A building & Pest inspection found a major defect ... what now?

If you followed the contract and use a registered builder then you likely have the opportunity to end the contract or re-negotiate the contract price or conditions.

The theory being you bought the house at the specific price not realising there was a major issue, such as a leaking bathroom, rotting stumps with out of level floors, or a major structural beam damaged or maybe serious termite damage or even live termites.

If you were unlucky enough to use someone who wasn't registered you may not be able to use this clause because you have not fulfilled the conditions of the contract.

ALWAYS USE A REGISTERED BUILDER

You could of course also get the contract changed to remove this condition too - but make sure you use a properly experienced person you trust.