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Home Inspections.  Yey or Ney?  Is there really any value?

Can the buyer ask for another inspection when the first one was over 3 hours long and did not find anything wrong except very minor maintenance? Answer; yes- the homebuyer(s) can  hire and pay for as many inspections as they want right up until the very hour of closing if they wish. They can hire inspectors even after the closing if they choose. That is their legal right, their time, and their money.  The REAL question is what impact does the inspection have on the transaction and the obligations on both buyer and seller under the terms of the contract?  That may be a little or it may be a lot.

So let’s back up and first take a quick look at the theory behind home inspections.  Why do or should homebuyers want a home inspection in the first place?  The common sense answer would say, I hope, because it informs the perspective homebuyer about the overall condition of the home in a more comprehensive, educated and certified manner.  The end result is a detailed report delivered to the homebuyer explaining in detail, the condition of the home from a structural and functional standpoint.  What parts and pieces work or what does not.  What components are outdated and or no longer to construction code?  What is functionally obsolete?  What may be potential problems in the near or distant future?  Problems that could lead to major construction repair cost. 

So it in theory provides or should provide a wealth of information.  So is it worth it?  That depends on how you look at it and the role you play in the transaction.  There is theory and then there is legal reality.  There is this other piece of the puzzle called the purchase contract.  A document in writing between a buyer and a seller that spells out according to its terms, the obligations, conditions and agreements between both parties involved in the sale of real estate.  That contract is legally binding on both parties.  It was created to legally protect both parties.  The seller’s representing agent usually wants nothing to do with the inspection for legal reasons.  If there is a problem with the home they do not want to know it because of obligation to disclose. They just want the closing date to get there as fast as possible.  On the other hand, the Buyer’s representing agent wants as little to do with the inspection as well but has certain duties under the terms of the contract to protect their client.  Again, for legal reasons they do not want to know anything that puts an obligation on them to advise or inform (disclose) and potentially mess up a deal.  Expensive repairs or problems can cause a contract to “bust out” quickly. 

The seller, as the owner of the home, has no further obligations beyond the terms of the contract.  They are not obligated to do anything in terms of additional repairs to the home or paying for additional repairs (allowances) and or lowering the purchase price of the home. Whether the buyer has one inspection or forty it does not matter.  No matter how bad the inspection report(s).  The vast majority of the time, the Seller will and should market / list the home “as is” which gives them the greatest protection.  They do have the legal obligation at least in most states to disclose in a “Seller’s Disclosure” all their fair and reasonable knowledge of the home and its condition. But unless the purchaser acts under the terms of the contract, most specifically its’ deadline dates, they are bound to follow through with the purchase or risk default and the loss of their earnest money. 

So the burden is on the buyer. If there is an “option period” negotiated into the contract and purchased separately, then the buyer under the terms of the option period has a certain window of opportunity to get as many inspections as they wish.  Within the time frame of the option period, they can terminate the contract without reason or loss of earnest money. They can also “re-negotiate” the terms of the contract and the seller may or may not agree to the new terms.   Once the option period has passed, the buyer is fully obligated to the terms of the contract. If the buyer chooses not to negotiate an option period they still have the right to have an inspection(s) done on the home but again, there is no obligation to the seller and the buyer is still bound to the terms of the contract including the closing date.

So here are 5 tips for homebuyers regarding home inspections:

1. 1. YOU ALWAYS NEED ONE: Regardless of the age of the home you do not know what is structurally behind the walls or in the foundation, etc. Just because it is new does not mean it is correct.
2. 2. ALWAYS NEGOTIATE AN OPTION PERIOD: No matter how good the deal is protect yourself at all times. Licensed Realtors are obligated legally and ethically to advise you to do so. If you are not utilizing the professional services of a Realtor you still need one. It protects you legally and gives you additional time without obligation to do your homework. It can be for as little or as much time as you need and are willing to pay for. The cost negotiated separately with the seller is their money to keep. If they are unwilling to negotiate an option period under any terms, you have a problem already. Remember, there is always another home.
3. 3. YOU ARE NOT AN EXPERT: Not when it comes to your own home. Regardless if you are a structural engineer, electrical contractor, designer, whatever, third party certified opinions account for something. They legally protect you in the event something is missed. It is way too easy to be “blinded” to reality because you are emotionally attached to the deal. They give you another set of eyes and professional recommendations. They give you valuable information upon which to make educated and sound decisions.
4. 4. HIRE AN EXPERT: Just because your cousin or brother- in -law has a little construction knowledge, maybe did some minor home repairs, etc. They are not licensed experts. Just because dear ol’ dad and mom are your most trusted confidants and may be footing the bill, does not mean they are licensed experts. And even if dad or mom is a licensed inspector that is still too close to the fire. Get an outside professional unbiased opinion. You want to stay friends with your friends. Don’t hire them or ask them to do your inspection. That is disaster waiting to happen.
5. 5. EVERYTHING IS NEGOTIATABLE: Especially during an option period. Do your homework. Really discuss the details of the report with the inspector. If necessary, go to structural experts to discuss the inspector’s report or have further inspections completed as necessary. Then make decisions based on what is best for your situation and your investment.

Stephen McClain is a licensed Broker and owner of Cornerstone New Home Solutions serving the greater Austin, TX metro and surrounding area. He is also a certified instructor for the Texas Real Estate Commission under contract with Champions School of Real Estate. For more information you may contact Stephen at smcclain@cornerstonenewhomesolutions.com.