Review of all things Real Estate: The importance of a professional home inspection in a real estate transaction

Did you know that sellers are required by California law to provide buyers with the history of repairs and known discrepancies when selling a property? Did you also know that lack of or incomplete disclosures are the most common reason for real estate lawsuits? A home inspection will protect the buyer and the seller against incomplete disclosures because the discrepancies will be known by the end of the inspection.

Some clients object to paying for a home inspection because their agent is required by California law to perform an agent visual inspection so some clients feel that will suffice to making required disclosures. But consider that some agents don’t know the difference between a doorknob and a doorbell, so it’d be risky to put absolute faith in the agent visual inspection catching all the discrepancies.

As the name implies, it is a visual inspection and agents are precluded from checking operating systems like turning on faucets, ovens, checking electrical continuity; it’s a visual inspection not a functional check of all the operating systems.

Reputable home inspectors will use checklists to ensure that they don’t miss important items so they can bring them to the attention of the client.

Regarding “reputable” home inspectors, there is no licensing requirement for home inspectors; anyone can advertise themselves as a home inspector. A good rule of thumb is to employ home inspectors who hold construction licenses and who belong to home inspection trade associations.

It’s also a good idea to ask your real estate agent who they recommend since agents will have been involved in multiple transactions and should have knowledge of reputable and honest home inspection companies.

A home inspection is normally considered a buyer expense, so the buyer will learn about the defects of the property to negotiate repairs. Most of the discrepancies called out during a home inspection will result in someone’s weekend project list after the transaction has closed but if the discrepancies involve health or safety issues those are legitimate repairs to request.

Examples of health issues would be inoperable toilets, sinks and/or garbage disposal. Safety issues are electrical and heating systems discrepancies. If a buyer doesn’t want to pay for a professional home inspection, all agents involved in the transaction will likely have the buyer clients sign a disclosure that states not having a professional home inspection is against the advice of all involved parties to the transaction; it’s that important. It helps protect the buyers and agents from future potential lawsuits.

A buyer getting a home inspection is easy to understand, but why might a seller want to get a home inspection? It helps the seller know the true condition of the property plus it allows the seller to make repairs ahead of time without the pressure of an escrow.

Some repairs require extended time to schedule the appropriate service providers and if repairs must be performed prior to the close of escrow (VA, FHA, USPA require certain repairs to be accomplished prior to funding), the close of escrow can be delayed or worse, buyers get spooked by the condition of the property and cancel the transaction which is good for no one.

So, it is best to know up front, and effect repairs and/or price the property accordingly. It’s also a good idea for the list agent to attach the home inspection on the listing in the multiple listing service so perspective buyers know the discrepancies ahead of time. It also allows the listing agent to indicate in the listing which discrepancies the seller has already worked off, which gives buyers a sense that the seller is not trying to cover anything up.

A word about repairs: the seller is not obligated to make any repairs; it’s up to the buyer to decide if the requested repairs are important enough to consider leaving the transaction. The best advice is to limit repair requests to health and safety discrepancies.

Repair request responses will also be driven by market conditions. If it’s the slam seller market as it was for the last 2+ years, then sellers are less likely to address repairs. Their position was “take it or leave it” because there were plenty of buyers lined up to purchase the property. That started changing about 12 months ago and now with very high mortgage interest rates, sellers tend to be more amenable to addressing health and safety items to keep buyers in the transaction.

The way to think about a professional home inspection is to consider it an inexpensive home insurance to protect both buyer and seller from future lawsuits. Buyers will have current, up to date knowledge about the home’s condition and sellers will have full clarity of the home’s condition to help preclude legal issues in the future.