A reader letter published by Stuff this month argued that sellers should be legally required to include a detailed building report with their property, at the vendor's expense. The writer's frustration will be familiar to many buyers: pay for a report, find serious issues, get quotes, put in a lower offer, and have the seller decline, leaving the buyer out of pocket. Then repeat on the next property.

Whether or not the law ever changes, the problem behind the letter is real, and sellers do not have to wait for a rule to address it. Sellers can already commission a building report and share it with buyers. This post looks at what that involves, what it does and does not do for a buyer, and why the buyer's own inspection still matters.

What sellers are required to do today

Providing a building report is currently a choice for sellers. The Real Estate Authority (REA) confirms that vendors can commission a property inspection report and supply it to potential buyers during the sale of their property.

Disclosure is a separate question, and the position is more nuanced than it first appears. Under the standard Law Association/REINZ Agreement for Sale and Purchase, the vendor's disclosure obligation has been read narrowly by the courts, as Foley Douglas explains in its article on whether a vendor has to disclose a previous negative builder's report. Vendors still must not misrepresent a property, and they should answer honestly if asked. Real estate agents, meanwhile, carry stricter duties. Under the REA's principles of disclosure, an agent must disclose known defects to buyers.

REA guidance also says an agent must tell prospective buyers if a previous inspection report highlighted problems with a property, even if those problems have since been resolved. A seller who commissions a report should therefore be prepared to act on what it finds, and to talk to their agent and lawyer about what needs to be shared with buyers.

Why sellers choose to provide a report

Sellers who provide a report are usually aiming to reduce surprises. If a buyer's inspector is going to find something, it is better for the seller to know first. Having a report ready can remove unknowns that make buyers hesitate, and can shorten the due diligence period for serious buyers. It also gives the seller an accurate picture of the property before deciding on a price or whether to carry out maintenance.

For sellers, that information is useful before the property is even listed. A pre-listing inspection can show up hidden moisture, insulation problems or overdue maintenance while there is still time to deal with them on the seller's terms, rather than under the pressure of a conditional agreement.

What a vendor report does not do

A report can find issues the seller did not know about, which may mean carrying out work before listing or revisiting price expectations. That is part of the point, but sellers should go in expecting it.

The bigger limit is on the buyer's side. Government guidance from Consumer Protection says buyers are unlikely to have any come back if a vendor's report misses something, because the vendor is the inspector's client and the buyer is not. It adds that a buyer's own pre-purchase inspection can flag issues not listed in the vendor's report. The REA gives agents the same advice: where a vendor's report is supplied, buyers should still be told to get their own, because a buyer who relies on a report they did not commission has no recourse against the inspector.

Buyers also have the right to choose their own inspector, since the inspection is for their benefit and at their cost.

This is why a vendor report and a buyer's inspection do different jobs. The vendor's report can shorten the conversation by putting known information on the table early. The buyer's own report is the one they can rely on.

Making a vendor report credible

The most common reaction to vendor-supplied reports is doubt about independence, and it is a fair one. A report paid for by the seller will only carry weight if buyers can see how it was prepared. A few things help: an inspector who is qualified and independent of the sale, an inspection carried out to NZS 4306:2005 Residential Property Inspection, a report with a clear date and scope, and a seller who shares the whole report, including anything it flags, rather than a summary.

Even then, the report is the seller's document. Its value to a buyer is as a starting point, and the buyer's own inspection is how they confirm it.

What a pre-listing inspection covers

Our pre-listing service is a non-invasive assessment of the building envelope, internal linings and critical moisture points, using thermal imaging and moisture meters. It looks for hidden moisture or internal leaks, missing or slumped insulation, evidence of past leaks, and overdue maintenance. The inspection is carried out by an NZiBi registered inspector who is also an ITC Level 1 thermographer. Where an issue is found, the report gives practical advice on next steps.

Sellers should book early enough to act on the findings. We suggest two to four weeks before going to market, which leaves time to deal with maintenance items before the first open home.

If you are a buyer handed a vendor report

A report supplied by the seller is useful information, and it is worth reading carefully. A few things to check:

  • Who prepared it, what their qualifications are, and whether they hold public liability insurance. The REA recommends using an inspector who conforms to NZS 4306:2005 Residential Property Inspection when choosing your own.
  • When it was carried out, since the condition of a property can change.
  • What it covered and what it did not, including any areas that could not be accessed.
  • Whether it is a building report, a LIM or a bank valuation. They are three different things. A LIM shows what the council has on record. A building report is an inspector's opinion of the building's condition. A valuation is typically about what a property is worth for lending purposes, not a check of its condition.
  • Whether any work has been done without consent. An inspection may show where work has been done on the original house, but it will not tell you whether that work had consent. Consumer Protection advises checking council records and the LIM for that, and raising any concern with your lawyer.

Then arrange your own inspection. Our prepurchase building inspections are carried out for the buyer, so the report is yours to rely on.

Where the law might go

The letter in Stuff calls for legislation, and that is a matter for policymakers and the public to debate. In the meantime, the practical options are the same for everyone. Sellers can choose to be open early. Buyers can still protect themselves with their own inspection. Both can take advice from their lawyer on how the sale and purchase agreement treats building reports and disclosure.

Frequently asked questions

Do sellers have to provide a building report in New Zealand?

Not as a general rule. Sellers can commission one and share it. Vendors must not misrepresent the property, and agents have their own disclosure duties, so check your obligations with your lawyer and agent before listing.

Can a buyer rely on the seller's building report?

Consumer Protection and the REA both advise that a buyer is unlikely to have recourse against the inspector for a report they did not commission, so buyers should obtain their own inspection.

What if a pre-listing report finds problems?

The seller can arrange the work before listing, adjust their price expectations, or share the findings with buyers. An agent has to disclose known defects, and has to tell buyers if a previous report raised problems, even if they were later resolved. Take advice from your lawyer and agent on what needs to be shared.

Is a building report the same as a LIM?

No. A LIM is a council document showing what the council has on record for the property. A building report is an inspector's assessment of the building's condition. They are used for different purposes.

Is a building report the same as a bank valuation?

No. A valuation is typically used to assess what a property is worth for lending. A building report assesses the condition of the building. Having one does not replace the other.

Does a pre-listing inspection damage the property?

No. Thermal imaging and moisture meter readings are taken through existing surfaces without drilling or cutting.

This article is general information. Check your sale and purchase agreement and disclosure obligations with your lawyer and agent before acting on anything in it.