The complete property due diligence checklist

Due diligence is not one task. It is four separate investigations that happen to run at the same time: is the property sound, is the title clean, is the paperwork fair, and is the price defensible. Buyers usually do the first well, the second by accident, and the last two not at all.

1. The physical check

What you can see, and what only a professional with a moisture meter and a torch will see.

• ✓Building inspection by a licensed inspector, with a written report you keep
• ✓Pest and timber inspection - termite damage is invisible until it is structural
• ✓Roof, gutters and drainage, which is where most water damage begins
• ✓Moisture readings in wet areas, and any sign of previous rectification
• ✓Electrical switchboard age and whether there are safety switches
• ✓Plumbing age and material, and whether the sewer connection matches the diagram
• ✓Asbestos, lead paint and cladding for anything built before the 1990s
• ✓Pool and spa fencing compliance, which is a legal obligation with penalties

2. The title and land check

The title search is short, cheap and the single densest source of information about what you can actually do with the land.

• ✓Registered proprietor matches the vendor named on the contract
• ✓Second schedule notifications - easements, covenants, restrictions on use
• ✓Any registered mortgage or caveat, and how it will be discharged at settlement
• ✓Unregistered dealings, which can change the position between search and settlement
• ✓The deposited plan, checked against the title: features drawn on the plan but absent from the register are worth a question
• ✓Whether the certificate of title is an old paper edition, which changes how settlement is prepared

3. The planning and council check

• ✓Planning certificate - zoning, what is permitted and what is prohibited
• ✓Minimum lot size and frontage rules, which decide subdivision potential
• ✓Flood, bushfire, landslip, coastal and contamination overlays
• ✓Heritage listing or conservation area status
• ✓Road widening proposals or acquisition reservations
• ✓Tree preservation orders, which in some councils cover every tree in the area
• ✓Development applications on neighbouring land that will change your outlook
• ✓Whether any works on the property were approved, and whether a building certificate exists

4. The contract check, which is the one that gets skipped

The standard contract in each jurisdiction is broadly balanced. What arrives attached to it usually is not, and that annexure is drafted by the vendor's solicitor for the vendor.

• ✓Price, deposit and balance actually reconcile - arithmetic errors on the front page are more common than you would think
• ✓Special conditions, read individually, with attention to any that delete or narrow a standard clause
• ✓Any right for the vendor to rescind, and on what grounds
• ✓Whether the deposit is released to the vendor before completion
• ✓The completion date and what happens if it is missed - penalty interest and fixed fees
• ✓Whether the property is sold as-is with no right to object or claim
• ✓Inclusions and exclusions, listed explicitly
• ✓Who is named as your solicitor for service of notices
• ✓For two or more buyers: whether joint tenants or tenants in common is nominated

5. The price check

Everything above tells you what you are buying. This tells you whether the number is right.

1. 1
   Find genuinely comparable sold prices

   Same suburb, similar size and land, sold within six to twelve months. Sold, not listed. Three good comparables beat thirty rough ones.

2. 2
   Adjust for the differences

   Land size, condition, aspect, parking, renovation quality. Write the adjustments down so the number has a derivation you can defend.

3. 3
   Check the disclosure rate in the area

   In some suburbs a large share of sales are not publicly disclosed, which makes any guide much harder to verify and should widen your range.

4. 4
   Price the findings

   Anything from the checks above with a real cost attached comes off your number, or becomes an amendment you ask for.

The order to do it in

Sequence matters, because each stage can stop you spending money on the next.

1. 1
   Contract and title first - they are cheap and fast

   A fatal special condition or an easement across the only place you could extend is worth knowing before you pay for an inspection.

2. 2
   Planning certificate next

   Also cheap. Tells you what the land can become, which is often why you were buying it.

3. 3
   Then the physical inspections

   The expensive part, spent only on properties that survived the paperwork.

4. 4
   Price last, informed by all of it

   Your number should reflect what you now know, not what you thought at the open home.

Doing the paperwork half in an evening

Steps one, two, three and five have a professional you can hire. Step four is the one buyers attempt alone at 11pm, and it is the one where the money is. TrueBuy reads the contract, the strata report and the building report together and returns every finding with the quote and the page it came from - so your conveyancer gets a list rather than a pile, and you get questions rather than a feeling.

Common questions

Information, not legal advice. Confirm with your conveyancer before acting.