Inspections

Most states require a clause in the home purchase contract guaranteeing the buyer’s right to have a property inspected before purchase. 

  • Why should you have a property inspected?
    • You’ll learn about any potential problems with the property before finalizing the deal. 
    • You’re in the best position to negotiate with the seller to either fix or pay for costly repairs before signing the purchase agreement.
    • Many lenders require a home pass inspection before they will issue a mortgage.
  • Inspectors vs. Appraisers:
    It may seem confusing that you need both an appraisal and an inspection.  But they are for very different purposes:
    • Appraisers evaluate the property to check whether the sales price is appropriate.  They focus on general condition of the home and comparable sales to come up with a dollar amount for the home.  While you pay for the appraisal, it is done to protect the lender, not you the buyer.

      If the appraisal is lower than the sales price, the lender may not give you the loan to buy it because if you default, the lender won’t be able to sell the property for enough money to cover the loan.
    • Inspectors often have more training than appraisers and major home inspection associations certify their inspectors’ credentials.

      They usually spend 2-3 hours climbing all over the property, looking for structural defects and documenting the physical condition of the home.  The buyer pays for the inspection and receives the repor

      If the property has major defects, there are several things which can happen
      • Loan: the lender may require that the loan amount be reduced to match the value of the home with the defect.  This means you may have to come up with a larger down payment to cover the difference.
      • VA and FHA mortgages require that the property pass inspection and require the seller to fix major defects before they will issue a loan.
      • Offer: if you wrote your offer contract to include a contingency requiring the property to pass inspection, you can:
        • Walk away from the deal
        • Negotiate with the seller to reduce the selling price
        • Negotiate with the seller to fix the problem and have the home re-inspected.
  • Inspection Overview:
    • Cost & Time: It usually costs a couple of hundred dollars to have a qualified inspector do a visual inspection of the accessible areas of a home. 
    • Report: You will then receive a signed report detailing what the inspector found, often with explanations about how and why the problems occurred and sometimes a recommendation for repair of the problem. 
    • Cost of Repairs: If the inspector is an active contractor in the area requiring a repair, they may even include an estimate for how much it may cost to fix the problem.
    • Elements Covered: A good inspector will give you an overview of his or her process for inspecting the property, which usually covers:
      • Home interior (structural issues, not cosmetic concerns like paint condition or whether the floor tiles are outdated)
      • Foundation, Basement, Drainage
      • Framing and Building Structure, Ventilation
      • Roof, attic, and chimney
      • Kitchen, appliances, laundry & bathrooms
      • Plumbing, electrical and heating/air conditioning systems
      • Garage
    • Additional inspections can include (sometimes with additional charge):
      • Spas and pools
      • Barns or other outbuildings
      • Wells
      • Docks and sea walls
      • Fences, gates
      • Lawns and sprinkler systems
      • Pest and wood-destroying insect reports (often required by lenders, including FHA and VA)
    • Environmental services can include (usually with additional charge) testing for:
      • Radon
      • Lead
      • Asbestos
      • Carbon monoxide
      • Formaldehyde
      • Mold
      • Water quality
      • Septic system quality
  • Types of Inspections
    • Pre-sale Inspection: Sometimes a seller will have a pre-sale inspection done.  This often happens when a property has obvious repairs required and the seller wants get those out in the open ahead of time so there are no surprises during the stressful last weeks of the deal.

      In this case, the seller hired the inspector and paid for the report.  While most states require a seller to disclose anything the inspector discovers, you will still want to hire your own inspector so you can be sure of the quality of the report.  And many lenders will require it.
    • Buyer’s Inspection: The most common process is that the buyer hires the inspector and pays for the inspection, which occurs between acceptance of the purchase offer and the closing. 

      So the inspector is working for you and your best interests, and the resulting report is your property (you don’t have to give it to the seller if you don’t want to).

      Ethically, most good inspectors won’t recommend contractors, estimate the cost of the repair (unless they would do the work themselves), recommend whether the property is priced correctly or is a good buy.  And in no way should they profit from the sale of the home. 

      Often your real estate agent can recommend a local inspector who has experience with the type of property you are purchasing, or you can contact the American Society of Home Inspectors (ASHI) (http://www.ashi.org/) or the National Association of Home Inspectors (NAHI) (http://www.nahi.org/) for a licensed company.
    • Not a Warranty
      An inspection is not a warranty, and is limited to what an inspector is able to see, within a 2-3 hour timeframe.  More on Home Warranties.

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