Here at AMI Lenders, where we specialize in private money loans to finance real estate, we are frequently asked by our clients: “Should I go through the expense of getting a home inspection even if the seller (or their realtor) assures me that the house is in good condition?” And the answer is: most definitely yes!
As a potential buyer, you can take your time to inspect a property you are interested in acquiring, maybe even staying at the property for a couple of hours “kicking the tires” and making sure all the doors and knobs function properly. But unless you have been trained to inspect a house, chances are you could miss a flaw that purposefully (or, in the best of cases, inadvertently) a seller is trying to cover up when selling a house. The most common flaws homeowners try to cover up when selling a home, in the opinion of a very experienced, Texas-based real estate agent who is a friend of ours at AMI Lenders, include:
- Leaking pipes. These flaws usually happen in older properties, but newer ones are not altogether exempt.
- Ants, termites, cockroaches, or small ground animals living inside the walls. In Florida, it has happened that alligators or snakes are found living under the house.
- Non-working appliances and/or AC/furnaces. Rarely do prospective buyers turn on and use devices before making an offer. The best-case scenario is when you find a property with brand-new equipment.
- Weak, damaged, or under-spec foundations.
- Damp or leaking basements.
- Ice dam roof damage is caused by ice backup during winter, resulting in water damage to the ceiling.
- General misstatements about the property’s overall condition. (“The furnace is 15 years old” when it’s 30 years old.)
Yes, you can fix anything, given enough money. But you do not want to be put into that situation after having signed for the new (to you) home.
Anecdotal evidence is abundant.
You can read tons of stories on the Internet about how, once the new owner moved into and lived in the house for a couple of months, one or more flaws started to become apparent. In the worst of cases, and in the “it could happen to you” type of advice, you might find yourself reenacting, in real life, the hilarious Tom Hanks and Shelley Long’s movie "The Money Pit." Believe us; you do not want to be them.
For illustration purposes, we fished out the following text from Quora[1]To exemplify what does happen to genuine buyers:
“The VA inspectors refused the house because it had no ceiling insulation. So the seller showed them a bill for insulation installed in the ceiling. Without the VA doing another inspection to verify it… they okayed the loan. That first winter was as cold in the house as the outside, no matter how much heat I had on. I looked into the attic, and yes, there was insulation. Batting insulation like what would be in the walls. One string of batting between two ceiling joists. All the rest of the attic was bare. The seller didn’t lie… The insulating company didn’t lie. It was true… They DID put some insulation in the attic. I’m surprised they took the time to roll it out.”
So, we assume that extra money had to be spent by the new owner to address this problem of no insulation on the ceiling.
Professional home inspections are well worth the money.
Let us just say, for argument’s sake, that four hundred dollars spent on a home inspection could save you thousands of dollars when the experienced home inspector finds out there is a severe problem with the house. Your return on investment could be immense.
So, you should hire a licensed professional home inspector after accepting your offer. Have the inspection done and reported in writing prior to you signing the final purchase agreement. Taking this action will allow you to have any problems found by the home inspector dully fixed or stated and discounted in the final contract (or maybe even in the HUD-1 Settlement Statement).
Deal breakers
Unless you have found a property that is “dirt cheap” and have the money to dump into what could well become your own “Money Pit 2”, be wary of the following deal breakers:
- Damaged or under-spec foundations. Do not accept a property that needs to be retrofitted with new foundations unless you have the written budget and expert opinion of a certified, licensed professional. And make sure these expenses fit comfortably into your budget; they are not for the faint of heart.
- Water is standing near the house, especially during the rainy season. It is complex and expensive to correct and can lead to all kinds of water-caused problems. Stay away from the lowest-lying house in the subdivision, area, or neighborhood. Be sure to check the Internet for "flooding-prone areas" in your locality. You could regret it for years to come.
- The floor plan is not what you are looking for. If you seriously consider moving or removing several walls to correct it, maybe you should look at another house. Certain walls just have to stay where they are, and it becomes very expensive to remove them. Mind you, reality TV shows make this look easy, but it's not. If the floor plan doesn't match your lifestyle, and you are considering moving or removing several walls to correct it, maybe you should look at another house.
Summary
If you are in the market for your first house or are looking to buy another one, do not "save" by skipping a formal home inspection. Instead, think of it as well-spent money, which can prevent you from incurring unforeseen and costly repairs. Be prepared to walk away from properties that meet deal-breaker criteria, no matter how gorgeous the house looks to you initially.
If you are looking for a hard money residential or business purpose loan ("una hipoteca con un prestamista privado" in Spanish) in the Houston area, look no further. At AMI Lenders, our advice as mortgage lenders is always geared toward financing the right investment property at the right price, for the right reasons, and with the appropriate loan terms.
We are one of Houston's fastest hard money lenders regarding closings and will become your financial ally. Houston Borrowers will also have difficulty finding better rates for hard money or private loans than those we offer.
We want our customers to succeed and take advantage of the financial opportunities provided by investing in real estate. Visit our website today and fill out an application for a loan backed by real estate. En AMI Lenders hablamos español.
[1] https://www.quora.com/Is-it-worth-going-through-the-trouble-and-expense-of-getting-a-home-inspection-even-if-the-seller-assures-you-that-the-house-is-in-good-condition By the way, reading this answer gave us the idea to write on this topic.