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Home inspections, seller’s hate them. But most buyer’s shouldn’t buy a home without getting a home inspection. We look at what a home inspection is. How much they cost? And who pays for the repairs of things found in the home inspection report.
What is a home inspection?
Home inspections are a detailed inspection of the mechanical, plumbing, roofing, electrical systems of a home, and a whole lot more. The typical home inspection process involves the inspector using a computer tablet, and working through an exhaustive checklist. The home inspector will look under every sink for possible water leaks. They’ll test each of the electrical receptacles and switches. In addition, they’ll crawl under the house and through out the attic. They’ll look for signs of rodents, water damage, mold, or other problems. And as they work through the checklist, the home inspector will take a picture of everything suspect.
Every home inspector I’ve seen in the past 10 years has used some kind of home inspection software package to help them do their job. That’s not a bad thing, but it does tend to create very long, scary reports. These reports are 45 or more pages and filled with all of the home inspector’s findings and pictures. Along with the items, most reports will include a description of why an item should be considered for “further inspection”. Almost half of modern home inspection report content, is boilerplate explanatory text.
It’s important to note, that home inspectors may have little construction experience. In California, home inspectors are not required to be licensed contractors. As a result, you shouldn’t assume that everything that is flagged as a problem, is a problem.
How much does a home inspection cost?
Home inspection prices and can vary by region. According to HomeAdvisor.com the national average for a home inspection is $315. However, in the Sacramento region, home inspections can cost between $450-$550. While some home inspectors charge a flat fee, others charge based on square footage of the house, whether or not the house has a pool or a deck, and any other pertinent areas they will need to inspect.
Who pays for the home inspection?
Normally, the buyer pays for the home inspection fee, but everything is negotiable. In the standard real estate agent’s purchase contract, there’s a checkbox next to who pays for which inspections.
A quick glance at this section and you should be able to see who’s being asked to pay for the inspections.
If the purchase contract provides for the seller to pay for the buyer’s “recurring and non-recurring closing costs”, then the seller is ultimately helping the buyer pay for their inspections.
Who pays for repairs after home inspection?
There’s normally no requirement for the seller to pay for the repairs found in a home inspection. However, the buyer will probably not feel the same way. Most buyers will request that the seller make certain repairs or upgrades. Alternatively, the buyers may ask for a credit towards their closing costs. These dollar amount can be quite hefty if the buyer’s looking for the seller to pay for extensive repairs, adding to the seller’s cost to sell their home.
There’s nothing that says the seller has to agree to pay for all of the repairs, or even some of the repairs. However, it’s in the seller’s best interest to try to at least give the appearance of meeting some of the buyer’s demands, especially if the items are related to health and safety (see below). This way, the buyer feels like they win something, and you as the seller can win something, by not paying for all of the repairs.
What’s the biggest reason to make your offer contingent on a home inspection?
Every standard home purchase contract will have a statement saying the purchase is subject to the buyer’s inspections. While experienced investors buy homes as-is without inspection contingencies, it is not wise for the end user to do so. Investors usually have a construction background and can quickly evaluate the condition and needed repairs.
But for end users, a home inspection can save you thousands of dollars in possible repairs. A home may have foundation issues, an HVAC system that is at the end of life, or a hot water heater that is 3 years older than it’s supposed life. While you may be handy at making minor repairs like painting or replacing a faucet, a faulty electrical panel or mold is beyond the average home buyer’s expertise.
If your home inspection finds that your future home needs major repairs, you need to know that before you buy it, not afterwards. You may be disappointed that your future dream home is really a shack in the woods instead of Cinderella’s castle, but it’s better to find that out before you move in, instead of after.
Additionally, if the home inspection report can give the buyer negotiating power. If the report shows repairs that are potential health or safety issues, the buyer will have an opportunity to negotiate with the seller. The buyer may choose to ask for a credit for the repairs or for the seller to make the repairs prior to purchase.
What to look for in a home inspection?
First of all, keep in mind that home inspections report on possible problems. Not everything included in a home inspection report is a problem. For instance, just about every house built in the 1970’s in the Sacramento region used electrical panels made by Zinsco. There’s literally hundreds of thousands of these panels in houses today. Over the years, some Zinsco electrical panels caused fires and have become a favorite of home inspectors to flag. Obviously, a fire is not something anyone wants, but a licensed electrician should be able to inspect your system and tell you if your panel is at risk.
I have a firm belief, but can’t prove it, that home inspectors feel they must scare the *!@#$% out of you, or they haven’t done their job.
Repairs that aren’t up to code
There may be items on the home inspection report that say something isn’t up to code. It’s important to understand that just because something isn’t up to code to today’s requirements, doesn’t mean the work wasn’t done to code when the work was performed. Every three years, the International Code Council publishes a list of requirements (codes) for safe building construction. These rules are updated, as construction materials change, and new safety issues become known.
For example, Ground Fault Circuit Interruptors (GFCI’s – they’re those electrical receptacles that have the little push buttons on them), weren’t required in bathrooms until 1975. They weren’t required in kitchens for another 11 years. Now, they’re standard. If a home was built in 1980, and hasn’t been updated or remodeled, it may not have GFCI circuit breakers in the kitchen. The home inspector will flag this as not being to code.
However, if something wasn’t done to current codes at the time of construction, then that could be a red flag. But what if your electrical in the kitchen was remodeled after 1987? If the kitchen still doesn’t have GFCI’s after the remodel, that may be an indication that the remodel was performed incorrectly and there could be additional issues.
Health and Safety Issues
Buyers should look for any items that are health and safety related. These items should be corrected as soon as possible, either by the seller or buyer. Missing smoke or carbon monoxide alarms should be addressed. Faulty electrical wiring should be evaluated to determine if it’s just not correct, or if it poses a safety risk. If there’s mold, then the source of the water needs to be identified and fixed. Then you need to have the mold removed. If friable asbestos is found, is it deteriorating or in an area that people could inhale the fibers? These are all things that the buyer should investigate further.
Items that are beyond their expected lifespan
Nothing lasts forever. Most water heaters are rated for only seven years, unless they’re properly maintained. Homeowners who properly maintain them can extend their life by several years. However, many homeowners either miss, or forget to perform common home maintenance items.
Major appliances may look functional, but still fail. HVAC systems can still run giving you the appearance that everything is good, even when it may be several years beyond it’s expected life. A typical home inspection report will include items that are beyond their expected life or nearing the end.
Be on the look out for big ticket items that are close to needing replacement. If you are the seller but don’t know how old an appliance is, look on the appliance itself. Often the year of manufacturing will be stamped on the appliance or part of the serial number. You can then research how long the expected lifespan is of the appliance.
Why a home inspection matters to sellers
Sellers hate home inspections because of three things. First, sellers often feel like inspectors blow things out of proportion. Second, home inspections normally mean additional repairs. Third, sellers may feel like they’re being held hostage when the requests for repairs are not requested until just before closing. When the requests for repairs come in at the last moment, there’s very little a seller can do but give in if they still wish to close on time.
Sellers also don’t want to inadvertently inform the buyer’s lender that their home needs repairs. Contracts that adjust the purchase price because of needed repairs are a red flag to lenders. If this happens, your buyer may not be able to get a mortgage for the sellers home until the repairs are made.
Want to avoid home inspection headaches? Consider making as many repairs as is feasible prior to listing the home on the market. You will be able to shop around for contractors and handymen to make any needed repairs. By shopping around you could potentially save money on repair costs.
The alternative of course is to sell the house as is, but this normally means at a discounted price.
Home inspection checklists
There are many home inspection checklists available on the Internet. A printable version of an inspection checklist for sellers can be an invaluable resource for sellers before putting their home on the market. Using the checklist, sellers can make many of the needed corrections to avoid possible red flags. Keep in mind, that it will be almost impossible for you to eliminate every problem. Home inspectors wouldn’t feel like they had done their jobs if they didn’t find something to flag as a potential problem.
The more repairs you can make, prior to putting your home on the market, the better your home will look to the inspector. And the better your home looks to the inspector, the more comfortable your buyer should be in purchasing your home.