Skipping an inspection could cost you
When Tori Easterling, a broker and real estate instructor, decided to purchase some investment property in Georgia, she faced fierce bidding challenges with cash investors.
By the time she viewed the property and made a bid, her offer was denied. Determined to secure at least one of these properties, which were being offered by the U.S. Department of Housing and Urban Development (HUD), Easterling cleverly devised a plan that included a due-diligence period that allowed her to back out of the deal.
It also gave her leverage to compete with those voracious cash investors. Easterling figured that since she’s the expert, she’d bid on properties without ever setting eyes on them.
Convinced she’d solved her dilemma; Easterling made an offer on six properties, got two acceptance offers, and narrowed down her decision to one after visually assessing the property.
Armed with her HUD Property Condition Report (a document that discloses things wrong with the property), Easterling confidentially placed a contract without an inspection. The outcome: a $5,000 roof job, a $20,000 siding estimate, and a nearby quarry with regular drilling that may be damaging her home’s foundation.
Before placing a contract on your dream home, here are a few things to know about home inspections—and why they’re so important.
What is a home inspection?
A home inspection is a visual, non-invasive inspection of a property. There are seven systems observed during the inspection, explains Scott Brown, owner of Brightside Home Inspections: the roof and attic, the basement and foundation, plumbing, HVAC, the interior living space, a home’s exterior, and the electrical system.
Throughout this process, the inspector assesses the home’s safety, operation, and the condition of its various systems, without dismantling or tearing apart the property. For example, when inspecting a furnace, the inspector makes sure it’s not leaking carbon monoxide; it operates when turned on and off, and there’s no sign of rust or corrosion. A maintained furnace releases a blue flame, and a yellow flame indicates a problem.
How much does an inspection cost?
Chris Chirafisi, a licensed product manager for American Home Inspectors Training, says that the cost for an inspection varies depending on the region. On average, a home buyer can expect to pay between $350 and $385, he says. However, in urban areas or larger cities—even areas that have licensing requirements or regulation demands—the price is even higher.
In New York or Los Angeles, for example, an inspection can cost upwards of $500. Easterling says that her clients pay about $600 because she advises them to have termite and radon testing done. Radon is a naturally occurring radioactive gas that causes lung cancer—and testing is the only way to be sure about exposure levels.
What should you ask an inspector?
Some states don’t have licensing requirements, which means anyone can put up a website, slap a sign on their truck, and open for business. Chirafisi says buyers should ask inspectors if they received professional training from a recognized home inspection school.
According to Chirafisi, there are roughly thirty states that have some licensing or regulation requirement. However, in states where licensing isn’t a requirement, make sure your prospective home inspector is a member of an accredited organization like American Society of Home Inspectors or the International Association of Certified Home Inspectors.
You also want to ensure that the inspector has experience; ask how many homes they’ve inspected. According to Brown, the home inspection company owner a full-time home inspector should, on average, be examining at least 250 homes a year. Brown adds that a lot of inspectors have backgrounds in engineering and often make excellent home inspectors.
If you’re in a state with no licensing requirements, hiring someone with an engineering background may put your mind at ease. Also, find out if the inspector is insured. Most states require inspectors carry insurance, but in states that don’t, you could run into an issue with your insurance company if a major defect becomes apparent later.
You found problems—now what?
When the home inspection reveals a defect or a deficiency, it gives you an opportunity to go back to your real estate agent and decide if you want to renegotiate the price—or even walk away from the deal.
Even with a new property, you could run into unexpected issues. And, just because the property is brand-new doesn’t mean corners weren’t cut. “It’s a good idea, [whether or not] the house is recently built or if it’s 100 years old… to have that unbiased, third-party home inspection performed to see if there are any problems missed,” says Chirafisi. According to Brown, “every home has some level of defect.Understanding what [those defects] are helps the buyer make an informed purchasing decision.”
What happens if the inspector misses something?
Sometimes someone discovers a defect a few months after a purchase. If this happens, you should reach out to your inspector and give them an opportunity to determine if the problem is something covered.
In many instances, it’s hard to see defects when a home is occupied. Chirafisi says that in some states, like Wisconsin, an inspector cannot limit liability. However, in Iowa, the inspection agreement could dictate that the inspector is liable only up to the price of the home inspection.
In some agreements, the homebuyer has two years to report any defects. If an inspector follows good standards of practice, they are unlikely to miss a significant issue, says Chirafisi.
Brown believes that homebuyers make a mistake when they focus on the cost of the inspection. Instead, they should evaluate experience and qualification and not who’s cheapest. “You’re talking about the purchase of something that’s $100,000 or $500,000. A few hundred dollars shouldn’t,necessarily, be the defining choice for your decision,” he says.
A hard lesson, learned
When Easterling advises her millennial clients get a home inspection, she’s often met with skepticism. Easterling assures her younger clients that an inspection is crucial; no one is trying to milk them for money.
Today, the siding on Easterling’s house still hasn’t been replaced, preventing her from selling or renting the property. Although she can now identify faulty shingles a mile away, the lesson comes with a $20,000 price tag.