Real Estate

Property Inspection Contingency – How Does It Work?

dianahill
Diana Hill
Professional Real Estate Investor Instructor

A couple of weeks ago we talked about contingencies and one was a property inspection. I thought I would give you a better idea of just how a property inspection works.

According to the National Association of Realtors, 84 percent of buyers request a property inspection as part of their contract. An inspection is very important for peace of mind but also as a negotiation tool. When you hire (we’ll talk about how you find a good inspector a little later in this article) an inspector, request a written report. Also ask that they give you a price for the estimated repairs needed (not all states allow this). This can help you negotiate deferred maintenance easily.

I’m often asked, “With all your years (ok decades) of experience, why do you still spend the money on an inspection?”  There are several very good reasons.  There are hundreds of things the inspector looks for including: structural elements, exterior evaluation, roof, plumbing, attic, foundation, electrical, appliances, HVAC, mold etc.  There’s also the element of obtaining an impartial, third-party opinion.  Even though this process should be unemotional, because it’s an investment, it can still be difficult to remain completely objective.

A few more things about the inspection process before we move on. Many people wonder if they need to be present for the inspection. Well, you’re paying for it; it’s going to be you’re investment property so the answer is YES.  This gives you the opportunity to observe what the inspector is doing and ask questions as they go along so you’ll have a clearer understanding when you receive the report.

A couple of the most common questions:

1) How long does it take?  A typical inspection will take several hours (a property 1500-2500 Sq Ft will last 2-4 hours).  You’ll have to typically wait 24-48 hours for your written report (some inspectors now have the technology to print the report on the spot).

2) What is the cost?    Cost varies depending on the size and complexity of the property as well as your geographic location.  For your typical 3 bed 2 bath house on the west coast it runs about $400.00.

How to find a good property inspector?  Of course you can always ask your realtor if they have a referral.  Here is a list of things to look for:

Licensing – not all states require an inspector be licensed.  You can find out more information about your state by going to the National Association of Property Inspectors and clicking on State Regulations.

Training – the legal requirements for training once again vary from state to state, however you want to look for an inspector that was professionally trained recently.  For many years inspectors were experts in one trade. No single trade can qualify someone to be a truly professional inspector.  Ask the inspector which formally recognized training school they received their education from.

Experience – the number of properties the inspector has performed inspections for is more important than the number of years they’ve been in the business.  A study was conducted by the American Society of Property Inspectors in 2005; 80 percent of the respondents said they were full time property inspectors, however only 40 percent said they had performed less than 100 inspections.  Ask an inspector how many inspections they do in a year and in their career.  A good rule of thumb is over 200 in a 3-4 year career.

Continuing Education – as with any industry things change and true professionals continually update their skills and knowledge with education.

Price – you get what you pay for.  If you are going to have the inspection, have it done right by a professional, which means it might not be the lowest price.

Other things to ask about, Association Membership, referrals, insurance, bonding and will the inspector be available for follow up questions. In my experience inspectors are worth every penny spent.

Great Fortune,

Diana Hill

dhill@tradingacademy.com

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