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June 18, 2018

House Sleuthing

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House Sleuthing

Help buyers make an informed choice about inspections.

Anticipation of the home-inspection report is one of the more nerve-racking elements of a real estate sale. "Inspections make both sides hold their breath to see if something’s serious enough to make the buyer withdraw," says Chobee Hoy of Chobee Hoy Associates, R.E. Inc., in Brookline, Mass.

HOMETIP FROM HOUSELOGIC

Owners should inspect their roof annually for signs of wear.

Early signs of trouble include:

  • Dark areas on ceilings
  • Peeling paint on the underside of roof overhangs
  • Damp spots alongside fireplaces
  • Water stains on pipes venting the water heater or furnace

Read more at Houselogic.com.

In many markets, inspections are de rigueur. But with so many foreclosures on the market (in various states of repair) and lenders requiring higher down payments, buyers may go into the inspection looking for confirmation that they’re getting a good value. You can help by making sure your buyer clients are realistic about what an inspector will—and won’t—do.

Inspector or Engineer?

Home inspections are great for uncovering red flags. They can help allay buyers’ fears of an ominous, costly surprise—leaky roof, misfiring furnace, or rotting beams—but they generally can’t guarantee structural soundness. For that, buyers may want to consider consulting with a general contractor or structural engineer.

Typically, inspectors focus on detecting common, visible problems in a home’s structure and systems. How long the inspection takes—and what it costs—depends on the size, condition, and systems within the property. Certified inspector Bob McDonough, franchise owner of Atlanta-based National Property Inspections, says he usually spends between two and four hours on a 2,000-square-foot house and charges about $325.

That fee closely matches industry norms, says Kathleen A. Kuhn, president of Bound Brook, N.J.–based franchisor HouseMaster, which has a National Institute of Building Inspectors–approved certification program.  Expect to pay more for extras, such as testing for lead paint or mold.

One of the challenges with making a recommendation is that the experience and skill level among inspectors varies greatly, says David Tamny, a Columbus, Ohio, inspector and 2010 president of the American Society of Home Inspectors. There’s no single standard for the nation’s estimated 20,000 to 25,000 home inspectors. Some have only baseline training while others have mechanical engineering degrees and decades of being top-notch home sleuths.

Standards of care can be different, too, says Mary Conroy-Henderson of Coldwell Banker in Dedham, Mass: "Some are extremely thorough; they’ll look at a roof with binoculars or take a ladder and go up on it. Some will just eye it."

Only 33 states require licensing and few require insurance, Tamny says. So it pays to check out inspectors’ professional affiliations. ASHI members must pass an exam, follow its code of ethics and standards of practice, and complete at least 250 inspections.

When recommending inspectors, remember that federal law prohibits real estate practitioners from collecting referral fees (or other things of value) for simple referrals. To avoid conflicts of interest and liability, always give buyers a choice. Bill Golden, GRI, with RE/MAX Metro Atlanta Cityside, recommends that buyers consider at least two reputable inspectors. Conroy-Henderson gives buyers a list of Massachusetts-licensed inspectors. Hoy updates a list of home experts, including inspectors, for her 22 brokers approximately every six weeks.

New Homes Need it

For more protection, suggest buyers pick an expert who’s familiar with both local building codes and the home’s type of construction and age. Yes, even new construction should be inspected. "It’s wrong to think only old homes have problems," says Robert Clein, a certified home inspector who’s also a structural engineer and president of Georgia Engineering Associates in Atlanta. "It’s even more important with a new home, since nobody has lived there."

Tips for Working with an inspector

Review the contract up front.   Most contracts contain standard terms describing services and limiting liability—typically to the price of the inspector’s fee, says Marian Kornilowicz, partner with Cohen Seglias Pallas Greenhall & Furman in Philadelphia.

Study the report with your buyer clients.   Inspectors should put their observations in writing, says HouseMaster’s Kathleen Kuhn, whose franchisees provide computerized reports with photos. Sit down with the report and reconcile it with the sellers’ disclosure statement. If necessary, suggest a second opinion.

Be ready to recommend specialists. When an inspector finds a red flag, the buyers may need to bring in another expert, such as an HVAC contractor, plumber, or structural or civil engineer. Buyers should get estimates for needed repairs, and—before they make an offer—decide what they’d like the sellers to fix or offer as credit. Many general contractors like Matt Lederer of Mahogany Builders in Chicago routinely perform such services.

Discourage seller participation.   Inspectors may not feel comfortable pointing out problems when the sellers are in the room, Tamny says.

Shadow the inspector. Thorough inspections cover major systems—electrical, plumbing, roofing, HVAC, and more. "Inspectors look for things that represent significant deficiencies but are in view. We won’t pull up carpet or look for hidden defects in walls," says Columbus, Ohio, inspector David Tamny. Chobee Hoy, a Brookline, Mass. practitioner, notes that buyers can seek sellers’ permission to remove carpet or paneling if something seems suspect. Besides exposing problems, inspectors will point out systems and provide buyers with guidance on how to maintain them.

Understand options if the inspector misses a major visible defect. "Many inspectors carry errors-and-omissions insurance, but their contracts often limit their liability to a refund of the fee," says Kornilowicz. "They rarely will pay for needed repairs, unless the defect is so blatant that they might be deemed grossly negligent [for having missed it] or have engaged in willful misconduct."

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