Risks for property buyers and sellers in stage four lockdown with Justin Lawrence


Australian Financial Review

Richard Wakelin



A peculiar property experiment is under way in Melbourne. The test: to see if a property market can function without inspections or other onsite due diligence. Since early August as part of stage four pandemic restrictions, physical inspections of listed properties are banned in Melbourne. Moreover, estate agents are not allowed to enter properties for still or video photography. It is a scenario likely to persist until mid-September, when stage four is scheduled to end.

More than 170 auctions were held in Melbourne over the first weekend of restrictions, delivering an impressive 72 per cent clearance rate, according to CoreLogic. The solid outcome was due to these campaigns having all their marketing photography in place and gathering enough buyer interest before the restrictions started. There will be listed properties in this camp in coming weeks, but the number will peter out soon.
By the end of August, many properties will be marketed without contemporary photography (unless shot by the onsite owner) and inspections.

Buying property sight unseen is not entirely novel – everyone seems to know someone who has bought this way – but has always been rare. That is because property inspections are so worthwhile, given the limitations of written and digital marketing material and the inherent partiality of the authors.

Property inspections allow the buyer to engage more of their senses – sight, hearing and touch – on the due diligence task. They can roam freely around the property and its surrounds, checking every nook and cranny, sniffing for rising damp, feeling for sagging or sloping floorboards, listening for signs of thin partition walls, as well as seeing if rooms are light and spacious and the property isn’t overlooked or has poor views.

Ultimately, most buyers want to determine whether the property “feels right” – a vague and imperfect criterion, but one that matters.

Often physical inspections give a clue that something out of the ordinary is amiss and sets off a fresh line of inquiry.

Should someone choose to buy sight unseen, there are ways to alleviate the risks, says Justin Lawrence, partner at law firm Henderson & Ball. “The buyer should provide the estate agent in writing a detailed list of questions about the property, and require the answers to be codified into the contract of sale through an addition to the special conditions section,” says Lawrence.

He cautions agents tempted to downplay problems. “All answers would need to be signed off by the vendor as every answer legally binds the vendor,” says Lawrence.

Vendors and agents may be tempted to refuse to engage in this Q&A legal process, but Lawrence believes this would be unwise. “Those agents who do not adapt to the pandemic environment are doing themselves and their vendors a huge disservice, as prospective buyers will likely walk away.”

A buyer would want to ask a range of specific questions about the condition of the property, the history and nature of past renovations, and so on. But there is always a risk there is a problem that is not anticipated and not asked about – the unknown unknowns.

Often physical inspections give a clue that something out of the ordinary is amiss and sets off a fresh line of inquiry. Even if this oversight doesn’t occur in the written questions, a buyer still faces the risk of being misled and then needing to launch legal action to either void the contract or seek compensation.

Given Melbourne’s hobbled market, there is a fundamental question for vendors: should they be listing now rather than wait a few weeks for the return of inspections? No is the blunt answer – with a few exceptions, such as the unlucky owner who must sell now. And there are some property sales – such as off-the-plan and vacant land – that can conceivably proceed without inspections.

There is also a tactical case for kicking off a campaign shortly before restrictions end to front listing-starved buyers before the competition does, in the knowledge there remains plenty of time for inspections. But otherwise, there must be a suspicion that there is an agent involved putting their desire to earn a commission over their client’s best interest.