I asked a friend recently what he thought of having home inspections done on residential investment property. “They suck,” he said rather vehemently. When I asked him why he had such an emotional reaction, he shrugged his shoulders and mumbled something about inspections being a big waste of time and money because they “never find anything wrong anyway.” I suspect my friend either isn’t buying enough houses, or he hired the wrong inspector.
My Home Inspector finds things wrong with every house he inspects, and that’s just the way I want it. Costing between $200 and $450 each, I think home inspections are one of the single best bargains for a real estate investor. In fact, usually the inspection pays for itself, and I’ll tell you why in just a minute. First, let me just say that if my inspector ever tells me a house has no problems, I will send him back to do the job right. Here’s why.
What Should Be Inspected
All my offers on houses (except bank foreclosures- I’ll explain that in a minute, too) are subject to an inspection by a professional Home Inspector. I’ll say it again. ALL my offers. Why? Two reasons.
First, even though I’m a pretty handy guy and I’ve bought and sold a lot of houses, I’m no expert in structures or engineering- not even close. My Home Inspector is. There are a lot of things that could be wrong with any home I purchase, no matter how good it looks or how new it is. Nasty things like cracks where there should be no cracks, leaks or water damage in spots that should be dry, heating systems that throw only cold air, and… well, you get the idea. My inspector, expert that he is, knows how to find these things, and his job is to tell me about them.
Second, because I make so many offers, I just don’t have time to inspect a home like I should. Putting a home inspection clause in my offers is like my safety valve. I don’t have to worry because my inspector will do what I don’t have time to do. As we already discussed, he’s much better qualified anyway.
O.K., I promised I would tell you the reason I don’t put this clause in my offers on bank foreclosures. Here’s why- it would weaken my offer to the bank. Banks give preference to true, non-contingent offers and I want them to know that I’m prepared to close no matter what. Will I have an inspection done on these foreclosure homes? You better believe I will- but I won’t make my offer subject to the inspection. The results of the inspection will be for my own information and edification only.
I have all my residential investments inspected, and I recommend you do the same.
Another Tool In Your Bag
There is one more very important reason to have a home inspection done. When you sign a purchase offer, and it is accepted by the seller, the negotiation process is not over- not by a long shot. In the seller’s mind it might be over, but in my mind it’s really just beginning.
When your inspector finds something wrong- trust me, he will- you have another tool in your bag of negotiating tactics. Now is the time to go back to the seller, explain the findings of the inspector, and ask for one of two things- either repairs of the problem areas, or credit off the selling price. Either one is good, but personally I like the money better. Here’s an example.
Recently, I had a home inspection done on a 1724 square foot ranch in a nice section of town. The home inspection actually turned up very little, but a couple of things my inspector did catch were a faulty damper in the chimney flue and a bad GFI circuit interrupter in one of the bathrooms. Not necessarily major repairs, but I am going to incur some cost to repair them. They also represent a powerful negotiating tool. What did I do?
I phoned my Realtor and explained the inspector’s findings. Then, I instructed my Realtor to ask for $750 credit off the price of the home to cover the repairs. Will I get it? Not bloody likely, but I will get something, and that’s the whole point. Whatever I am able to negotiate, (in this case it wound up being $350) it’s more than I would have gotten if I had decided to forego the inspection. Also, I wouldn’t have found out about the needed repairs until much later- maybe not until I sold the house and my buyer’s home inspection turned them up. Not good.
But, since I did know, I was able to renegotiate for $350, which was $130 more than the inspection cost me. I told you most of them pay for themselves! Very good.
Who To Hire
I have written another article, Building Your Team, about how to find and hire competent professionals to help you in your Real Estate business. I’ll share a few additional comments here on that.
First, look for someone with the right credentials. Members of the American Society of Home Inspectors (ASHI) are certified to conduct home inspections, and licensed engineers are licensed by your state. Either or both of those qualifications are very desirable.
Second, look for experience. If they just hung their shingle last week, they are probably not experienced enough to handle the job. My guy has been inspecting homes for 23 years, and was a contractor before that. In fact many highly qualified inspectors are semi-retired contractors.
Finally, ask other investors and Realtors for referrals. They will know who the trustworthy inspectors are in your town. Once you find someone you trust and enjoy working with, stick with them. The hassle of switching is not worth saving a few bucks, which is all we’re really taking about anyway.
Consider well what I’ve said in this article. I think you’ll agree that getting a home inspection is one of the best things you can spend your money on when investing in residential property.
Now, go make more offers!
Tom Dunn is a successful real estate investor and author of the popular DealFiles Real Estate Investor Stories free newsletter. You are welcome to share this report, unedited and in it’s entirety, with anyone you like. You may not remove this text.? 2006 by Tom Dunn. Website: http://www.dealfiles.com e-mail: firstname.lastname@example.org