Is it Home Sweet Home, or the Money Pit?
By Teresa Ambord
Occasionally you hear the sad story of a new homeowner who finds him/herself the owner of a money pit. In some states, sellers are required by law to disclose to buyers any known problems with the house, such as roof damage or plumbing faults or potential hazards in the area, such as floods, earthquakes, fires and the environment.
But even if the seller does not disclose any defects, you need to do two things:
- Inspect the house yourself before you make a formal written offer. There are several good do-it-yourself books available instructing you what to watch for. Buy the book, study it, and be informed before you go house hunting.
- Hire a professional inspector. This is done after you make a formal written offer, but the offer should be contingent on the results of the inspection. You need a general contractor to conduct a top to bottom inspection, including the roof, the foundations, the plumbing and heating systems, and the drainage.
Home inspectors usually follow one of two methods. Some are checking to be sure a house meets the minimum industry standards, while others want to discover as many defects as possible, to give the buyer a true picture. Those who stick to the minimum may do so because of the litigious nature of our society. By limiting the scope of their inspections, they limit their liability. If you want a true picture of what you're getting, ask to see what the report will include.
A professional inspection should take two or three hours for the job to be done right. Depending on where the house is located, it'll cost you $200-$500, but could save you tens of thousands of dollars in the end. Accompany the inspector as much as possible so you can ask questions and learn details about the house. You may want to arrange special inspections as well, such as for pest damage, mold, asbestos, and other health or environmental hazards. Be sure to ask for the reports in writing.
If the inspections turn up problems, you can negotiate with the seller and possibly have the price adjusted to compensate for the repairs, or arrange for the seller to initiate and pay for the work.
Finding a Reliable Inspector
The common wisdom seems to be that the best way to find a good inspector is to ask friends for recommendations. Or you can ask a realtor that has no connection with your purchase. Do not ask your own agent or an agent representing the seller for a recommendation. Though the agents are probably good people, they have a financial interest in closing the deal. Too often homebuyers have relied on the advice of realtors who may be influenced by the prospect of a quick sale, and instead of being happy homeowners, they have horror stories to tell.
- It's a good idea to get a few bids from inspectors who have been recommended as reliable. Check their references, including consulting your state's consumer protection agency to see if complaints have been filed against them.
- Ask the inspector to see proof that he/she carries E&O insurance (errors and omissions) or malpractice insurance.
- If an inspector's contract limits his liability, for example, to a percentage of his fee, it's probably better to look elsewhere. To see why, read this legal case: Contract law
A great source of referrals and information is the American Society of Home Inspectors, ASHI. To be members of ASHI, these inspectors must pass exams, meet practice standards, and as a condition of membership, they are prohibited from doing contracting in order to prevent a conflict of interest.
To find an inspector and to see a list of Frequently Asked Questions, click below: