I really don't like inspections.
Well, I really just don't like paying for an inspection, where if anything is actually wrong, I am told to "contact a qualified expert." Whether it is foundation, electrical, or plumbing, the inspector will usually just tell me to get a quote from "a qualified expert" or get that quote themselves.
Continue Reading Below
Despite the lack of clarity that comes from most inspections, they are very expensive. I have seen inspections cost $650 for a single family home and up to $30,000 for a large apartment building. In any case, that is money that could be used toactually fixthe things that are wrong, or at least it seems to me.
In a span of about 18 months, I purchased well over 400 homes from a large real estate investment trust (REIT), and I didn't once get a formal inspection. That is not to say that I just bought homes all willy nilly without ever doing my due diligence. I just decided that there was a better way to inspect buildings -- inexpensively! I'm not going to advocate that you don't get inspections on a building because there is risk involved with that process, which newbies should avoid. I am, however, going to give you my list of what to ask, look for, and negotiate during the escrow process.
7 tips for getting the most out of a propertyinspection
1. Make sure your inspector gives you bids for the items he calls out.This is a big one for me. If I'm going to be paying $400 or more for an inspection, then I sure as heck better be getting a quote on the work for the things that are wrong. It is important to understand as the buyer (person ordering the inspection) that any bid you get from the inspector is going to be marked up in some way. That is fine, though; you still want it.
Many inspectors will double up as contractors or have a contractor partner that they recommend for doing repairs found during inspection. However, most times they aren't particularly interested in the contracting work and will just make their bids so high that it would become worth it if you wanted them to do the work.
2. Once you have an inspection, have a separate contractor bid out the work.You should always, and I meanalways, get two bids for work, but this is particularly true of work being done during the escrow process. In fact, you should walk the property with your contractor and ask them to bring up anything that they think may be wrong with the house.
This will essentially act as a second inspection and won't cost you a dollar, at least up front. The contractor is going to be incentivized to nitpick every single thing he sees wrong because it means more business for him. This aligning of interest is a good thing for you and important in making sure you don't buy a property with a large issue.
3. Make sure your inspection includes sewer, plumbing, and electrical.These are the three areas where I have been hurt worst when buying properties. Everyone gets super worried about a bad foundation, but you can usually tell a property has a bad foundation just by looking at it, and inspectors are pretty good on that item. Electrical, plumbing and sewer are more difficult because they require more work. Access to the foundation is easy -- walk around the building or go into the crawl space under the house. It is far more difficult to check the wiring behind the walls or the insides of pipes.
Make sure to ask the inspector if these items are included in the inspection cost because sometimes they aren't. At worst, have your contractor go around and do a cursory test of the switches and plumbing. This approach won't be perfect, but it is better than nothing.
Lastly, make sure to ask the seller to disclose any specific issues that they have ever had with the aforementioned. Getting their response in writing, even if it is just email, can be helpful down the line if there is an issue.
4. A soil test can be a good use of money.You want to get this priced out, and it can be expensive, but I'm actually in favor of a good soil test. The reason is that there could be pollutants or other really harmful material, like lead, in the soil, which could meaningfully impact your property. In particular, I would get a soil test on a large deal or my first couple of deals. If you are only going to own one property, it is worth the $500 dollars for the soil test to make sure that you don't get sued or lose a lot of value.
5. Ask for a better price on the inspection.I'm always a fan of trying to negotiate pricing. The worst that they can say is "No." If you are anything like me -- and you likely are if you are on BiggerPockets reading this article -- then you want to own a lot of real estate. This is a fact that I would share with the inspector when you go back to ask for a better price. Tell them that if they do a good job, then you will give them all of your inspections.
I like having a go-to inspector whom I can trust and have worked with before. He is going to give me better pricing, but even more importantly, he is going to be more likely to have my back and do a better job. It is no different than hiring a contractor for the first time you want to build a good relationship.
6. Be physically present at the inspection.Body language and intonation are important. Be present at the inspection so you can see how the seller, inspector, and agents react to certain things. This is a great way to simply learn more about real estate, but it is also a way to get a "feel" for how these people view your property.
Inspectors and agents have seen hundreds of homes, and they will have a good idea if something is a big issue or not a big deal at all. You want to be there to see their reaction. There are loads and loads of ethical and good real estate agents out there, but like any profession, there are also those that aren't so moral. The reality of the situation is that the agents are incentivized to get the deal done, and their incentives don't necessarily align with yours. I'm not saying to be distrustful, but I do think a skeptical mind-set is a good thing for a property inspection.
7. Ask as many questions as you can think of ... and take notes on the responses.Inspections can be a whirlwind -- and an emotional time. If this is a first purchase or a big deal, then you will be even more emotionally invested. Thus, it is important to ask as many questions as possible in an attempt to critically look at the situation.
A few I like are:
- What are you doing?
- Why are you looking there?
- Why aren't you looking there?
- What do you think about ______?
- I don't understand ... why?
Don't try to be a know-it-all. On the contrary, be a know-nothing. You gain nothing by impressing the inspector and agent with your knowledge of housing inspections and construction. Make the inspector adequately explain things to you. If he can't get you to understand, it is not your fault it is his! The more questions you ask, the more likely you are to get a good inspection. Also make sure to write down notes that you can go over later. It is easy to forget an item if you don't write it down.
Although I'm not a fan of inspections, they can certainly prove useful in the right situation. When in doubt, make sure to be cautious and spend the extra few bucks up front.
What are your thoughts on inspections? What inspections do you get (or not get)?
This article originally appeared on BiggerPocketsand is Copyright 2014 BiggerPockets,
The article 7 Smart Tips for Getting the Most Out of a Property Inspection originally appeared on Fool.com.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
Continue Reading Below