Home Inspections – Real Estate 101

This week, I want to share some guidance about having a prospective property inspected prior to purchase. This is something that comes up with each and every transaction and depending on which area your looking at purchasing in varies in how its perceived and how realtors and buyers/sellers practice this important piece of the puzzle.

First off, I want to be very clear about this and it may be the most important thing you take away from this article, and that is that every property should be inspected…period.

If you are working with a realtor who doesn’t recommend an inspection, run far and fast to find a new realtor. Not having an inspection is like telling the seller that you don’t care about the condition of the property and you are willing to take it without recourse.

Real estate condition reports do not tell you the condition of the property when compared to a home inspection so lets also be clear that these two things are completely separate, the condition report is the SELLERS disclosure of the properties condition as he/she knows it at the time of listing the property and a home inspection is a third party inspection and subsequent report which will tell you in great detail about the actual condition of the property at the time of the inspections. What is the difference? Well sellers are only subject to what they know in the real estate condition report, and inspectors are not only highly trained, they have insurance to protect themselves and you from errors made during the inspection.

Why do I need this? Well it should be quite simple but it’s not, you need a home inspection when you want to be certain that a home is not falling apart, to be sure that there are no “material” defects in the place that would have prevented your enjoyment of the property as intended, as well as safety and structural defects, not to mention other factors and things you cannot find out using typical look and see methods.

Home Inspection Process

Home inspections are typically done as part of a real estate offer to purchase, or even a listing agreement between a seller and real estate professional. We will use the offer to purchase senario for this article because it’s most common. As part of the real estate purchase process the inspection generally takes place after the price is worked out and any other terms are solidified to the point of having an “accepted offer”, this is a legal term you should contact an attorney to understand if you don’t already. Once the offer is accepted its now time to deal with the contingency of an inspection, in the Wisconsin offer to purchase the inspection must have a date certain as to its completion, or generally it goes away and that is a bad thing because it generally leaves the liability up in the air in terms of the condition of the property and could potentially lead down a road where the buyer is legally bound to purchase a property and doesn’t want it based on defects.

Typically the buyer will hire a home inspector of choice to show up at the property and do the inspection, this is a very thorough inspection by itself but not all encompassing by any means. This usually takes 3-5 hours based on the size of the property and the extent of the defects the inspector must document along the way. The inspector will look at the roof, test the electrical sockets, look at the panel, and take a general view of the heat source inside the home as well as look for signs of leaks in the plumbing, roofing, and signs of water in the basement. Things like railings and safety features are pointed out as well as code issues.

Once the inspector has completed the inspection, they usually want to point out some things directly and then they will provide a report of everything they saw, this report is generally 20-30 pages long and is very useful, based on what generally happens next.

Once the buyer has the report and has had time to discuss it with their professional, a general knowledge of what is acceptable and not acceptable is developed. In Wisconsin the process is a little confusing to most buyers and sellers, and realtors quite frankly about what happens next. The buyer simply gives notice to the seller, that defects are present and unacceptable. Then generally to provide proof of the defects provides a copy of the report to the seller. This report at this stage is VERY important because it does two things, it gives the buyer protection, and also imposes liability on the seller to disclose these defects to any other prospective purchaser that may come along if this transaction does not reach a closing. This is where most real estate professionals are separated into groups, professionals, and thugs. If your a buyer your realtor should inform you that once you give this notice of defect the seller has the option of either proposing an amendment to the offer to purchase, generally suggesting the seller either fix or give a credit for the buyer to fix, defects in the report. The seller has the option to do nothing, which generally allows the buyer to cancel the offer to purchase or take the property as is. Most real estate salespersons get this wrong, they sometimes tell the buyer to propose the amendment asking the seller to fix specific items in the report. This is wrong for two reasons, it first lets the seller off the hook for the defects, and secondly it diminishes the negotiation power of the buyer.

At this point the seller has proposed an amendment and the buyer has either cancelled the transaction or approved of the concessions provided for in the amendment, but be very careful about the dates, if you miss an important date here in the offer the transaction may automatically die based on the default wording of the Wisconsin offer to purchase.

This article is not to be construed as legal advice, simply informational in regards to the author’s past experience as a Licensed real estate salesperson in the state of Wisconsin.

I highly recommend a buyer and seller obtain trustworthy advice and follow the advice of their attorney in any real estate situation they don’t 100% understand.

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