Kenny Rogers recorded a song called The Gambler where he sang the following regarding playing poker:
You’ve got to know when to hold ’em
Songwriter: Don Schlitz
Know when to fold ’em
Know when to walk away
And know when to run
Buying a house is somewhat similar. While it’s easy to fall in love with a home, you do need to know when it’s time to fold your cards so to speak and walk away from a money pit. You don’t want to gamble with your biggest investment.
Part of choosing the right home is making the correct decisions up front and a major one is ensuring that you conduct a professional, independent home inspection before buying any home.
6 key reasons to NOT avoid a home inspection
Here are key reasons why you should not avoid a home inspection when buying a resale or new home:
- Protection against future costly repairs that may be uncovered.
- Potential to reduce the sale price in your favor.
- Security against health concerns (mold, water damage, radon) that may be discovered.
- Protection against illegal, incomplete or shoddy renovations.
- To meet insurance and banking requirements, as some may not approve the sale without it.
- It gives you a reason to walk away from the sale if you change your mind.
Keep on reading as we’ll discuss each of these points in more detail along with some personal anecdotes I have regarding properties I’ve owned and look at a few more key issues including what fixes are mandatory after a home inspection, what repairs to ask for, and when to walk away from a home sale.
1. Protection against future costly repairs
There are many potentially expensive repairs that your home can and may eventually face. Foundation problems, roof and shingle replacement, electrical problems, water leaks and water damage, mold, asbestos and pests tend to be the most expensive.
Knowing about potential repairs in advance can help you prepare for them, budget for them or avoid them completely if you choose to walk away from a house purchase if the repairs are too much.
A home inspector is experienced in looking for things that novices can’t.
2. Get a better purchase price on the home
If you find a home that is in need of repairs as determined by a home inspection, several things might occur:
- You might bring repairs to the attention of the current homeowner that they didn’t even know about. They may be willing to have them fixed at their expense in order to sell the home.
- You may be able to get a better price on the home and do the repairs yourself.
3. Protect yourself against health concerns in the home
A resale home can have a number of potentially dangerous problems that may or may not be visible to a layman i.e. the average homeowner.
Carbon monoxide, lead paint, radon, mold, moisture, asbestos, pests and poor ventilation are all potentially serious problems that could exist in a home that you may not notice yourself.
If you’re asthmatic or someone in your household is, you’d want to know ahead of time before purchasing a home that has issues that should be remedied before buying.
You may also be unaware of issues such as dangerous staircases with a lack of proper hand railings that aren’t to code or wonky steps leading into the house that shift and could cause a slip and fall.
4. Discover illegal or poor workmanship
Homeowners are increasingly turning to handymen they find online to do major work in their home often for cash. These people may or may not be licensed or even particularly skilled. Illegal or shoddy workmanship could cost you down the line if there is an accident such as a fire.
Commonly, illegal renos could include additions to a home, a new or modified deck or finished basement with electrical work that wasn’t properly inspected or may not have had a valid permit.
How prevalent is unpermitted work? One real estate agent felt it could be as high as 40% – 50% of homes.
Depending on where you live, the work could be grandfathered in but if you have a problem in your home like a fire and it’s discovered to be the fault of an illegal reno, your insurer may not cover the damage.
You can find out yourself if a homeowner applied for a permit and you can expect your home inspector to comment on shoddy work that they notice that was done by an amateur.
5. Keep your insurer and bank happy
Some home insurance companies and lending institutions require a home inspection and perhaps an appraisal to ensure that the house is worth what you’re paying.
If your home is a certain age – say 25+ years old – it’s more likely that an insurer or lender might require a home inspection done as the older the house, the greater the chance of potential problems including grandfathered rules that may no longer apply to newer houses.
6. You have a reason to walk away from the purchase
Since your home is typically the biggest purchase you’ll ever make, you want to ensure you make the right decision and don’t end up buying a money pit, a house that will cost you more in repairs than it’s worth.
If you’re on the fence regarding a particular home and are looking for a reason to not buy it, a home inspection may provide a reason or two.
What fixes are mandatory after a home inspection?
No repairs are mandatory after a home inspection. You the buyer may choose to walk away from the purchase if the house price isn’t lowered or unless the repairs are made. The seller may choose to walk away if they decide not to give you anything on either point.
Sellers do have a legal obligation to disclose certain items that could negatively affect the value of a home, however. Depending on where you live, a seller may be required to disclose that the home was once used to produce drugs (grow op, meth lab), if it has asbestos or another hazard, or has water damage to name but a few.
Even if they aren’t disclosed, a good home inspector may find them for you.
Think about what repairs must be made for you to purchase the home and decide whether or not they are ones you would be ok with paying for yourself if you get the house but without a price break or the repairs completed.
And not all disclosures may be discovered with a home inspection: If a murder or other crime was committed in the home, the seller may be required to disclose that as the house could be considered to be stigmatized as a result.
You’d be amazed what you the potential homeowner can find out when you ask a few neighbors…
What repairs should you ask for after a home inspection?
It depends.
If a repair is a deal breaker between getting the house and not getting it, the answer is probably self explanatory.
But the reality is that you might be in a hot market and not want to lose the house to someone who may just take the house as is. It really depends on the situation.
When my wife and I bought our first (resale) home together, we offered $8,000 over asking price since we knew we had competition. Since we offered over asking price, we felt comfortable asking for a few small things: We asked the seller to get the AC unit outside the home serviced as it was making a noise and we also asked for a bar fridge to be included in the sale as it was built in and there would be an empty spot with no fridge. The seller had planned to take it with her.
These were minor points and didn’t cost the seller much. And since we paid $8,000 more than what she asked for to beat the other bidder, we felt it was fair.
When should you walk away from a home due to a poor home inspection?
While each situation is unique, some major problems could make a home simply not worth the bother, especially if there are similar options that don’t carry the same risk.
Here are some potentially expensive problems that a home might have that could make it not worth buying.
Foundation problems: Problems with the foundation of your house are among the most expensive repairs you can face. The two most common foundation problems tend to be when the foundation settles or when the walls crack. While some cracks in concrete are normal and expected, some can be very serious and be a red flag in a resale home. While the average cost for foundation work
is over $4,500, it can be even higher when hydraulics are needed for more extensive repairs.
Title issues: Does the home have a potential or actual problem with the title of the home leading you to believe that the ownership might be complicated? Sometimes a home can have a mistake in the title. Title fraud is a major concern in some countries, too. If you’re buying a home from a deceased person, is there a concern that there is an heir that might have a claim on the house? There are a number of potential ownership issues that could arise that you need to know about and protect against.
Easements: Also considered a title issue, an easement is a situation where one property owner has a right to use the property of another owner. Common examples include beach access, private roads or private paths that one owner is allowed to use that is actually owned by another property owner. Another example could be a utility easement where power, water, sewer or telephone lines exist and the utility company’s staff have the right to access them on your property. While many easements don’t affect the value of your property, you need to know about them before you buy in case you have a personal issue with it.
Termites: Termite damage costs homeowners over $5 billion yearly according to recent estimates and it may or may not be covered by your homeowner’s policy. The problem with termites – other than the obvious damage and cost part – is that the damage they cause is done slowly, often over many years, without homeowners even noticing. Termites should be dealt with professionally and while a home inspector may not be qualified to diagnose or solve the problem, they could notice the clues that you might have an infestation.
Water damage: Homeowners might try to cover up water damage so that it doesn’t become an issue during a sale by painting over it. Sometimes water damage might be due to a one-off problem such as a kitchen faucet leaking or toilet overflowing. Other times water damage might be a result of an unknown leak that occurred over years that may have caused rotting wood and other damage unseen to the naked eye.
Electrical issues: Electrical issues are a tricky one because in some jurisdictions, homeowners can do some basic electrical work themselves. Other more involved electrical work requires a licensed electrician and permit. If you buy a home with illegal or incorrect electrical work done, it could be a fire hazard that could not only lead to injury or death but may also be an insurance problem if you ever need to make a claim. A good home inspection will include – where possible – an inspection of your electrical system. Keep in mind that hidden wiring behind walls may not be accessible to check but you can search local records for work permits and even ask the home sellers for evidence that work was done by a licensed electrician.
Roof issues: If you have a shingle roof, expect that it will need to replaced at some point, typically in the 15 year range although it depends how bad your winters are, how hot your summers are and how well the roofing work was done. In my experience, roof shingles can often be in good shape even after 15 years but problem areas are often near eavestroughs and downspouts that drain directly on the roof shingles and wear them out over time. Roof reshingling usually costs thousands of dollars and up and varies wildly due to roof size, where you live and how good the roofing contractor is, as there are many fly-by-night roofers who do cheap work.
Illegal, shoddy or incomplete renovations: As mentioned above, renos that weren’t completed legally (i.e they were done without a permit or inspection), were built poorly or weren’t even completed are also possibly red flags that you might strongly consider walking away from. If you walk into a home that is for sale and see partially or poorly completed work, you’re probably going to wonder what else was done haphazard.
Asbestos: Mesothelioma is a cancer caused by asbestos exposure. Asbestos is a deadly material that was once used in home and building construction due to its low cost, durability and fire resistance among other benefits even though manufacturers knew the dangers. Some older houses built before the 1980s may still have it and it can cost thousands of dollars to have it removed professionally.
Grow-op concerns: Increasingly, pot growing operations and meth labs have popped up in residential neighborhoods. Other than the potential damage to the home, there is a stigma attached to the house and everyone on the street and possibly the town will know what happened within the home. And if the situation involved crime, the last thing you want is someone mistaking you for the previous owners once you move in.
Home inspection tips for buyers
- Never skip paying for a home inspection on a resale home.
- Don’t let the seller or their agent provide one as it may only highlight the good parts of the home they want you to know about.
- Doing a final home inspection on a brand new home is a good idea too. It may result in you finding out where the builder messed up, forgot to do some work, or simply did a shoddy job in areas.
- If you’re buying a new home in a subdivision, ask your neighbors who they used for home inspection services as you might hire the same one they did. They may be familiar with the builder and area already and thus be aware of common problems other homeowners have.