Zealand's Reserve Bank, which also acts as prudential regulator, recently put a 'speed gun' on residential lending in an effort to curb rapid house price rises.

From 1 May:

  • LVR restrictions for owner-occupiers will remain at a maximum of 20% of new lending at LVRs above 80%.
  • LVR restrictions for investors will be further raised to a maximum of 5% of new lending at LVRs above 60%.

This means that most new owner occupiers in New Zealand need a 20% deposit, and most new investors need a 40% deposit.


Photo by Tierra Mallorca on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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author-avatar
Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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