First Home Buyer Due Diligence Guide (Australia)

Due diligence is the homework you do before you're legally bound to buy: checking the property's condition, its legal title, and your finances. In Australia the rule is "buyer beware", so the seller doesn't have to point out defects. Doing your own checks is how you find problems while you can still negotiate the price or walk away. This guide covers what to check, when, and what it costs.

Quick definitions

• Due diligence: the checks you run on a property before you commit.
• LMI (Lenders Mortgage Insurance): a one-off fee that protects the lender, not you, if you borrow with less than a 20% deposit. It can cost $10,000 to $35,000.
• Strata / owners corporation: the shared ownership and rules that govern a block of units, and the body that runs it.
• Sinking fund: the savings pool a strata building keeps for big future repairs. If it's underfunded, owners get hit with special levies.
• Easement: a right for someone else to use part of your land, like a shared driveway or a council drain running under it.
• Settlement: the final step where you pay the balance and the home becomes legally yours.

What is due diligence, and why does it matter?

Due diligence is the investigation you do to check a property's condition, legal standing, and true cost before you're locked in. It has three parts:

• Legal: reviewing the contract and title for risks
• Physical: inspecting the condition through professional reports
• Financial: confirming your loan and understanding every cost

Because "buyer beware" applies, a seller isn't required to disclose physical defects unless you ask. That puts the job on you. Do it well and you gain real leverage: to negotiate, to ask for repairs, or to walk away before it's too late.

The core due diligence checklist

1. Building and pest inspection (for houses)

A professional building and pest inspection is essential for a house. It flags structural problems, water damage and mould, termites and other pests, and the state of the roof, wiring, and plumbing.

• Cost: around $500 to $1,500 combined, depending on the property's size and location
• Timing: before you offer, or during your cooling-off period

If it turns up termite damage or structural issues, that's powerful leverage: ask the seller to fix it, drop the price, or walk. See our building and pest inspection guide for the full detail.

2. Strata report (for apartments and townhouses)

For a unit, inspecting the whole building isn't practical. Get a strata report instead. It reveals:

• The owners corporation's finances and any outstanding levies
• Planned major works and maintenance
• Management disputes or governance problems
• The health of the sinking fund

When you buy into a strata scheme, you inherit its financial position. If the sinking fund is underfunded, you could face a special levy (a one-off charge for major repairs) within months. Key things to weigh up:

• Strata levies: cover maintenance, insurance, and management. Buildings with lifts, pools, or car stackers cost more to run.
• Sinking fund: an underfunded one signals future special levies.
• Building age: blocks hitting 20 to 25 year milestones often need expensive compliance work.

3. Title search and legal review

Have your conveyancer or solicitor review the legal documents:

• Title search: confirms who owns the property and reveals any easements, encumbrances (a claim or restriction on the property, like a mortgage or caveat), or restrictions
• Zoning: confirms what the land can be used for
• Building approvals: checks that renovations and additions were properly permitted
• Contract of sale and vendor statement: the seller's disclosure document

Never sign until your conveyancer has reviewed everything. More on this in our vendor statement and contract guide.

4. Contamination and environmental searches

Contamination is expensive and slow to fix. Before you commit, check the site's history: was it ever a petrol station, dry cleaner, factory, or landfill? Most states keep a contaminated land register (in NSW, the EPA maintains one). For a property with a worrying history, a professional environmental assessment is worth the cost.

• Cost: $200 to $500 for searches; $1,000 or more for a full environmental assessment

5. Flood and hazard checks

Before you get serious about a property, check whether it floods or sits in a bushfire or hazard zone. Look at your state or council flood maps and planning portal, check council records, and ask neighbours whether it's ever gone under. (In NSW, for example, the NSW Planning Portal and council flood data are the places to look; every state has an equivalent.) Flood-zone homes face higher insurance and can be harder to finance.

6. Builder and developer background (for new builds)

Buying new or off-the-plan? Research the developer's track record and financial stability, and check whether the builder has a history of disputes or "phoenixing" (closing one company to dodge liability, then reopening under a new name). Confirm the building warranty and any unresolved defects. A dodgy builder can leave you with repair bills you can't recover.

The cooling-off period: your safety net

Cooling-off periods are state-specific, running from 5 business days in NSW down to none in WA and Tasmania. In NSW, a private-treaty purchase gives you 5 business days after contracts are exchanged (10 for off-the-plan), and pulling out costs 0.25% of the price. Auctions get no cooling-off anywhere.

Use the window to finish your building and pest inspection or strata report, get unconditional finance approval, and have your conveyancer review the contract. For the rules in your state, see our cooling-off period guide.

In hot markets, sellers may ask you to waive cooling-off (in NSW, via a Section 66W certificate). Only do that once your conveyancer has approved the contract, your inspections are clear, and your finance is unconditional.

Making an offer: the strategic approach

Don't offer until you've done your preliminary checks. Making an offer signals you're ready to sign, so if you're not ready, agents lose interest. A typical run:

1. Inspect the property and check comparable sales
2. Line up your conveyancer for a quick pre-offer review
3. Make your offer to the agent (price, settlement period, deposit)
4. Pay a small holding deposit (often 0.25%) to take it "under offer"
5. Send the contract to your conveyancer
6. Complete inspections during cooling-off
7. Review everything with your conveyancer
8. Sign once you're satisfied, then exchange and pay the deposit (usually 10%, sometimes 5%)

The holding deposit, explained

When your offer is accepted you often pay about 0.25% of the price into the agent's trust account. It shows you're serious and takes the property off the market while you finalise things. If the seller takes another offer, you get it back in full. Once you exchange, it counts towards your full deposit. If you cool off, you usually forfeit it.

Who you need on your team

• Conveyancer or solicitor (essential): reviews contracts, runs searches, manages exchange and settlement. Budget roughly $1,000 to $3,000 all-in (professional fee plus disbursements). See how to choose a conveyancer.
• Building and pest inspector: a written report and negotiating power. Around $500 to $1,500 combined.
• Mortgage broker or lender: get your finance to unconditional before you exchange. Your lender will value the property, and if it values below your offer, you may have to cover the gap.
• Buyer's agent (optional): represents you, not the seller. Fees run about 1.5% to 3% of the price, or a fixed fee. Weigh it up in our buyer's agent guide.

Common mistakes to avoid

• Rushing due diligence to "secure" the place. Fear of missing out drives buyers to skip checks, then discover major defects after settlement. A few extra days protects hundreds of thousands of dollars.
• Skipping the strata report. The $200 to $400 cost is cheap insurance against a surprise special levy.
• Ignoring land history. A former industrial or petrol-station site can carry contamination that costs tens of thousands to fix.
• Overlooking builder quality. Research the developer and builder before you buy new.
• Ignoring flood and infrastructure risk. Check flood maps and planning portals, and talk to neighbours.
• Not getting unconditional finance. Conditional approval can fall through if the valuation comes in low.

Learn from others in our guide to the costly mistakes first home buyers regret.

Budget for the costs beyond the price

First home buyers often underestimate the extras. Rough guide:

Upfront checks

• Conveyancing and searches: $1,000 to $3,000
• Building and pest inspection: $500 to $1,500
• Strata report (if a unit): $200 to $400
• Environmental searches (if needed): $200 to $500
• Lender valuation: often free, sometimes $200 to $400

At settlement

• Deposit: usually 10% (sometimes 5%)
• Stamp duty: varies by state and price; first home buyers often qualify for concessions or exemptions
• LMI: only if your deposit is under 20% and you're not using a government guarantee

Ongoing

• Council rates, water, and (for units) strata levies, which can run $1,500 to $5,000+ a year
• Home and contents insurance: budget $800 to $2,000+ a year

First home buyer schemes: what's federal vs state

This trips a lot of people up, so it's worth being clear.

First Home Guarantee (federal, nationwide)

The First Home Guarantee, part of the Home Guarantee Scheme run by Housing Australia, lets eligible first home buyers purchase with as little as a 5% deposit and no LMI, because the government guarantees up to 15% of the value.

Since 1 October 2025 the scheme has been much bigger:

• No cap on places (the old 35,000-a-year limit is gone)
• No income limits (the old $125,000 single / $200,000 joint caps are gone)
• Higher property price caps, for example Sydney and NSW regional centres $1.5m; Brisbane, Gold Coast and Sunshine Coast $1.0m; Melbourne and Geelong $950k; Perth $850k; Darwin $750k (from 1 July 2026)

Single parents and eligible single guardians can buy with as little as a 2% deposit under the related Family Home Guarantee. You apply through a participating lender or broker, not Housing Australia directly.

First Home Owner Grant and stamp duty (state by state)

These are set by each state, so they differ. In NSW, for instance, eligible buyers of a new home can get a $10,000 First Home Owner Grant (subject to a price cap), and first home buyers may pay reduced or no stamp duty up to certain thresholds. Amounts, caps, and thresholds change and vary by state, so always check your state's revenue office before you plan around them. Our first home buyer checklist points you to the right places.

A rough due diligence timeline

1. Weeks 1 to 2 (pre-offer): get pre-approval, research suburbs and comparable sales, check flood and hazard maps, and line up a conveyancer and inspectors.
2. Week 3 (before offering): inspect properties and arrange a pre-offer contract review.
3. Week 4 (offer accepted): book inspections straight away, pay the holding deposit, request a strata report if needed, and send the contract to your conveyancer.
4. Weeks 5 to 6 (cooling-off): review the inspection and strata reports, let your conveyancer finish the searches, get unconditional finance, and negotiate on any issues.
5. Week 7 (exchange): if you're satisfied, sign, exchange, pay the deposit, and arrange insurance and utilities.
6. Settlement day: funds transfer, and you get the keys.

Key takeaways

• Due diligence is protection. A few hundred to a few thousand dollars of checks beats a five-figure surprise after settlement.
• Don't rush, even in a hot market.
• Get the professionals in: conveyancer, inspector, and broker.
• Do as much as you can before you offer, to strengthen your position.
• For apartments, always get a strata report.
• Know which schemes are federal (the guarantee) and which are state (grants and stamp duty).

Frequently asked questions

What is due diligence when buying a house?

It's the homework you do before you're legally locked in: checking the property's condition, its legal title, and your finances. The goal is to find any problems while you can still negotiate or walk away, because in Australia the seller doesn't have to volunteer defects.

How much should I budget for due diligence checks?

For a house, roughly $1,500 to $4,000 all up: a combined building and pest inspection ($500 to $1,500), conveyancing and searches ($1,000 to $3,000), and a lender valuation (often free or a few hundred dollars). Apartments swap the building inspection for a strata report ($200 to $400).

Do I really need a strata report for an apartment?

Yes. A strata report shows the building's finances, planned repairs, and any looming special levies. Skipping it to save $200 to $400 is how buyers end up hit with a surprise five-figure levy weeks after settlement.

Next steps

• Building and pest inspection guide
• How to choose a good conveyancer
• Cooling-off periods by state
• Vendor statement and contract guide
• Complete first home buyer checklist

This guide is general information, not personal financial or legal advice. Property laws, grants, and thresholds vary by state and change over time, so always confirm the current rules with a qualified conveyancer, your lender, and your state's revenue office before you buy.