Even though this isn’t necessarily a mortgage or financial post, I wanted to talk about the importance of a home inspection when buying a property and also BEFORE listing a property. With some mortgages, the home inspection is imperative to the financing of a property because lenders won’t loan money on a property with major structural damage. They want to make sure that their investment is sound. So, in some ways, this definitely has to do with finances, because the last thing you want when buying a property, is to shove a bunch more money into your already purchased property. You certainly don’t want a money pit.
When you buy a property, the listing agent will supply a sellers disclosure form. This form is filled out by the seller or homeowner with as much information as they know about the property. Sellers have a legal right to disclose as much as they possibly can about repairs, home improvements, additions, previous damage, leaks, lead paint, and anything else pertaining to the construction and integrity of the property. This will tell the buyer about the precise condition of the property before they finalize the purchase.
The purpose of a home inspection is to identify any material defects in the condition of the structure as it currently sits. Material defects can affect the property’s market value, desirability, habitability, and safety from injury. Any defects that affect the price can and should be noted in the home inspection report. The inspection should be a noninvasive examination of the mechanical, electrical, and plumbing systems as well as the integrity of the structure such as the roof, ceilings, walls, floors, and foundation. Nothing will be dismantled or disturbed so long as it can provide an adequate inspection of the material. The inspection will identify each system and component of the structure and describe any material defects. As a seller and buyer, it’s important to accompany the home inspector because often times the inspector will make recommendations about the conditions and suggest any further evaluation.
It’s important to get your own unbiased opinion and evaluation of the property. Home inspectors may not be paid a referral fee or provide any type of compensation to brokers, agents, buyers, or sellers and they must agree to accept a fee arrangement for the inspection of the report based on the findings and conclusions. They also cannot inspect any property that they have a financial interest in, so it keeps things as unbiased as possible. The inspector doesn’t care who buys the property or who sells it, as long as their findings are accurate and unbiased.
Should sellers purchase a home inspection report before listing?
I’ve seen some situations where the listing agent will ask the seller to provide a Condition of Property Transfer Disclosure Statement, which will more fully inform prospective buyers about the condition of the property. At this point, the seller could alleviate any deficiencies or damage and the inspection report and an updated report should be ordered for potential buyers to see. This can alleviate the need for a potential buyer to purchase a home inspection after the initial offer. This could be a great incentive to the buyer since it’s technically saving them a few hundred bucks.
The benefit of the listing agent and the seller obtaining the home inspection report is that the seller stays in control and does not expose themselves to claims of misrepresentation if the buyer or the buyer’s agent is the one who orders the home inspection report. The listing agent can discuss with the home inspection whether or not the findings in the report affect the value, safety, or livability of the property for prospective buyers.
We strongly suggest professional home inspectors conduct the report, however, general contractors, structural pest control operators, architects and such can provide home inspection reports, but may not be versed in all areas of the home inspection. They may be proficient in one area but lack qualification and knowledge in other areas. It’s important to go with a licensed and qualified professional home inspector regardless of whether you are the buyer or the seller.
“A listing agent requesting a home inspection report should advise the home inspector that the seller, broker, and all prospective buyers of the property will be relying on this report. This disclosure will avoid later unenforceable claims by the home inspector that the report was intended for the sole use of the seller, broker, or buyer who signed the home inspectors contract.”
If a buyer makes an offer on a home and requests the home inspection report, on receipt of the report, the buyer cancels the offer. If another prospective buyer receives the same in inspection report from the listing agent, they too can rely on it to acquire the property. However, the report must correctly state the extent of any defects or damage. The home inspector cannot create the report for one buyer, but for any and all potential buyers from here on out.
“If a buyer discovers an error in the home inspection report regarding the existence or nonexistence of a defect affecting the value or desirability of the property, the buyer has no more than four years after the date of the inspection to file a legal action to recover any money losses.” [Bus & P C §7199]
So, as a seller, having a home inspection done prior to listing will show prospective buyers that you’re already doing your due diligence in protecting the property, correcting any errors or mistakes, and it keeps you, the seller, in charge of the home inspection process.
[Information adapted from Journal.firsttuesday.us]