The Importance of Home Inspections When Buying a Home
Are you wondering what happens after you fill out the paperwork to purchase your home?
Of course you could start planning for a move, but that’s not what should take precedence. Most people have been focusing on their search for a home with all the necessary amenities, making sure they are qualified for a loan, and keeping a watchful eye on their nest egg making sure they are staying within their budget.
Often, they neglect to think of the details that immediately follow that search. Let’s assume you’ve found a home that is in the right location, is right size with the amenities you want, and is the right price for you and your family.
After careful consideration you decide that you want to purchase the home. You’ve negotiated with the sellers and come up with a legal contract at an agreed upon price between you and the seller. When that’s done, it’s all over. What a big relief! Right?
Congratulations! This is an exciting time for you! But no. It’s not over. In fact, it’s just begun. You’ve only taken the first step towards buying a home. You put an offer in and it was accepted. Now let’s take a look at what you should be focusing on next.
Where are you in the home buying process?
The Due-Diligence Period
After the first contract is signed by both parties, it is considered an executed contract and you will begin what is known as the due-diligence period.
The due-diligence period is defined as the specified time period in which it is a buyer’s obligation to thoroughly investigate the property in question to determine whether the buyer is completely satisfied with it before finalizing the purchase.
You would be wise to schedule various investigations with home inspectors in order to help you make the decision to move forward with the purchase of this home that much easier. It is traditional to have 10 days from the day the contract is accepted to do your due diligence.
You could ask for an extension on this, however, during your contract negotiations if you have unusual circumstances that would prevent you from having your inspections performed in that amount of time. Depending on the type of inspection you need and where you live, 10 days is usually sufficient.
Hiring a Home Inspector
You should make sure to hire qualified inspectors, but not let this keep you from doing some of your own investigation. Fees for home inspectors vary by the area you live in. Consult your realtor, or a trusted friend, for recommendations on inspectors in your area.
You will want to investigate, on your own, the home’s condition, the neighborhood, the roads in the area, local schools, crime reports, the homeowner’s association, and just about anything else related to the home and the surrounding area that you find of particular concern for you.
Professional home inspectors should also perform an inspection that includes a general home inspection, a termite inspection, a septic inspection, a water well inspection, and any investigations about the property and/or area the home is in that will satisfy your requirements.
Expect your inspector(s) to walk you through the home, point out any concerns he or she may have, and even point out regulations that you will need to keep in order for your home to stay within regulations (i.e. weep holes, keeping the foundation clear, where to turn off the main water, etc.).
What is Involved in the Home Inspection?
The specifics of a home inspection are pretty much the same no matter where you live. By definition a general home inspection is a limited, non-invasive examination of a home. You would be wise to have this conducted by a certified home inspector.
After the inspection, he or she will prepare a written report of any findings. You can use this report to make informed decisions about proceeding with, or cancelling, your purchase contract.
As long as this is all completed within the defined due diligence time period, you will not be penalized or lose your earnest money deposit. Your realtor or the company handling the sale will explain all of this to you.
The termite inspection, and if applicable, a septic and/or a water well inspection should also be performed by competent and certified inspectors who will deliver a report of their findings during this time period.
More Paperwork From the Seller
But the home inspection is not the only information for your consideration, as the seller is required to deliver to you several more forms within 5 days of signing the contract; at the very least a Seller’s Property Disclosure (or SPDS, pronounced “spuds”) and a Claims History Report (or CLUE).
A seller’s property disclosure is essentially several pages of questions that the seller must answer, which contain pertinent information about the home. The questions cover previous problems such as leaks, damage by weather, etc. It will also reveal whether the seller has ever seen scorpions, snakes, or rodents anywhere on the property at any time during their residency.
Other information contained in the SPDS addresses the history of the property with respect to ownership, how and when the seller acquired the property, whether they know of any liens on the property, or if there is a survey of the property lines, etc.
The property lines would be a critical issue if for instance the home or land you are purchasing borders an area that would not be obviously defined. This might be a shared access or driveway, a pipeline easement or a right of way.
The SPDS also will include information related to the utilities and the companies that service them, the type of water and gas lines and pipes installed, and any improvements that they have made to the property with details as to when and what those improvements were.
It reveals noise levels the seller is aware of such as traffic, an airport, or a rail line, and any odors they have observed from areas such as landfills. It addresses whether they are aware of any toxic areas around the home and neighborhood, and asks about any knowledge they may have about the home ever having been used as, or stored products produced in, a “clandestine drug laboratory.”
Finally, it includes information about flood plains and wetland areas in the area, and whether the home in question lies within either. This document is legal and binding for the seller, so you can be comfortable that they are disclosing all known and pertinent facts about the home and the surrounding area.
The Claims History Report (or CLUE), on the other hand, comes from the homeowner’s insurance company and gives a history of the property with respect to any insurance claims that have been made in relation to it. This information should coincide with what you will see on the property disclosure.
Buyer’s Inspection Notice and Seller’s Response
This is also the time if you, or an inspector, discover something about the home that either of you are not comfortable with, you may ask the seller to remedy that condition by repairing, replacing, cleaning, or servicing any items that you find unacceptable.
If this is necessary, it is done with documents called the ‘Buyer’s Inspection Notice’ and the ‘Seller’s Response’ form or more commonly known together as a BINSR (pronounced “Binser”).
The BINSR should be sent to the seller before the end of your inspection/due diligence period, and then the seller has 5 days from the moment it is received to respond. Sellers have the option to decide whether they will do what you’ve asked, won’t do as you ask, or do SOME of what you ask.
You will then have another 5 days to indicate whether you will proceed with, or cancel, the purchase based on that response. Should the seller refuse to remedy any of the items you have asked for, you may cancel the contract and retain your interest money.
It is common to send a copy of any inspections to the seller for their consideration as well, so that they may make their decisions on your requests based on a knowledge of the problems found.
In regards to everything you’ve read, it goes without saying that you should immediately begin to schedule inspections as soon as you have a fully executed contract signed by all parties involved.
Other Issues That May Arise
Escrow (also commonly called a real estate purchase agreement and receipt of deposit) is a process that provides for a fair and equitable transfer of property from one person to another. It assures that the lender releases the home purchase funds at or about the same time that the deed is recorded to reflect new ownership. (Realtor.com)
Most lenders expect a home to go through closing within 30 days of an offer being accepted and a contract being signed, at which point the escrow will close, passing the home from one person to the other.
This means that the buyer and seller have as many as 20 days to use for inspections, notices, and responses. With such little time, that makes scheduling your inspections in the first 24 hours of contract acceptance vital.
Inspectors can be busy with other homes, and may need some lead time on when you would like an inspection done. You will also want to allow some time in case your inspector recommends further inspections by other qualified specialized inspectors.
For example, if a full roof inspection is recommended, you will want to have time to be able to have that scheduled with a roofer before the end of your due diligence period. You will also want to have plenty of time to go over all inspection reports and findings yourself to decide what you want to ask the seller to remedy, or to find out how much it might cost you to do needed corrections and repairs yourself.
One thing to also consider, that has become quite common, is to find a home with an “as is” condition attached to the purchase.
If this is the case with the home you’ve chosen, you as the buyer will have to sign what is called an “as is” addendum, indicating that you understand that the seller is making no warranties as to the condition of the property, the zoning of the property, or the fitness of the premises for any particular use or purpose.
Unfortunately, it also means that they won’t remedy or correct any items you find unacceptable. It’s an easy way to avoid all of the hubbub that goes with home inspections, etc.
That sounds quite scary when you first realize the implications of this, and it can make you feel as if the seller is trying to hide something. However, that may not be the case. Perhaps the sellers have inherited the property but have never actually lived there.
If the property is owned by the bank, you will almost always see this type of addendum to the contract. In any case, you will likely know up front if there is a condition like this on the property before you even make an appointment to see the home for the first time. In fact, it should be included in any verbiage advertising the home for sale whether you receive that information from your Realtor, via MLS (multiple listing service), or you discover the home yourself on one of the popular internet websites.
If this happens to you, the first thing you should do when faced with this type of addendum, is to take a deep breath and don’t panic. You will still have the due diligence period to do any and all inspections that make you feel comfortable proceeding the purchase.
Even if the seller won’t correct any items, you may find that there aren’t any serious issues that prevent you from comfortably proceeding with your purchase. You will still be delivered a SPDS and the insurance claims history report, even though the SPDS may simply say that they have never lived in the home and have no idea about anything asked.
Of course you will also be able to hire a number of qualified inspectors and do your own investigations to put your mind at ease about the purchase even if there are no disclosures or warranties offered by the seller.
By taking the time to learn the potentially threatening issues, and by doing your proper “due diligence” before you buy, you can significantly reduce your risk of anything going wrong.
While it will take some time and effort on your part, it is much easier to do the work ahead of time than to find out that there is a problem after you close on the home.
Have an understanding of what happens during the home-buying purchase, and heed my warnings, and you can move into your new home with a peace of mind and start making those memories that will last a lifetime!
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© 2014 Victoria Van Ness