02/06/07: You Need A Home Inspection
By Benny L. Kass
Q: I am a first time home-buyer. I have found a house that is approximately 35 years old, and plan to submit a contract shortly. I have been talking to my realtor about the need for a home inspection and she has not been very supportive of this. She has suggested that if I make the contract contingent upon my obtaining a home inspection, the seller may balk at signing the contract.
What do you suggest?
A: I suggest that you consider terminating your relationship with your real estate agent.
Why would you buy a 35 year old house without having a professional inspect the property? Do you know anything about structure? Or about roofs? Or basements?
This list can go on. Unless you are a professional contractor, you definitely need to retain the services of a competent home inspector. Your contract must be contingent on your obtaining a satisfactory inspection. This means that you will have X number of days (the number to be spelled out in the sales contract) to have the property inspected. If you are dissatisfied for any reason, you have the absolute right to terminate the contract and get your earnest money deposit refunded.
In fact, many buyers give the deposit check to the broker, but add language in the sales contract that the check will not be deposited until the inspection contingency has been removed.
There are two kinds of inspection contingencies.
– general inspection: here, if the buyer is dissatisfied with the inspection for any reason – in his or her sole discretion – the buyer may declare the contract null and void.
– specific inspection: under this arrangement, the buyer must provide the seller with a list of specific repairs to be made. The seller has a fixed number of days in which to respond. Let’s take this example: you list 8 items for consideration by the seller. The seller comes back in a timely manner and agrees to repair 6 of the problems, but not all of them. You then have a fixed number of days in which to either accept what the seller has proposed, continue negotiations for the remaining two items, or terminate the contract.
While sellers and real estate agents prefer the latter approach, from the buyer’s point of view, the general inspection clause is the one to use. In this case, the buyer still have the right to advise the seller that there are ten items to be corrected and if the seller agrees to those repairs, the buyer will remove the contingency. But the buyer may be completely turned off from the house based on the inspection, and under the general contingency would have the absolute right to terminate. That option is not available under the specific contingency language.
It should be noted that under either contingency, time is of the essence. If the buyer does not act promptly and advise the seller of the problems (or that the contract is terminated), most standard contracts state that the contingency is “deemed to have been removed” and the contract remains in full force and effect.
How do you find a home inspector?
The best way is word of mouth. If your friends used an inspector and were satisfied with him, that would be the way to go.
Your real estate agent will suggest names. But you should insist that you be given at least two names so as to avoid any suspicion of favoritism. Unfortunately, over the years there have been reported stories where home inspectors downplayed any problems in the house because the inspector wanted to get more business from the real estate agent.
There is a trade association known as American Society of Home Inspectors (ASHI) that has an interesting web site (www.ashi.org). You can find names of inspectors in your area, as well as a lot of useful information about home inspectors, product recalls and state regulatory requirements. Unfortunately only some 31 states have statutes dealing with home inspectors. For example, according to their website:
Maryland Trade practice act enacted in 1992. Maryland law requires home inspectors to disclose professional qualifications and the scope of the inspection within the home inspection contract. The law also requires home inspectors to conduct home inspections in accordance with the standards of practice set forth by a professional home inspection trade association such as ASHI or the National Association of Home Inspectors
In Virginia, there is a voluntary certification program, and no person may hold him/herself out as a "certified home inspector" without meeting the certification requirements prescribed by the Virginia Department of Professional and Occupational Regulation (804) 367-8500.
“One of the costliest mistakes homeowners can make is to hire an unqualified inspector to assess their home”, said Frank Lesh, incoming 2007 President of ASHI. According to Lesh, you should ask the following questions of the potential inspector – before you make the final decision on which inspector to use:
– How long has the inspector been involved in inspections and how many inspections has he done?
– Is the inspector specifically experienced in residential inspections?
– Does the inspector (or his company) have a policy not to do repairs or improvements based on the inspection? Clearly, if the inspector wants to do the corrective work, there is a potential conflict of interest; the inspector may find bogus problems just to get paid to correct those matters.
– Does the inspector participate in continuing education programs to keep his or her expertise up to date? and
– Is the inspector a member of a professional trade association such as ASHI. Inspections are important. If that boiler breaks down days after you go to closing, you will have a hard time getting the seller to pick up the tab for repair or replacement. If the inspector catches the problem during the contingency period, you have leverage; you can either get the seller to resolve the problem or you can walk away from the contract.
Inspections are also important for the seller. Since the property will usually be inspected within a few days after the sales contract is signed, the buyer will know up front if he wants to buy or walk. Otherwise, a seller may learn a day before settlement (or even at the settlement table itself) that the buyer has concerns and will not close unless the seller fixes up some problem areas or gives the buyer a cash credit.
Additionally, should a buyer complain to the seller after settlement about problems he has now discovered, the seller can easily advise the buyer “you had a home inspector; if that problem was not discovered, complain to your inspector, the one you hired”.
Home inspections should be a mandatory part of every residential real estate transaction.