Home inspectors are a key part of your real estate investing dream team, but it’s important to remember that they are a due diligence cost. You pay them for the inspection whether you end up buying the property or not.
In some cases, you might pay for inspections on several properties before you find one that meets your criteria.
What Do They Do?
Home inspectors thoroughly examine the condition of a property to identify any potential issues.
Their goal is to give you a comprehensive understanding of the property’s condition before you commit to buying it.
While they don’t fix issues or guarantee that nothing will go wrong, their report provides you with valuable insights.
Here’s what they typically handle:
- Examining the Structure – They assess the foundation, walls, roof, and other structural elements that are visible to check for any major defects.
- Inspecting Major Systems – They check the plumbing, electrical, and HVAC systems to make sure they are functioning properly.
- Identifying Safety Concerns – They look for issues like faulty wiring, mold, or other hazards that could pose risks to occupants.
- Providing a Report – After the inspection, they provide a detailed report outlining any concerns and recommending repairs.
It’s also worth noting that home inspectors are human, have limited access to inspect inaccessible aspects of the properties (like things behind walls) and can miss things. They aren’t perfect.
Their liability for missing major issues is often limited to the amount you paid them for the inspection. Understanding the terms of their contract and what recourse you have if something is missed is important.
Some issues may also be out of their control; for example, they might not be able to inspect a roof thoroughly if it’s covered in snow.
When Do You Involve Them?
You hire the home inspector once your offer has been accepted and you’re in the due diligence phase of the transaction. The inspection should happen early in this period—look at the dates and deadlines of your contract with your real estate agent—so that you have time to review the report and decide whether to move forward with the purchase or negotiate repairs with the seller.
Since you’ll pay for the inspection whether you buy the property or not, this is part of the upfront cost of evaluating potential properties.
In some cases, you may have to inspect several properties before closing on one.
In other cases—like very competitive, extreme seller’s markets—you may choose to accept additional risk and waive your rights to inspect the property to get your offer accepted. Or, pay to have an inspector join you while looking at that property before you make your offer.
Why Are They Important?
Home inspectors help you uncover potential issues that could affect the value or safety of the property.
They provide peace of mind by helping you avoid unexpected repairs that could eat into your cash flow or force you to spend more than you anticipated after closing.
Here’s why they’re crucial:
- Uncovering Hidden Problems – Their inspection can reveal issues like structural damage, electrical problems, or leaks that you wouldn’t otherwise notice during a walkthrough.
- Informing Your Investment Decision – The inspection report gives you critical information to help you make a more informed decision about whether to proceed with the purchase.
- Negotiating Power – If significant issues are uncovered, you can use the report to negotiate repairs or ask for a reduction in the purchase price.
Following the Inspection
It’s a good idea to follow the inspector around as they go through the property. This helps you in several ways:
- Learn What to Look For – Watching the inspector will teach you what to check on future properties, so you can spot potential problems before you even make an offer.
- Get a Better Understanding of the Property – They can show you important features like shut-off valves, access to crawl spaces, potential weak points of the property—like poor drainage or ventilation to keep an eye on—and other things that you’ll need to know as the owner.
- Get Additional Information – By being present, you can ask questions in real-time and gain insights that might not make it into the formal report. These can be valuable on this property and future properties.
- Clarify Costs – While some inspectors may offer rough estimates on repair costs, take these with skepticism. Not all inspectors will have an accurate idea of what it will cost to fix the problems they identify, so use their estimates as a starting point, but get professional quotes for significant repairs.
I like to think of shadowing the inspector as mentoring you’re getting for the hour or two when you hire them to do the inspection.