Located in the growing Sunshine Coast suburb of Mount Coolum, this investment property was purchased Home Scouts for…
Whether you’re a first-time home buyer or an experienced investor of Sunshine Coast property, a due diligence checklist is as critical a part of your property purchase as the search, offer strategy and settlement.
A due diligence checklist involves the investigation of every aspect of a property prior to purchase, as well of course as your preparedness to purchase. Problems identified during due diligence can be deal breakers, or alternatively, issues to negotiate in terms of price or correction of problems as a condition of settlement.
Why is it important that you have a due diligence checklist?
- To ensure your purchase is well considered, well researched and that you’re fully prepared for the purchase. One of the biggest risks when buying property is not doing your research. People rush in and buy and can then be left to deal with the consequences.
- To reveal any hidden problems with the property. One of the most important reasons to carry out a due diligence checklist is to reveal any hidden problems with the property. This could include site issues, structural problems, water damage, or pest infestations. Conducting a thorough inspection of the property will help you identify any potential issues that could affect the value of the property or your ability to live in it.
- To ensure legal compliance. Buying a home requires navigating a complex legal landscape, including contracts, titles, and zoning laws. Having a due diligence checklist can help ensure that the property is legally compliant and that there are no outstanding debts attached to it. This can help you avoid any legal issues or financial liabilities that could arise down the road.
- To negotiate a fair price. Conducting due diligence gives you a better understanding of the true value of the property. For example, if the inspection reveals that the roof needs repairs, you can negotiate with the seller to lower the price or fix the problem before contract settlement.
- To provide you with peace of mind. Buying a home is a major investment, and it is natural to feel anxious about the process. Conducting due diligence can provide peace of mind and help you feel confident in your purchase decision. By doing your research and verifying information, you can be sure that you are making an informed and well-informed decision.
Here is a checklist of the types of due diligence anyone looking to buy a Sunshine Coast property should consider.
1. Buyer specific issues
Before you start looking at property or even suburbs, do you know how much you can afford and are pre-approved, as well as cover in terms of associated costs with owning a home? In addition, when you purchase property there are a number of other upfront costs to cover too – deposit, conveyancing, building and pest inspections, stamp duty – so make sure you have those funds accessible so that you can cover these when you find your ideal home.
A due diligence checklist on buyer-specific issues involves us identifying and addressing any client-specific potential issues, particularly in relation to finance. If any aspect of your financial situation is not addressed, it can impact the strength of your offer and the way in which you negotiate to secure a property.
2. Suburb / area insights
Evaluating the location and surrounding area of the property you’re considering buying helps to identify potential risks, opportunities, and benefits that may affect the property’s value, such as environmental hazards, zoning restrictions, transportation access, infrastructure and growth plans and proximity to public amenities.
Being local to the Sunshine Coast, we have a strong understanding of locations and their surrounding areas, and also research what developments and zoning changes are planned for the suburb/s we are targeting for our clients. For example, we recently undertook extensive suburb due diligence for a client who was seeking an investment property which had good proximity to infrastructure, schools and hospitals.
As part of our research, we identified a new hospital was in early planning stage and located an investment property within close proximity to this proposed infrastructure to achieve maximum benefits for property values. The new hospital was formally announced shortly after we secured the property for our client.
3. Neighbourhood knowledge
Investigate the surrounding area and neighbourhood where the property is located. Things like the safety and security of the area, real estate market trends, future developments within the neighbourhood, quality of schools, local infrastructure and access to parks, shopping centres, and healthcare facilities, etc, lifestyle of the neighbourhood and the demographics of the area can help you determine whether the area is a good fit for you and your family.
One aspect of carrying out a due diligence checklist is research development applications submitted in the area or major Council plans proposed.
Some of this research can be done online, but it really helps to get a local perspective from a trusted professional or contact like us who know about what the neighbourhood, schools, etc are really like and what plans are proposed. We share these insights regularly with our clients to help them make informed decisions.
4. Analysis of the block
If you’re buying a house, make sure you research and investigate the block thoroughly to ensure that it meets your needs and is a good investment.
Understanding or researching the local real estate market and comparing prices of similar properties in the area, doing your relevant checks like we do for clients to ensure that the property is compliant with local regulations and zoning laws, identifying potential risks such as environmental hazards, property boundary disputes or easements, and understanding the property’s history (eg previous owners, renovations or repairs undertaken) can help you make an informed decision about whether the property is right for you or you should avoid it all together.
For example, we had a client from Hervey Bay who had identified their perfect block of land in Coolum. They’d already envisaged the house they’d design on the block, but engaged us to conduct due diligence for them on the property to assess the likely price and if there were any risks associated with it.
From our assessment, we found bushfire risks, flooding risks and vegetation risks associated with the property, as well as the fact that it was located on a busy street and was overpriced compared with other land for sale in the area. This due diligence checklist determined that the block was a ‘no go’ to proceed on, and ultimately saved our client significant hassle (and money!) down the track had they bought without being aware of these issues.
5. Detailed property inspection
A building and pest inspection is invaluable and a non-negotiable in getting a very clear idea of the condition of the property you’re planning to buy. A good building inspector will check the structure of the roof, walls, floors, fences and any adjoining buildings, look for things such as cracks, faults, asbestos and movement. A pest expert will check for termites, white ants, borers and other pests.
If there are issues it will allow you to get quotes for the repairs and you may choose to negotiate with the seller if they are significant. For example, we recently secured a property for our Sydney client, subject to a Building and Pest Inspection which is standard. The house had only one owner previously and had been renovated by the owner and in great condition. When the Building Inspector assessed the property, he identified that three of the back bedrooms were not of the required 2400mm habitable height (they were 2380mm). As a result, we negotiated with the seller who agreed to rectify the ceiling heights in all three bedrooms prior to settlement to ensure they were compliant. The sellers had no idea of this problem until our Building Inspector assessed the property thoroughly.
If you’re buying a Sunshine Coast unit, you also need to make sure you thoroughly look in to the Body Corporate running the complex you’re buying in to, and know how they run it, what expenses are proposed and all other key information relating to the complex.
6. Professional contract review
As soon as you sign the contract you are responsible for the property, and if you sign it without having it reviewed, you’ll be agreeing to whatever is in the document.
If you find something wrong with the house after signing, it may be difficult for you to pull out of the agreement (even though in Queensland we have a 5 day cooling off period). Even worse, if you’re denied a loan from your bank without any rights under the contract, you’ll not only miss out on the finances to buy a place, but you may still have to pay the deposit to the seller (up to 10% of the total price). Also, the seller could claim even more from you for any loss on resale of the property.
We always ensure contracts are reviewed by a conveyancer prior to our clients signing any agreement, so make sure you do this as part of your due diligence checklist.
In summary, a due diligence checklist is an essential part of the home buying process and anyone who doesn’t do the appropriate due diligence runs a huge risk financially. If you need help or advice with your due diligence checklist, to ensure that all necessary checks and evaluations are conducted before you make your purchase, we are experienced Sunshine Coast property buyers and are always happy to help.