First Home Buyer's Complete Due Diligence Guide: Avoid Costly Mistakes Before Settling

Last updated: October 2025

Introduction

Buying your first home is one of the most significant financial decisions you'll ever make. Yet many first-time buyers rush through the due diligence process, eager to secure their property quickly. This can be a costly mistake. Thorough due diligence—the process of investigating a property before making a legally binding commitment—is your best protection against hidden problems, unexpected costs, and poor investment decisions.

In this comprehensive guide, we'll walk you through everything first-time home buyers in Australia need to know about due diligence. We'll cover what to check, when to check it, and how professional guidance can save you from financial disaster.

What Is Due Diligence and Why Does It Matter?

Due diligence is the investigative process you undertake to assess a property's condition, legal standing, and financial implications before you're legally bound to purchase it. It covers three critical pillars:

Legal Due Diligence: Reviewing contracts and legal documents to identify risks

Physical Due Diligence: Inspecting the property's condition through professional reports

Financial Due Diligence: Ensuring loan approval and assessing all costs involved

The principle of "buyer beware" applies in Australia. This means vendors aren't obligated to disclose physical defects unless directly asked. That responsibility falls on you. By conducting thorough due diligence, you shift the power dynamic in your favour, giving you leverage to negotiate, request repairs, or walk away if serious issues arise.

Key Due Diligence Checklist for First Home Buyers

1. Building and Pest Inspections (Essential for Houses)

A professional building and pest inspection is non-negotiable when purchasing a house. This report identifies:

• Structural issues such as cracks or foundation problems
• Water damage or mould
• Pest infestations, including termites
• Roof and gutter condition
• Electrical and plumbing system functionality
• Any potential costly repairs needed

Cost: Typically $300–$800 depending on property size Timing: Before making an offer, or during your cooling-off period

If you discover termite damage or structural issues, this information becomes powerful negotiation leverage. You can request the seller cover repairs, reduce the purchase price, or walk away entirely.

Learn everything about building and pest inspections in our detailed guide.

2. Strata Reports (Essential for Apartments and Townhouses)

For strata properties, skip the building inspection of the entire complex (impractical for large buildings) and request a strata report instead. This crucial document reveals:

• Regular and special expenditure
• Outstanding levies and financial health of the owners corporation
• Proposed capital works and maintenance schedules
• Management issues or disputes
• Plans for essential safety systems

Critical Insight: Under the Strata Schemes Management Act 2015 (NSW), you as the new owner become liable for all unpaid levies. If the building hasn't properly funded its sinking fund, you could face unexpected special levies within months of purchase.

Important Factors to Assess:

OC Rates (Owners Corporation Fees): These cover building maintenance, insurance, and management. Larger buildings with more complex systems (lifts, pools, car stackers) incur higher costs.

Sinking Fund: This reserve fund covers major replacement costs like lift replacements, roof repairs, or electrical system upgrades. An underfunded sinking fund signals future special levies.

Essential Safety Services: Buildings must maintain fire safety systems, sprinkler heads, and emergency equipment. These require regular inspections and upgrades.

Building Age: Buildings reaching 25-year maintenance milestones often require expensive compliance work. A 5-year-old building may seem young, but substantial work could be ahead.

3. Title Search and Legal Document Review

Have your conveyancer or solicitor review all legal documents, including:

• Title Search: Confirms the seller's ownership and reveals any encumbrances, easements, or restrictions on the property
• Zoning Certificates: Verify the property complies with local zoning laws and its intended use is permitted
• Building Permits and Approvals: Ensure all renovations and additions were done with proper permits
• Contract of Sale: This mandatory vendor disclosure document outlines terms, conditions, and any special conditions

Cost: Included as part of conveyancing fees ($400–$800)

Never sign a contract until your legal representative has reviewed it for red flags that could affect your ownership or enjoyment of the property. Read more about understanding vendor statements and contracts.

4. Contaminated Land and Environmental Searches

Contamination issues are, as experienced property buyers note, "an absolute nightmare to resolve." Before committing to a property, check:

• Historical Land Use: Was the site previously a gas station, dry cleaner, factory, or landfill? Industrial or commercial history may indicate contamination risks
• Contaminated Land Register: NSW maintains a public register of known contaminated sites
• Phase 1 Environmental Assessment: For properties with concerning historical use, consider this professional investigation

Cost: $200–$500 for searches; $1,000+ for Phase 1 assessment

5. Flood and Risk Zone Checks

Before viewing properties seriously, check:

• NSW Flood Data and Maps: Identify whether the property sits in a flood risk zone
• Council Records: Some councils maintain additional hazard mapping
• Historical Records: Ask locals whether the property has ever flooded
• NSW Planning Portal: Check for development applications or proposed road widening that could affect your property

Properties in flood zones face higher insurance premiums and may have difficulty securing finance.

6. Builder and Developer Background (for New Properties)

If purchasing a new build or recently completed property, research:

• Developer Track Record: How long have they been operating? Do they have a history of financial stability?
• Builder Reputation: Check reviews and whether the builder has been involved in any disputes or phoenixed companies
• Construction Warranty: Verify 10-year warranty details and any unresolved defects

Dodgy developers and builders who "phoenix" companies (close one entity to avoid liability, then reopen under a new name) leave buyers with expensive defect remediation costs they can't recover.

The Cooling-Off Period: Your Safety Net

What is it?

In NSW, when you purchase a residential property through private treaty (not at auction), you have a 5-business day cooling-off period after contracts are exchanged. For off-plan properties, this extends to 10 business days.

This period is your legal safety net—the only time you can change your mind and exit the contract without major consequences (beyond forfeiting 0.25% of the purchase price as consideration).

Learn more about cooling-off periods in every Australian state.

What to Do During Cooling-Off

This window is your time to:

1. Arrange building and pest inspections (or strata reports)
2. Obtain unconditional finance approval from your lender
3. Thoroughly review the contract with your conveyancer
4. Conduct final neighbourhood checks
5. Arrange a final walkthrough of the property

Waiving Your Cooling-Off Period

In competitive markets, sellers often request that you waive your cooling-off period by providing a Section 66W Certificate. This makes your offer more attractive but removes your safety net.

Only waive cooling-off if:

• Your conveyancer has fully reviewed and approved the contract
• Building and pest inspections are complete and satisfactory
• Finance has been unconditionally approved
• You've completed all due diligence and are 100% confident

What Happens if You Cancel?

If you change your mind during cooling-off, you must:

1. Contact your conveyancer immediately
2. Have them send a formal written notice of rescission to the seller
3. Understand that you'll forfeit the 0.25% deposit paid at exchange

A phone call or verbal message is not sufficient—the cancellation must be in writing.

Making an Offer: The Strategic Approach

Before Making an Offer

Don't make an offer until you've completed preliminary due diligence. Making an offer signals to the real estate agent that you're ready to sign the contract immediately if it's accepted. If you're not ready, agents will view you as unserious and move on to other buyers.

The Process

1. Inspect the property and review comparable sales
2. Contact your conveyancer and arrange preliminary legal review
3. Make your verbal offer to the agent, including your proposed price, settlement period, and deposit amount
4. Provide holding deposit (typically 0.25% of purchase price) to show you're serious—this takes the property "under offer"
5. Get the contract from the agent and send it to your conveyancer
6. Complete inspections during cooling-off
7. Review everything with your conveyancer
8. Sign the contract once all conditions are met
9. Exchange contracts and pay the deposit (typically 10%, though 5% is becoming common)

The 0.25% Deposit Explained

Many first-time buyers are confused about the 0.25% deposit. Here's how it works:

• When you make an offer accepted, you typically pay 0.25% of the purchase price into a real estate agent's trust account
• This shows you're serious and takes the property "under offer"
• The property is then removed from the market while you finalise your purchase
• If the vendor accepts another offer, your 0.25% is returned in full
• Once you exchange contracts, this 0.25% is applied toward the full deposit
• If you cancel during cooling-off, you forfeit the 0.25%

Essential Professional Support

Your Conveyancer/Solicitor

This is non-negotiable. Your legal representative will:

• Review all contracts and identify red flags
• Conduct title searches and zoning checks
• Manage the exchange of contracts
• Calculate all adjustments (rates, levies, etc.)
• Ensure your lender's requirements are met
• Guide you through settlement

Cost: $400–$1,000+ depending on property complexity

Learn how to choose a good conveyancer in our detailed guide.

Building Inspector

Never rely on your own assessment. A licensed building inspector will:

• Provide a detailed written report
• Identify structural issues you'd miss
• Give you negotiation power based on findings
• Provide peace of mind or early warning signs

Cost: $300–$800

Pest Inspector

Separate from building inspections, pest inspections specifically check for:

• Active termite infestations
• Other timber-destroying pests
• Evidence of past infestations

Cost: $150–$400

Read our complete building and pest inspection guide for more details.

Your Mortgage Broker or Lender

Ensure your finance approval is unconditional before exchanging contracts. Your lender will arrange a valuation—if the property value is lower than your offer, you may need to pay the difference.

Common First-Time Buyer Mistakes to Avoid

1. Rushing Due Diligence to "Secure" the Property

In competitive markets, FOMO (fear of missing out) often drives rushed decisions. Buyers waive inspections or skip legal review to move quickly. This frequently results in discovering major defects or contract issues after settlement—when you're legally bound.

Better approach: Complete due diligence before exchanging contracts. It takes a few extra days, but protects hundreds of thousands of dollars.

2. Skipping the Strata Report

Apartment buyers sometimes skip strata reports to save money or time. Weeks after settlement, they discover an impending $50,000 special levy or undisclosed maintenance issues.

Better approach: Always obtain the strata report. The $200–$400 cost is insurance against catastrophic surprises.

3. Not Checking Historical Land Use

Properties built on former industrial sites, gas stations, or dumpsites can harbour contamination. Remediation costs run into tens of thousands.

Better approach: Ask your conveyancer for a contamination search. Review the property's history on council records.

4. Overlooking Builder Quality

Buying from a builder with a history of defects or phoenixed entities means you'll likely face costly repairs with no recourse.

Better approach: Research the developer and builder. Check online reviews and ask your conveyancer about their track record.

5. Ignoring Neighbourhood and Infrastructure Risks

A great property in a flood zone or next to proposed road works can become a financial liability.

Better approach: Check flood maps, talk to neighbours, and review the NSW Planning Portal for upcoming developments.

6. Not Securing Unconditional Finance Approval

Making an offer with only conditional approval means your lender could later reject the property if the valuation comes in low.

Better approach: Get unconditional pre-approval before making an offer. Understand your actual borrowing capacity.

Learn from other buyers' experiences in our article about 9 costly mistakes first home buyers regret.

The Role of Real Estate Agents and Buyers' Agents

Real Estate Agents

Your real estate agent is the vendor's representative, not yours. Their job is to sell the property—ideally at the highest price. While they can provide market insights, remember that their interests may not align with yours.

What they can help with:

• Market data and comparable sales
• Negotiation assistance
• Logistics and scheduling inspections

What they can't help with:

• Legal advice
• Financial planning
• Building or pest inspections

Buyers' Agents

A buyers' agent represents your interests throughout the purchase process. They can:

• Conduct due diligence on your behalf
• Negotiate price and terms strategically
• Help you avoid emotional decisions
• Identify properties that match your criteria
• Save you time and potentially money through better negotiation

Cost: Typically 1–2% of the purchase price

For first-time buyers in competitive markets, a buyers' agent can be worth the investment by avoiding costly mistakes and securing better terms.

Financial Costs Beyond the Purchase Price

First-time buyers often underestimate total purchase costs. Budget for:

Immediate Costs

• Conveyancing: $400–$1,000+
• Building and Pest Inspection: $300–$800
• Strata Report: $200–$400
• Pest Inspection (separate): $150–$400
• Environmental Searches: $200–$500
• Title Search and Zoning Certificate: Included in conveyancing fees
• Valuation (lender requirement): $200–$400

Settlement Costs

• Deposit: 10% of purchase price (or 5% if negotiated)
• Stamp Duty: Varies by state and property value (first-home buyers may qualify for concessions)
• Land Tax: Applies to investment properties only
• Lenders Mortgage Insurance (LMI): Required if deposit is below 20% (unless you qualify for the Home Guarantee Scheme)

Ongoing Costs

• Council Rates: Typically $300–$700 per quarter in NSW
• Strata Levies: Varies widely; can be $1,500–$5,000+ annually
• Water Charges: Around $100–$200 per quarter
• Home and Contents Insurance: Varies; budget $800–$2,000+ annually

First-Home Buyer Support in NSW (2025)

The NSW government offers several schemes to help eligible first-time buyers:

Home Guarantee Scheme (HGS)

As of October 1, 2025, the scheme has expanded with:

• Unlimited places (no quota)
• No income caps
• Higher property price caps (varies by location: Sydney $1.5m, Melbourne/Geelong $950k, Brisbane/Gold Coast/Sunshine Coast $1.0m, and other regional variations)

Eligible buyers can purchase with deposits as low as 5%, and single parents can qualify with deposits as low as 2%, without paying Lenders Mortgage Insurance (LMI).

First Home Owner Grant (FHOG)

For new homes, eligible first-time buyers can receive a $10,000 grant.

Stamp Duty Concessions

First-home buyers may qualify for full or partial stamp duty exemptions. Check Revenue NSW for current thresholds.

Always verify your eligibility with the relevant government agency before planning your purchase.

Step-by-Step Due Diligence Timeline

Weeks 1–2: Pre-Offer Research

• Obtain mortgage pre-approval
• Research suburbs and comparable sales
• Check flood maps and environmental hazards
• Review council records for zoning and development applications
• Identify and interview conveyancers and inspectors

Week 3: Before Making an Offer

• Attend open homes and inspect properties
• Arrange pre-offer legal review of contracts
• Confirm building inspection availability

Week 4: After Offer Accepted

• Arrange building and pest inspections immediately
• Pay 0.25% holding deposit
• Request strata report (if applicable)
• Provide contract to conveyancer for detailed review

Weeks 5–6: During Cooling-Off Period

• Receive and review building and pest inspection report
• Receive and review strata report
• Have conveyancer complete all searches and legal review
• Discuss findings with your inspector and conveyancer
• Arrange final walkthrough
• Obtain unconditional finance approval
• Request price reduction or repairs if inspection reveals issues

Week 7: Exchange and Settlement Preparation

• If satisfied with all inspections and legal review, sign contract
• Exchange contracts and pay deposit
• Arrange home and contents insurance
• Notify lender to proceed to settlement
• Arrange utilities connection

Settlement Day

• Funds are transferred
• Settlement is complete
• You receive the keys

Key Takeaways

1. Due diligence is your protection. The cost of being thorough (a few hundred to a few thousand dollars) is minimal compared to the cost of discovering major defects after settlement.
2. Never rush the process. Even in competitive markets, take time to complete inspections and legal review. An extra week of due diligence is worth it.
3. Professional guidance is essential. A conveyancer, building inspector, and mortgage broker are not optional expenses—they're investments in your financial security.
4. Timing matters. Complete as much due diligence as possible before making an offer. This strengthens your negotiating position and gives you control.
5. Use cooling-off wisely. If offered a cooling-off period, take it. Use this time to complete final inspections, secure unconditional finance approval, and make a fully informed decision.
6. For apartments, get a strata report. This is not optional. Strata schemes can hide significant financial or structural issues.
7. Understand all costs. Budget for inspections, conveyancing, searches, stamp duty, and ongoing costs like council rates, levies, and insurance.
8. Don't let emotions cloud judgment. It's easy to fall in love with a property, but thorough due diligence keeps you grounded and protected.

Final Thoughts

Buying your first home should be exciting, not stressful. By following this due diligence guide, you'll enter the property market with confidence, knowledge, and protection. You'll negotiate from a position of strength, avoid costly surprises, and make a sound investment that sets you up for long-term financial success.

Remember: taking time upfront to do things right saves you money, stress, and regret down the line. Your future self will thank you.

Next Steps

Ready to get started? Check out our other essential guides:

• Building and Pest Inspection Guide - Learn when and how to inspect properties
• How to Choose a Good Conveyancer - Find the right legal professional
• Understanding Cooling-Off Periods - Know your rights in every state
• Vendor Statement Contract Guide - Understand what you're signing
• Complete First Home Buyer Checklist - Your step-by-step roadmap

Disclaimer: This guide is general information only and should not be considered personal financial or legal advice. Always consult with qualified professionals—including a conveyancer, mortgage broker, and financial advisor—before making property investment decisions. Property laws vary by state and territory. This guide focuses on NSW; always verify requirements in your jurisdiction.