What Is Property Inspection?
Property Inspection / Due Diligence is a systematic review conducted before selling or auctioning a property to determine:
“Can this property be sold in reality—and at what price—under its current condition?”
Inspection focuses on facts that directly affect price, transferability, and buyer risk.
What Does a Full Property Inspection Cover?
A comprehensive inspection evaluates at least five dimensions:
Physical Condition – structural issues, age, depreciation (~1.5–2% annually), illegal alterations
Legal Status – mortgage, litigation, enforcement, encumbrances
Occupancy Status – vacant, tenants, relatives, unauthorized occupants
Actual Market Prices – closed transactions, not asking prices
Buyer Risk Exposure – repair, transfer, resale risks
Higher risk = lower acceptable price.
Common Owner Misconception
“I bought it for 2 million and paid for years—so it must be worth that.”
Reality:
Early payments are mostly interest
Properties depreciate
Market prices ignore owner’s sunk cost
Inspection Factor | Approximate Rate / Range | Impact on Sale Price |
|---|---|---|
Building depreciation | 1.5–2% per year | 10-year-old house may lose 15–20% |
Property older than 20 years | — | Value often 20–40% lower |
Buyer-estimated repair costs | 5–15% of price | Deducted from offer price |
Illegal or unapproved extensions | — | Price reduced 5–10% |
Occupied / tenanted property | — | Discount of 5–20% |
Vacant, move-in ready | — | Higher price acceptance |
Mortgaged property | — | No direct cut, but weaker bargaining position |
Property under litigation / enforcement | — | Typically 20–30% below market |
Land Department appraisal vs market | — | Appraisal usually 10–30% below market |
Asking price vs actual closing price | — | Closing price 5–15% lower on average |
These figures explain why “the purchase price of a house is not equal to its selling price today.”
Buyers do not arbitrarily push prices down — they calculate based on real costs and real risks.
Property inspection is the process of turning reality into numbers, so pricing reflects what the market will actually accept.
What Does “As-Is Sale” Mean?
An as-is sale reflects the property’s current condition without additional guarantees.
It enables realistic pricing and faster closure.
Why Inspection Is Essential
Accurate pricing
Transparent buyer communication
Reduced negotiation friction
Faster sales
Lower legal risk
FAQ (Frequently Asked Questions)
Q: Can a property be sold without a property inspection?
A: Yes, it can be sold. However, there is a high risk of incorrect pricing, failure to sell, or being heavily pressured to lower the price.
Q: Does a property inspection always result in a lower price?
A: Not always. If the property is well maintained and located in a good area, the price may be higher than the market average.
Q: Is a property inspection different from a bank appraisal?
A: Yes. A property inspection focuses on whether the property can be realistically sold, not on loan approval.
Q: How does an auction help address condition-based pricing issues?
A: It allows the market to determine the price through real competition, rather than speculation.
