Should I Get a Valuation, Building Inspection, and LIM Before Making an Offer?
There is a cost to getting all of these reports prior to making an offer on a house - so why should you get them done?
Advantages of Getting Your Due Diligence Done Prior to Offering
The main advantage of having your valuation, building inspection and LIM done prior to offering is you have a full understanding of the house and its worth to you.
Another major advantage is that getting a valuation, building inspection and LIM usually means you can get unconditional finance approval for that house and can then choose to make a cash (unconditional) offer – this sort of offer is very appealing to vendors.
When a cash, unconditional offer is agreed and signed it is binding, the house is sold! A cash offer can give you bargaining power and you can often buy a house for a lower price with a condition free cash offer.
The main disadvantage is the cost. Altogether, these reports will cost well over $1000 – just how much depends on the house itself. This money is potentially being spent on a house you may never buy.
In normal house negotiation situations (not a tender, or auction) putting your building inspection, valuation and/or LIM as a condition in your offer is standard. If a price is agreed on – then you get the reports (do your due diligence).
Houses for Sale By Auction or Tender - Due Diligence
In the case of an auction, if you want them, you need get your valuation, building inspection, LIM and unconditional finance prior to the auction as when you are bidding you are making an unconditional offer for the house; if you are the winner bidder – you have bought the house.
In a tender situation – adding a building inspection, valuation and/or LIM to your tender puts you well below a cash offer in the rankings. Your offer will need to be significantly higher then other tenders to be seriously considered in this situation.
So if you are serious about your tender – try to make as close to a cash offer as possible – this usually means doing your valuation, building inspection and/or LIM prior to the tender date and getting an unconditional finance offer so you don’t have conditions in your tender.
Due Dilligence You Can Do For Free
No matter what you decide to do, we recommend you read our before you put in that offer section, here we have 4 things you can do at minimal cost (free even) that will let you get to know the house you are thinking of buying. You may find that what you discover changes your mind, saving you the cost of hiring the professionals altogether.
The Propertytoolbox Home Buyers Guide
Want more info and advice? Head to the Propertytoolbox Home Buyers Guide for all you need to know about buying a house in NZ. We have comprehensive information about property valuation and building inspection that can help with those pre-offer decisions.