Friday, March 4, 2011

Home Inspection 101

During the process of searching for a new home, I often get the question, "How would I find out if there is something wrong with the house?" As your agent, part of my job is to point out areas or items that I recognize as a possible concern, but it is in your best interest to do a home inspection.

Here are a few questions I get regarding this part of the process:

When do I do the inspection?

If you find a house that you really like, the first thing we need to do is put in a purchase offer. In the offer, we have the ability to put in a contingency stating that we would like "X" amount of days to do an inspection. I usually set it at 7 days from the offer being accepted so that we have time to coordinate everybody's schedules. Once the offer is accepted, we set up the inspection to take place within that time frame.

Who does a home inspection?

You want the inspection to be done with a trained and licensed professional Home Inspector. If you do not have a person in mind, I have a list of inspectors that I have worked with in the past that I have found to be both good at what they do and competitively priced.

Often I get a client that states that they have a brother, father, etc. that was a contractor or handy-man and they would like them to do the inspection. I strongly urge against this. You want someone who is recognized as an inspector, licensed by the state (unless not required in your area), and does home inspections professionally. If for some reason there is an issue with the home, we would need their professional opinion and report to bring to the seller to back up our requests.

Who pays for the inspection and how much does it cost? 

The price for an inspection varies from inspector to inspector. Some charge a flat rate, others charge by square footage of the home. Regardless of how they charge, it is the buyer who pays for the inspection at the time it is performed.

What does the Inspector actually do?

When an inspection takes place, the inspector will check out the home for anything that may be a concern. The scope of the process usually entails checking the plumbing, the electrical service, the structure and foundation, the roof, the furnace, and the water heater. They will get into the attic or crawlspace to make sure there is nothing unusual there. Basically they will check over the home like a doctor gives a person a physical.

What will an Inspector NOT do?

A home inspection is NOT a code inspection. They will not be making sure everything is up to the local codes. A pre-existing home will have been built to code at the time of construction, but over the years, codes change, and they vary from area to area. They may find something that blatantly screams "not up to code" and make note of it, but on the whole, they are not checking for code compliance.

The inspector will also inspect only what they can gain access to. They will not be punching holes in walls, digging up foundations, removing appliances or cabinetry. If you buy a house, then find an issue inside the wall while you are doing renovations, it is not something that the inspector missed... it is just something that was not in the scope of their duties. At the time of the inspection, you do not yet own the house, so you can not have someone come in and tear it apart.

I don't like something that the Inspector found. What now?

Once the inspection is complete, we will be issued a report (usually with photos) stating the condition of the home. If there is something in the report that you do not like, we have the option of bringing the issue to the seller and negotiating a solution. Each case is different.

In some instances, the seller will agree to take care of the issue and the sale can continue. In other cases, they will split the cost of the repair with the buyer. I have also been involved with deals where the purchase price has been altered to reflect the amount of the repair or fix (in the past, credits at close have been made, yet that practice is going away and is frowned upon on the whole).

It also happens where the seller says "Too Bad". They are not obligated to fix the issue, it depends on how they would like the deal to continue. Once you put on paper in the Removal of Inspection Contingency that you would like something taken care of by the seller, it is just like making a counter offer on the house. The seller has three options... Agree to the terms, negotiate the terms, or reject the terms. If they reject the terms, that could be a deal breaker.

Should I ask for repairs in the Removal of Contingency?

It depends. The probability that the Inspector will find something is quite high. The answer to this question hinges on what you are comfortable with. If it is discovered that the furnace is damaged you may want to see if you can have the seller fix or replace it. If you have a cousin that is an HVAC installer and can get you one cheap, then it may not be a concern for you. If the electrical box is found to be a potential fire hazard, you may want to have that taken care of by the seller, but if your profession is Electrician, then maybe not.

What I do recommend is that you do not ask for small items. I had a deal die once because the buyer and seller could not come to agreement on the installation of a Ground-Fault Circuit Interrupter by the kitchen sink.The buyer lost out on the house over an estimated $25.00 repair. There was another buyer waiting in the wings to purchase the home for asking price (the first buyer's offer was less than asking). That was an extreme case, but it did happen!

My advice is to only ask for items to be replaced or repaired if they are something that if not addressed, you do not want the house. Do not use the inspection contingency as a negotiating tool to get more than what you originally bargained for. That is not what it is there for. This contingency is put in place to protect you from buying a house that has issues that you were not or could not be aware of just by walking through it.

What if they do not accept the terms?

If they do not accept the terms, unfortunately the deal could die. If you love the house and decide that since they will not do the repair you still want to proceed, it IS POSSIBLE that it may be too late. Keep this in mind. As I stated before, there may be another buyer waiting to pounce.

Everyone walks away from the transaction if you can not come to an agreement... the house continues to be marketed for sale and the buyer continues the house hunt. Typically, if there are deposits, then the monies are returned.

Can I do an inspection before I place an offer on a house?

In most cases, you will perform the inspection after an offer is placed on a home. There have been instances where an inspection was done before putting in an offer, but I do not recommend it.

The "contingency" is put in place to protect the buyer. Doing an inspection before putting in an offer will possibly waste your money. If you find something you do not like, like a cracked heat exchanger in the furnace, you do not have any bargaining room to have the current owner repair it because you do not have an offer riding on the work being completed.

The only benefit of doing an inspection before placing an offer is that you can save time and just walk away... but you are then going to find another home, and do another inspection... 

Do I have to do an inspection?

No, but I strongly suggest it. Years ago, some agents were using the bargaining tactic of not performing a home inspection to entice a seller to accept their offer. Buyer beware at that point. If you have the option of checking out a used car before buying it, wouldn't you?

Hopefully this answered some questions regarding the Home Inspection. If there is something that is bouncing around in your head which I did not cover, I encourage you to add it in the comment section at the bottom. I will be happy to respond to your inquiry.

Roc and Roll Homebuyers!

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