DIY Research for beginners

An Introductory Guide to Conducting Property Due Diligence on Your Own.

Purchasing a property is likely one of the most significant financial decisions you will make in your lifetime. While a solicitor or conveyancer will eventually play an essential role in ensuring all legal matters are handled correctly, there are steps you can take to conduct preliminary due diligence on your own. This process can help identify potential red flags and save time and money before engaging legal professionals.

By following the key steps outlined below, you can gain a clearer understanding of the property’s condition, potential risks, and its true value. This guide will walk you through everything you need to check, from title searches to building inspections, to help you make an informed decision.

1. Review the Property Title and Zoning Information

Conducting a Title Search

One of the most fundamental pieces of property due diligence is verifying the property title. A title search confirms that the seller has the legal right to sell the property and reveals any potential encumbrances, such as mortgages, easements, or covenants, that could affect your ownership.

You can typically conduct a title search online through your state’s land registry office. For example, in Victoria, the Landata website allows you to order property titles for a small fee. The key information to look for includes:

• Encumbrances: These could be restrictions or legal obligations on the property, such as easements (rights of others to use part of the property), covenants (conditions attached to the use of the land), or caveats (warnings of potential claims against the title).

• Ownership details: Ensure that the seller is indeed the registered owner of the property.

  
  

Checking Zoning Laws

Zoning laws dictate what can and cannot be done on a property, so it’s crucial to understand the zoning of the property you’re interested in. Zoning information can be obtained from your local council’s website or planning authority. It will outline:

• Permitted land use: Whether the property is zoned for residential, commercial, or mixed use, and whether there are restrictions on future developments.

• Building regulations: Restrictions on extensions, renovations, or even building new structures.

If you’re considering making changes to the property, this will be particularly important to assess early on.

2. Examine the Section 32 (Vendor Statement)

In many parts of Australia, such as Victoria, the seller is required to provide a Section 32 (Vendor Statement). This document contains critical information about the property that must be disclosed to potential buyers, including:

• Building permits: Details of any building work undertaken, including renovations or extensions.

• Rates and charges: Information on council rates and other charges associated with the property.

• Planning information: Relevant planning or zoning restrictions.

It is essential to scrutinise the Section 32 for any inconsistencies or surprises. If the vendor has failed to disclose something material, this could be grounds to negotiate a better price or even withdraw from the purchase.

3. Check for Building Permits and Approvals

If the property has been renovated or extended, check that the appropriate building permits were obtained, and that the work complies with local council regulations. This is crucial because if unauthorised work has been carried out, you could face hefty fines or be required to remove the structure.

You can typically verify this by contacting the local council or reviewing the vendor’s Section 32 statement. Pay attention to:

• Retrospective approvals: If the vendor completed work without initial approval but has since sought retrospective approval, make sure that all documentation is in order.

• Building inspections: Make sure that any required inspections were conducted during the building process and that the final occupancy certificate (if applicable) has been issued.

4. Conduct a Preliminary Property Inspection

Before engaging a professional building inspector, you can perform your own visual inspection to identify obvious defects or areas of concern. Here’s what to look for:

Structural Issues

Examine the property for any visible signs of structural damage, such as:

• Cracks in walls: Large cracks can indicate subsidence or foundational issues.

• Sagging roofs: Check for any visible sagging or signs of wear and tear in the roof structure.

• Dampness and mould: Look for evidence of water damage, particularly around windows, ceilings, and in basements. Mould growth could indicate poor ventilation or leakage.

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Electrical and Plumbing

• Electrical wiring: Check whether the wiring looks modern and safe. Exposed wires or outdated systems could be hazardous and costly to replace.

• Plumbing: Test water pressure in taps and showers, and check for any obvious signs of leaks around sinks, toilets, and outside taps.

While this initial check cannot replace a professional building inspection, it can help you identify any glaring issues that may influence your decision to proceed further.

5. Review the Neighbourhood and Local Amenities

Location is one of the most critical factors in determining a property’s value, and you can easily research this on your own. Here’s what to investigate:

Proximity to Schools, Shops, and Transport

• Schools: If you have children or plan to in the future, investigate the quality of local schools. Most state education departments offer online school zoning maps that will tell you whether the property falls within the catchment area of preferred schools.

• Shops and services: Consider the proximity of essential services such as supermarkets, pharmacies, and medical centres.

• Public transport: Check how far the property is from train stations, bus stops, or tram lines. Easy access to public transport can significantly increase the property’s desirability and value.

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Crime Rates and Safety

It’s important to assess the safety of the neighbourhood. Websites like the Crime Statistics Agency (Victoria) provide detailed data on crime rates by suburb. A high crime rate in the area could affect the property’s future value and your peace of mind.

6. Check for Environmental Hazards and Natural Risks

Understanding the environmental risks associated with the property is a crucial aspect of due diligence. Look for potential hazards such as:

Flooding and Bushfires

Australia is prone to natural disasters like floods and bushfires. You can check whether the property is located in a flood zone or bushfire-prone area by reviewing:

• Local council flood maps: Most local councils have flood zone information available online.

• Bushfire Attack Level (BAL): If the property is in a bushfire-prone area, it may be subject to specific building requirements or restrictions. The BAL rating will indicate the level of risk and the necessary precautions that need to be taken.

  
  

Contaminated Land

Some properties may be built on land that was once used for industrial purposes or is otherwise contaminated. This could limit what you can do with the property or result in significant clean-up costs. Your local council or environmental protection agency can provide information on whether the land is contaminated or has any restrictions.

7. Research Future Developments and Infrastructure Projects

Large-scale developments or infrastructure projects near the property can either increase or decrease its value. Here’s how to assess these risks:

Proposed Developments

Research whether any major developments, such as shopping centres, apartment complexes, or new roads, are planned near the property. While these can increase the property’s value, they can also result in increased traffic or noise. Check local council websites for planning applications and development approvals.

Infrastructure Projects

Upcoming infrastructure projects, such as new railway lines, motorways, or public transport upgrades, can improve accessibility and desirability. However, construction noise and disruption can be a downside during the building phase.

8. Evaluate the Property’s Value with Comparable Sales

One of the most effective ways to gauge whether the property is priced fairly is by researching comparable sales (also known as ‘comps’) in the area. Websites such as Domain, realestate.com.au, and CoreLogic allow you to search for recent sales of similar properties in the neighbourhood.

(The beforementioned databases do have their limitations, but are the best available to the public. As a licensed estate agent/buyer’s agent, we have access to the Real Estate Institue of Victoria database, which provides deeper insights, as well as access to the majority of undisclosed results.)

Look for properties that have:

• Similar size (in terms of bedrooms, bathrooms, and land size).

• Similar condition and style (e.g., renovated vs. unrenovated).

• Sold within the last six months (as market conditions can change quickly).

This will give you a clearer picture of the property’s current market value and whether the asking price is justified.

9. Talk to Neighbours

One often-overlooked step is speaking with neighbours. This can provide invaluable insights into the area and the property itself. Neighbours may be aware of any problems that the seller isn’t disclosing, such as noisy residents, traffic issues, or disputes over boundaries.

Simply introducing yourself and asking general questions can reveal whether this is a neighbourhood you want to live in.

10. Assess Your Financing and Affordability

Lastly, ensure that you have a clear understanding of your financial position before proceeding with any purchase. While this isn’t part of the due diligence on the property itself, it’s vital to know what you can afford, including all associated costs (stamp duty, legal fees, insurance, etc.).

Use online calculators to estimate your borrowing capacity and seek pre-approval from your lender. This will give you a realistic budget to work within and avoid overcommitting financially.

In summary:

Conducting thorough due diligence on a property before engaging legal professionals can save you significant time and money, while helping you make a more informed decision. From researching the title and zoning laws to investigating the neighbourhood and inspecting the property for potential defects, each of these steps will provide critical insights.

While a solicitor or conveyancer will eventually guide you through the legal aspects, the groundwork you lay by conducting your own research will give you a strong foundation to ensure the property meets your needs and is free of red flags. This will ultimately make the process smoother and less stressful when you do engageIf you conduct proper due diligence on a property, you can save yourself from potential headaches and ensure that you’re making a wise investment. This guide outlines steps that can be taken independently before involving legal professionals, focusing on identifying red flags, understanding the property’s true condition, and confirming its suitability for your needs.