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
WIN YOUR HOME LOAN INTEREST FREE

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

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
WIN YOUR HOME LOAN INTEREST FREE

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

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

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

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

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

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Rates correct as of September 25, 2021. 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 which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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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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