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By Jennifer Anderson, Member
FORBES Real Estate Council
Whether you’re purchasing your first home or you’re an experienced buyer, each property has its own unique considerations when it comes to ensuring a safe environment and sound investment. Not only are home inspections vital – it’s also vital to complete them correctly and comprehensively within the established time frame.
Many buyers are undereducated about the home inspection process. As a buyer, you don’t necessarily need to know every detail about home inspections, but you should have a good understanding of the basics. Most importantly, you should know what to look for in a strong real estate team that can guide and advise you throughout the entire process. Here are a few essential considerations.
Select the right team.
A good agent knows as much about people as they do about real estate. They should not only be sensitive to your individual budget and lifestyle considerations, but they should also have long-standing relationships with local inspectors, contractors, etc. and be able to recommend those who best align with your personality and objectives.
Your agent should educate you about the home inspection process as part of your initial consultation and onboarding process. Some agents even offer workshops about how to determine which home inspections are necessary and how to negotiate with sellers. Additionally, they may review the particulars of previous sales with their clients to familiarize them with the cadence of a successful real estate transaction.
Have a plan and act fast.
Once you’ve found the right home, your agent should work with you to draft an offer that takes into consideration the specific inspections you might need. This way, you’ve already allotted the appropriate time for inspections to be completed after you’ve placed money into escrow.
At minimum, your first round of inspections should include a standard home inspection – which analyzes the home’s heating, air conditioning, plumbing and electrical systems, as well as the roof and other structural components – and a termite inspection. These inspections should be front-loaded, ideally within the first few days, allowing 24 to 48 hours for the reports to come back and additional time to arrange for any necessary specialist inspectors.
Throughout the country, home inspection periods can range from zero to 30 days. In the Del Mar and San Diego markets, they average around 17 days, which pass quickly, especially if you need to schedule additional inspections. By front-loading your initial inspections, you can avoid having to request an extension period, which the seller may or may not grant you.
Don’t spare any necessary expense.
Buyers should pay for their own inspections in order to maintain the advantage of choosing their own inspectors and receiving the reports first, which gives them a leg up in any subsequent negotiations.
Depending on the geographic location and age of a home, additional inspections should be performed to ensure your safety. These could include tests for radon, mold and asbestos. Sometimes, buyers shy away from these tests, because they can be expensive. But making sure your home is free of toxins and contaminants could literally be a matter of life or death – and remediation, once you own the home, could easily cost hundreds of thousands of dollars.
When negotiating, compromise is key.
If your inspections uncover any serious issues with the property, you should collect several repair estimates from different vendors and use the average cost to negotiate with the sellers. Because these issues would have to be added to the seller disclosure if the home were relisted, sellers are usually incentivized to compromise with buyers – but compromise is the key word.
Home inspections are not an opportunity to get an “upgrade” on a real estate deal by finding something wrong with the property. It is an opportunity to be compensated fairly for items that are past useful life and/or pose a potential safety risk. Very rarely is it wise to enter negotiations with a “take all” style. Unless the seller is exceptionally motivated, buyers usually receive more when they ask for less.
A good benchmark is to consider requesting credit for about 60 to 80% of the average repair estimate from several different contractors. In my experience, buyers who request slightly less than full credit end up negotiating a better outcome than buyers who go all-in up front.
Inspect more than the physical home.
Ensuring a home is ready to buy requires more than inspecting just the physical property. Your agent should help you understand which additional information you should request in order to uncover whether there are any issues with the preliminary title report, as well as any liens or restrictions on the property.
Inspecting intangibles is especially important if you’re purchasing property that is part of an HOA. Typically, those buying into an HOA have a window during the inspection period to review all of the information associated with owning in that community. Buyers should analyze the HOA reserves to understand the rate at which HOA fees are increasing and whether there are enough reserves to make unexpected repairs. Reading through the HOA’s meeting minutes can also uncover any red flags, such as problematic neighbors.
