Why we use inspectors to evaluate a property.
The main reason we use inspectors to evaluate property we are thinking of buying is because of what the Romans described as “Caveat Emptor”. It means “let the buyer beware”. In practical terms, it means the seller is putting the house forth and it is up to the buyer to look it over and decide what the property is worth to them.
Sellers get the prices for their houses from different places. Some use Realtors to determine market value , some use the Multiple Listing Service to do this for themselves. Other buyers are aware of what similar properties sell for in that area and price their property accordingly. Some buyers just seem to pull the figure out of the air with no substantiation for the amount.
A home inspection helps you save money & can help you get the house cheaper.
These repairs are important for a couple of reasons. First of all, your buyer is going to expect the necessary repairs to be made. Your buyer wants everything to be in good working order when he buys the house. As an investor, that’s where you make some of your money, by adding value to the property. Because you are going to have to put money into the property, the money you are going to spend making these repairs is the basis for price reduction negotiations with the seller.
It goes like this, you make an offer and then have the property inspected. When the inspection report comes back, you go back to the seller and say; “based on the findings of this licensed inspection report I am adjusting my offering price to reflect the repairs that have to be made to this property in order to bring it to a good and marketable condition”. Then you are in play, and the haggling starts in earnest.
Repairs on the inspection report are negotiating points with your seller.
Now, What else do we know about these repairs? You know that these repairs are negotiating points when you are dealing with the seller you are buying the property from, but they are also selling points when you have made the repairs and are now selling the property to your buyer. Don’t ever miss a chance to show your prospective buyer that you have put money into the house for him to enjoy, and that these repairs and improvements will benefit him for many years to come.
Another consideration in using the services of a licensed real estate inspector is that the property will probably go through an inspection when it sells. You need to know the condition of the property when you buy it, because you don’t want any costly surprises when you go to sell it and your buyer brings in his inspector who proceeds to put the property under a microscope.
Inspections can help you identify problems early, before you’ve spent too much money.
Inspections can identify problems before you get too deep into the investment to back out. Once you have closed on the property, it’s yours. If you find out after the closing that the house needs 36 piers to fix the foundation and you didn’t know about it, then that’s too bad for you. An inspection will tell you lots of things like that before you put a noose around your neck financially.
A lot of investors are professional people who do well in their field and have a lot experience in that field. If single family residential construction is not in your background, you have the option of hiring that expertise the same as you would legal or financial expertise.
Inspectors learn a lot and know a lot.
What a professional inspector has to offer may be the solution that stabilizes your situation and puts your negotiations back on a level playing field. A person who wants to become an inspector must first spend time as an apprentice, then take an exam before he can proceed to the next level. At the next level he must perform 150 inspections under the supervision of a Professional Inspector. It takes a year before the candidate can sit for the last exam and become a Professional Inspector licensed to do inspections on his own. There is also the matter of 90 hours of college level classroom instruction he must take in construction techniques and inspection before he can qualify to take the exams, and after he becomes a Professional Inspector he still has to complete 8 hours of continuing education every year to renew his license.
Inspectors are licensed and have standards to follow.
Most states have ordained a set of Standards of Practice which is the law on how and what is to be inspected in a house. What this all means to you the investor is when you hire a licensed inspector, you are getting someone who is trained, experienced and has a methodology for going over the property with a fine toothed comb. The product of this inspection is a legal document that you can turn to when negotiating with the seller over the purchase price.
So that’s why inspector’s can help you when you buy. They have that methodology, that training, and that experience that most folks just don’t have in this area. What it means to you is a basis for lowering the offering price by pointing out the repairs and deficiencies in the property, with a document you can turn to back up what you say. Good luck to you on your adventures in real estate, and I’ll see you out on the property.
By Kevin Smith, with editing and contributions by Joshua Berg
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