In short: Victorian law does not give buyers an automatic right to a building or pest inspection, and the vendor does not have to disclose defects. You protect yourself by inspecting before you sign or bid, by using the 3-day cooling-off period on private sales, or by making the contract conditional on a satisfactory report. The main statutory exception is owner-builder work, which requires a defects report and insurance.
Buyers in Victoria buy a property in the condition it is in. That principle, caveat emptor, is softened by the Section 32 disclosure rules and a few specific protections, but it means the inspection is your job. This page explains the legal position, the contract tools available, and how a lender's valuation differs from an inspection.
What the law says
No general duty to disclose defects
The Sale of Land Act 1962 (Vic) requires the vendor to give a Section 32 vendor statement covering title, planning, outgoings, permits and notices. It does not require disclosure of structural defects, damp, termites, illegal plumbing or a leaking roof. A vendor who actively misrepresents the condition may be liable under the general law and the Australian Consumer Law, but silence about a defect is not usually misrepresentation.
Owner-builder work
Section 137B of the Building Act 1993 (Vic) applies where the vendor carried out building work as an owner-builder within the previous 6 years and the work is above a value threshold. The vendor must include in the contract a defects inspection report prepared by a prescribed building practitioner within the 6 months before the contract, and, where the work exceeds the threshold, domestic building insurance covering structural defects. A contract that doesn't comply can be voided by the purchaser before settlement.
Builders' warranties that run with the land
Part 3 of the Domestic Building Contracts Act 1995 (Vic) implies warranties into domestic building contracts, including that work is carried out in a proper and workmanlike manner, complies with the law, uses suitable materials, and that the home is fit for occupation. These warranties pass to subsequent owners and can be enforced for 10 years from completion. Domestic building insurance is available for major defects where the builder has died, disappeared or become insolvent.
Contract conditions
The standard Law Institute of Victoria / REIV contract contains a general condition that, where the particulars state the sale is subject to a building inspection or pest inspection, allows the purchaser to end the contract by written notice within the stated period if a written report discloses a major structural defect or a live pest infestation. Vendors and their agents often resist these conditions, and they don't apply to auctions. Special conditions can vary the wording.
Cooling-off
Section 31 of the Sale of Land Act gives private-sale buyers 3 clear business days to withdraw for any reason at a cost of $100 or 0.2% of the price. See our cooling-off period page. Many buyers use this window to run an inspection if they couldn't do one beforehand.
Your protection at each stage
| Stage | Protection | Limits |
|---|---|---|
| Before offer (private sale) | Arrange your own inspection with vendor's consent | Cost is yours even if you don't buy |
| Signing (private sale) | Add a building and pest condition | Vendor may refuse; must be a major defect or live infestation to exit |
| After signing (private sale) | 3-day cooling-off | Not for auctions; small penalty |
| Before auction | Inspect beforehand | No conditions or cooling-off after the fall of the hammer |
| Owner-builder work (6 years) | Section 137B report and insurance | Threshold and 6-year limit |
| New home (10 years) | Builder's implied warranties and insurance | Insurance mainly for builder insolvency, death or disappearance |
| Before settlement | Final inspection under the contract | Confirms condition as at signing, not pre-existing defects |
How to get an inspection done, step by step
- Book early. Good inspectors in Melbourne's north are busy in spring. Give yourself a week before an auction.
- Choose the right report. A pre-purchase building inspection to Australian Standard AS 4349.1 covers accessible structure, roof, subfloor, drainage and major defects. A timber pest inspection to AS 4349.3 covers termites, borers and fungal decay. A combined report is the norm.
- Ask about what is excluded. Reports don't cover concealed areas, electrical or plumbing testing, or estimates of repair cost unless you ask for them.
- Attend the inspection if you can. An hour on site with the inspector tells you more than the report.
- Get quotes for anything significant before the cooling-off period or condition deadline expires.
- Renegotiate or walk away. A written report with a major defect is your evidence for a price reduction or for ending a conditional contract.
Worked example
You are the highest bidder on a $650,000 house in Craigieburn at auction. You inspected it the week before: the report noted an older roof with some lifted tiles and minor subfloor moisture, but no structural defects or termite activity. You budgeted $8,000 for roof repairs and bid accordingly. Because the auction contract is unconditional, that pre-auction report was your only protection, and it did its job.
Contrast a private-sale buyer signing for a $580,000 house in Wollert with a building and pest condition and a 7-day period. The report finds active termites in the garage frame. The buyer serves written notice within the period and recovers the full deposit. Without the condition and outside cooling-off, they would have been bound to buy a house with a live infestation.
What it means for your home loan
- A valuation is not an inspection. The lender's valuer assesses market value, usually from a short visit or a desktop model. A property with serious defects can still value at the contract price, and the lender will not warn you about the defects.
- Defects can affect the valuation. Valuers do note obvious structural problems, and a property in poor condition or with unapproved works can come in under the contract price, reducing your loan. See understanding LVR and LMI.
- Repair costs come out of your deposit. Budget for them in your upfront costs, or negotiate the price down.
- Renovation finance. If a report reveals major work, a construction loan or a loan with a renovation component may be the right structure.
- Building insurance from settlement. Lenders require it, and insurers may exclude pre-existing damage identified in a report.
GNT Finance encourages every client to inspect before they commit, because a loan is easier to arrange on a property with no surprises. Our home-loan service is at no cost to you in most cases.
Common mistakes
- Relying on the valuation as evidence the house is sound.
- Bidding at auction without an inspection because the property "looked fine".
- Accepting the vendor's report. A report commissioned by the vendor may be accurate, but it is not addressed to you and you may not be able to rely on it.
- Using a general handyman instead of a qualified inspector working to the Australian Standards.
- Not checking for owner-builder work. If the Section 32 shows owner-builder permits in the last 6 years, ask for the section 137B report.
Frequently asked questions
Is a building inspection compulsory when buying a house in Victoria?
No. Victorian law doesn't require a building or pest inspection, and the vendor doesn't have to disclose defects. The buyer is responsible for checking the condition of the property. A building and pest inspection is strongly recommended before signing a private-sale contract or bidding at auction, and the contract can be made conditional on a satisfactory report if the vendor agrees.
Can I make an offer subject to building and pest inspection in Victoria?
Yes, on a private sale. The standard contract has a general condition allowing you to end the contract if a written report identifies a major structural defect or live pest infestation, when the particulars state the sale is subject to inspection. Vendors sometimes refuse or shorten the period. Auction contracts cannot be made conditional.
Does the seller have to disclose termites or defects in Victoria?
Generally no. The Section 32 covers title, planning, outgoings, permits and notices, not building condition. A vendor who makes a false statement about the condition may be liable for misrepresentation, but silence about a known defect is usually not actionable. The exception is owner-builder work within 6 years, which requires a defects inspection report and, above a threshold, insurance.
Should I get a building inspection before an auction?
Yes. An auction contract is unconditional and has no cooling-off period, so the inspection must be done before auction day. If you are outbid, the cost of the report is lost, which is frustrating but far cheaper than buying a house with hidden structural problems. Some buyers negotiate to share a report with other interested parties.
What does a pre-purchase building inspection cover?
A report to Australian Standard AS 4349.1 covers the accessible parts of the building: structure, roof exterior and interior, walls, floors, subfloor, wet areas, drainage and site. A timber pest report to AS 4349.3 covers termite activity and damage, borers and fungal decay. Reports exclude concealed areas and don't test electrical or plumbing systems unless separately arranged.
Talk to GNT Finance
Inspection reports and valuations tell different stories, and you need both before you settle. GNT Finance will explain how a property's condition affects your loan and help you plan for any repair costs. Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Laws change — confirm current rules with the State Revenue Office, the ATO or a licensed professional.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.