During the real estate gold rush recently concluded, many buyers unwisely waived the home inspection out of desperation to outbid the competition. Such foolishness will come to haunt these desperados who opted out of a critical part of the home-buying process. They could only do so because no lender was involved in the transaction (i.e., the deal was “all cash”) or the lender had unusual criteria for funding the loan.
No home is without problems, even those recently built. The only question is the number and nature of the issues, not their existence. Some problems are relatively minor to fix (cracked windows, chipped floors, incorrectly mounted appliances) and some are more concerning (potential flooding on the outside and possibly indoors, old plumbing in need of replacement, termites, etc.).
A detailed, thorough home inspection can reveal what most sellers won’t disclose, namely the home’s current state, along with issues requiring immediate attention as well as those needing to be addressed somewhere down the road. In many states, a buyer’s only remedy for the seller’s nondisclosure of a critical fault is a lawsuit, a costly and time-consuming enterprise.
Hiring an experienced, highly qualified (and honest) inspector is critical for buying any home (even if paying all cash, as I did several years ago). A thorough inspection will provide detailed information needed to understand the extra costs entailed when owning the home. For those buyers with ultra-deep pockets, this may not matter, especially if the home in question is to be torn down and replaced with new construction. However, for all others, detailed knowledge of where the functional problems lie is crucial for addressing the home’s most pressing problems early on before the cost of repairs and renovation mounts.
The home I ultimately bought was riddled with issues, most of which were revealed by the inspection report. A few others came to light when a contractor performed a second inspection, designed to estimate the cost of repairs and renovations required to make the place whole. The sellers had only disclosed one fault–a cracked window in the bedroom. But my own home inspection performed the first time I visited the property made it clear that the cracked window was but the tip of the proverbial iceberg. My back-of-the-envelope estimate of the repair and renovation costs–$16,000–turned out to be right on the money. A local contractor was willing to put an estimate of $10,000 in writing, and the sellers were willing to throw in a $6,000 reduction in cash along with most of the home’s furnishings and appliances (they were moving far away, so this arrangement suited them as well).
Unfortunately, most buyers lack the knowledge to perform an on-the-fly inspection and cost estimate, which is why having BOTH a home inspector and a contractor (or two) involved in the property’s evaluation is critical. Your agent should be part of the inspection process so he/she can also understand the home’s pros and cons.
Several months before buying my current home, I made an offer on a different property (in a different state). To my agent’s credit, she arranged for TWO different professionals to examine the home’s roof just to be sure nothing was missed (it wasn’t, which is why I withdrew my offer; both professionals concluded the roof required replacement at a likely cost of $25,000). When searching for a home a decade ago, I engaged a realtor who had extensive construction experience so that the two of us could discuss the pros and cons of each home visited. I learned a lot from this agent as did I talking with the inspector going through the home I would soon buy. I learned a lot about that home from that inspector and frequently referred to his report (especially his recommendations for minor repairs) to ensure the home was well-maintained.
How does one choose a good home inspector?
Hopefully, the one chosen is not just good but truly great. The most meticulous and detailed the inspector the better. There are several ways to tell if you’ve chosen the right inspector. Here are several of the most important criteria:
1. INTERnachi certification. This organization educates and certifies home inspectors. Your inspector should have such certification at a minimum.
2. At least TEN years of experience as an inspector (home inspection is a complicated process, so the more experience the better).
3. Prior background in either construction or engineering. The certification courses are rather superficial and can’t guarantee true expertise. Something more is needed.
4. Good communication skills. Call the prospective inspector and discuss what the inspection involves and how detailed the report will be. Are the responses to your questions clear and straightforward? Ask for a sample report to judge the quality of the photos and the clarity of the text. A good report should include dozens of photos.
5. Advanced technology to probe the home’s innards. A thermal sensor is useful for evaluating the home’s electrical wiring. A laser measurement tool is useful for determining the dimensions of each room, and so on.
6. Ask if the inspector collaborates with local pest inspectors (ideally, there should be two separate inspections performed by two different individuals). If the property is in a rural area, you may also need a separate septic inspection. The home inspector may be able to recommend a qualified individual.
7. Inquire whether the inspection will also include the roof. Sometimes, it’s wise to have a roofing contractor evaluate the roof independently of the home inspector. A second opinion, whether it be a roofer or builder, can prove very helpful (as noted below).
Most buyers during the pandemic regretted their purchasing decision mainly because of faults neither disclosed by the seller nor revealed in the inspection report. Thousands of additional dollars were likely spent to rectify major not unearthed during the inspections. Occasionally, an aggrieved buyer will sue the inspector, but usually not (it’s expensive and time-consuming, with no guarantee of success). Rather the buyer just shells out money to pay for the needed repairs adding to the (true) cost of the home (which is not included in the home loan). Therefore, choosing the right inspector(s) is of the utmost importance. It's worth paying extra to hire the most experienced, credentialed professional you can find to perform the inspection. The individual should possess sufficient integrity to withstand pressure from the realtors to go “easy” in the inspection report. This happens (I know, because my home inspector from a decade ago told me of many instances where the buyer’s agent pressured him to facilitate the sale. In certain states, this is illegal; the realtor in question can lose their license to practice, but this rarely happens).
It's also a good idea to have an experienced and trustworthy builder evaluate the prospective home. That professional may have a slightly different perspective than the inspector, so might be able to flag issues the inspector either didn’t notice or felt was not their job to mention.
In a future article, I’ll discuss what to look for when hiring a contractor/builder. Let me conclude by stating how important it is for the buyer to get an accurate estimate of the repairs, replacements, and renovations needed to make the home fully functional. These extra costs may not be covered by a home warranty or your home insurance policy so knowing in advance how much more you’ll have to spend is critical for sound financial planning (I set aside $10,000 for repairs and renovations for both homes purchased; a comparable amount or more is highly recommended).
What are NOT included in the home inspection report are non-functional issues like the condition of the home’s paint and floors (unless a physical or health hazard). Lenders tend to ignore such aesthetic considerations when evaluating the inspection report, but you shouldn’t.
Why?
Because the property’s physical appeal is a key factor in whether you and your family will be happy living in your new home (or not). Request a local contractor provide a written estimate of the costs associated with all anticipated repairs and renovations. This estimate can be used to negotiate with the seller and, as important, provide a forecast of how much extra (apart from the loan) will be needed to make the home truly comfortable.
To learn more, read “House Hunter Confidential” (5th ed.) (Chapter 11 “Your Team of Experts,” and Chapter 44 “The House Inspection,” available on Kindle.