“Just because a home might seem perfect on the outside doesn’t mean it’s actually flawless.”
In my last few posts, I guided you through the contract phase of buying residential real estate. Now I’d like to talk in more detail about the inspection process. This step occurs after you have negotiated terms with the seller. Most contracts provide a designated period for you to hire a licensed professional to examine the property you want to purchase.
Just because a home might seem perfect on the outside doesn’t mean it’s actually flawless. Major concerns could be hidden in the smallest places or even invisible to the naked eye. You might not notice cracks in the foundation or signs of a mold problem, or not recognize that the roof, furnace or appliances may be beyond their useful life and ready to fail, or not know if there are serious problems with the electrical wiring. You need to choose the right inspector who can discover potential problems before you close the deal.
The inspector you hire will evaluate the home to identify any code violations, hidden damage, required repairs and/or maintenance items. If you fail to take advantage of this inspection right, you could be waiving your right to reject the deal or to require that the Seller make repairs prior to the Closing.
The Value of a Professional
An experienced, licensed inspector’s evaluation and identification of potential or actual health and/or safety issues affecting the condition of the property, can provide you with ammunition to negotiate repairs and/or repair credits. These credits can offset the expenses you will otherwise incur after the Closing to fix or eliminate the problems identified by the inspector.
You can either compel the Seller to make the repairs before the closing documents are signed. Or, you can compel the Seller to provide you with credits at Closing equal to 10% of the estimated cost of the repairs/replacement costs. You should always discuss these decisions with your attorney so you can weigh all your options.
Without your inspector’s expertise, you could be stuck making expensive repairs years after your purchase when they might have been resolved during the Negotiation Stage at no cost to you.
Since it is so essential to pick a knowledgeable inspector, let me stress that it’s not in your best interest to fall back on a family member or a friend for the job. Even if you feel someone in your inner circle can investigate the property as well as a professional and at a more modest cost, you could be setting yourself up for disaster. If the inspection proves to be faulty, you have no meaningful legal recourse.
Therefore, I recommend you search for an independent professional, licensed inspector to inspect your prospective home during the Inspection Contingency Period. When you hire someone who is not personally tied to you in any way, you’re much more likely to get an impartial and professionally organized report of every potential issue in the home.
Avoid Limitations of Liability
While I strongly advise using a professional inspector to protect your interests against expensive hidden defects in the house, you must also protect yourself against the inspector. The inspector you hire will most likely present you with a Service Agreement. This agreement may contain fine print seeking to excuse the inspector from any responsibility for making mistakes in performing the inspection. This exoneration is most often found in a certain clause in your contract called “Limitations of Liability.”
Signing an agreement with the Limitations of Liability clause means that if the inspector doesn’t inform you about a certain issue and you discover at a later date that the problem is financially devastating, you cannot sue the inspector. The most you will be able to recover is a reimbursement of the inspector’s original inspection fee, which is typically $250-$400 and probably won’t cover a fraction of your expense in fixing the overlooked issue.
So if an inspector hands you a contract with a Limitation of Liability provision, cross it off. Or keep looking for an inspector who doesn’t insist on this exoneration provision.
Coming Soon
Concluding my series on buying residential real estate, in my next post I’ll explain the attorney approval process. This is the final stage of the Negotiation Stage and is a critical part in ensuring you obtain the fairest deal possible.