Real Estate Investing - Why I Like Home Inspections!

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!

Real Estate Investing: Inspection Check List

Imagine you shift in your new home and the roof starts leaking during the rain, or there are cracks on one of the walls of your living room. How does it feel? To avoid such incidents, it is always wise to inspect your real estate before plunking hundreds of dollars on buying it.

Doing the Inspection on Your Own:

It is better to do inspection on your own in order to get better price for the real estate. However, you need not learn the technicalities of building to check out errors. Anybody can make out if the home needs repairs, or there is something wrong with the drawers and sinks. Moreover, bring along a home inspector with you, inspecting on your own helps in negotiating with the sellers regarding the flaws.

Checklist for Home Inspection:

It is a good idea to keep a list of things that you have to check while looking around the house. Make notes of the things that are wrong. Do not depend on your memory in this case. There are innumerous things to check. You may find many flaws too. Your checklist and notes will help you during negotiation with the estate seller.

HUD’s Handbook for Minimum Property Standards:

HUD?s Handbook, illustrating the minimum housing property standards, comes in handy during inspection. You can order the handbook online. The HUD Direct Distribution System gives it free.

Inspection Checklist for Your Home:

? The position of the propane tank.
? Water logging spots around the house as well as the drainage system.
? Trees and other plants that are posing a hindrance.
? The condition of paint.
? The condition of roof, chimneys, and pipes.
? The alignment of doors and their locks.
? The windows panes and glass.
? Cracks in the foundation and the height to avoid the threat of harmful insects creeping inside the house. Cracks larger than 1/8 inch is a warning sign.
? Condition of the driveway.
? The supports of the porches, their paints and porch boards.
? The doors and ventilation of sheds.
? Electrical fixings.
? The sturdiness of fences.

Inside the rooms, you should inspect the walls, ceilings, and floor for visible cracks. Check the cabinets and bathrooms for drains, fireplace, faucets and sinks, and lightings. Check the garage too. Take your time and inspect every detail of the house. It is you, who have to live in it.

Remember, real estate inspection serves as a tool for negotiating the price with your seller. Do not sign any document before inspection. Dig out as many flaws as you can and present them before the seller to get a fair deal.

So, start pointing fingers!

Real Estate Investing: Inspection Check List

Imagine you shift in your new home and the roof starts leaking during the rain, or there are cracks on one of the walls of your living room. How does it feel? To avoid such incidents, it is always wise to inspect your real estate before plunking hundreds of dollars on buying it.

Doing the Inspection on Your Own:

It is better to do inspection on your own in order to get better price for the real estate. However, you need not learn the technicalities of building to check out errors. Anybody can make out if the home needs repairs, or there is something wrong with the drawers and sinks. Moreover, bring along a home inspector with you, inspecting on your own helps in negotiating with the sellers regarding the flaws.

Checklist for Home Inspection:

It is a good idea to keep a list of things that you have to check while looking around the house. Make notes of the things that are wrong. Do not depend on your memory in this case. There are innumerous things to check. You may find many flaws too. Your checklist and notes will help you during negotiation with the estate seller.

HUD’s Handbook for Minimum Property Standards:

HUD?s Handbook, illustrating the minimum housing property standards, comes in handy during inspection. You can order the handbook online. The HUD Direct Distribution System gives it free.

Inspection Checklist for Your Home:

? The position of the propane tank.
? Water logging spots around the house as well as the drainage system.
? Trees and other plants that are posing a hindrance.
? The condition of paint.
? The condition of roof, chimneys, and pipes.
? The alignment of doors and their locks.
? The windows panes and glass.
? Cracks in the foundation and the height to avoid the threat of harmful insects creeping inside the house. Cracks larger than 1/8 inch is a warning sign.
? Condition of the driveway.
? The supports of the porches, their paints and porch boards.
? The doors and ventilation of sheds.
? Electrical fixings.
? The sturdiness of fences.

Inside the rooms, you should inspect the walls, ceilings, and floor for visible cracks. Check the cabinets and bathrooms for drains, fireplace, faucets and sinks, and lightings. Check the garage too. Take your time and inspect every detail of the house. It is you, who have to live in it.

Remember, real estate inspection serves as a tool for negotiating the price with your seller. Do not sign any document before inspection. Dig out as many flaws as you can and present them before the seller to get a fair deal.

So, start pointing fingers!