Insider's Guide to Saving Money &
Eliminating Risks When Buying Your First Home!
A home inspection will give you a chance to discover more about the home before you purchase it. In case there are serious problems with the foundation, mold issues, or underground leaks, you will be prepared to ask for repairs, a reduced price, or walk away from the property.
The Importance Of Home Inspections
Finding a home doesn't mean that your investigative duties are over. Although most states do not have required inspections, your lender may require at the very least a pest inspection that will need to be conducted before they agree to approve your mortgage loan. If there are termites or other insects, the home owners will have to take care of the problem before they sell the home.
But what about full home inspections? Are they worth it? In most cases, the answer is yes. Although you will have to pay for a home inspection, it may save you a lot of money in the long run.
A thorough home inspection will include checking the following:
- Electrical systems
- Heating and cooling systems
- Foundation
- Siding
- Structural elements
- Roof
- Insulation
- Doors and windows, and
- Plumbing
If you are buying a new or used home, it is best to have a home inspection before signing the final paperwork. Once the inspection report comes back, you will the opportunity to ask the homeowners for a price reduction, go ahead and buy the home anyway, or ask the homeowners to make the necessary repairs.
You will receive a varied reaction from homeowners. Many times, they will agree to lower the price a little.
When drawing up an initial offer for the purchase of the home, you should include a statement that allows you to withdraw your offer if any repairs are not taken care of or the price is not lowered due to the findings by the home inspector.
If the contract does not include this, then you can still withdraw the offer, but you may owe the agent commission fees. States may vary where this is concerned.
Having a home inspection will give you peace of mind when you are buying a home. Since you will be taking out a mortgage, it is important to know what you will be buying, and the amount of money you will have to invest after purchasing the home.
A home inspection will also help you make your final decision whether to purchase the home or to keep looking for another.
How To Find A Home Inspector
There are a few places to turn to when looking for a home inspector:
- Your real estate agent
- References from friends and family
- The phone book, and
- Contractors
Ask around and see if you can get references of other homeowners that will give you a good report. Many home inspectors work freelance and only work certain days during the week. They are trained in home inspection and many are retired contractors, builders, electricians, and plumbers who know what they are looking for.
When you find a few home inspectors, give them a call and ask the following questions:
- How long have you been inspecting homes?
- How much do you charge per hour?
- What do you look for when inspecting a home?
- What types of reports should I expect?
- What days during the week are you available?
- Do you offer septic system inspections?
- What type of licensing do you have?
A thorough home inspection should take an inspector about three hours to complete. This will give you an idea of how much the inspection will cost.
Once you have asked these questions, find out if your lender has specific inspections that the home must pass before you will receive a home loan.
If the inspector can complete these inspections along with the home inspection, then it is worth the time and the money to have the inspector complete all inspections on the same day.
The next step after choosing an inspector and finding out which inspections will be needed by your lender is to make sure that you can be at the home for the inspection. Usually your agent will arrange a time for the inspector to perform the inspection. This is your chance to follow the inspector and learn about the home you are purchasing.
It is up to you if you would like to be present for the inspection or not. Many times, the reports will be enough to give you a clear idea of what needs to be done. After the inspection is complete and the reports have been completed, it is up to the homeowners to either make the repairs necessary, hire the contractors to do the repairs, or lower their asking price.
If the repairs are minor and will not require too much money to repair, they will usually agree to make the repairs. If you would like to absorb the costs of the repairs, then you can offer to do so.
You should receive this decision in writing so that there is no confusion during the final walk through before the closing. At the closing, you should have all of your paperwork, including the home inspection reports with you in case there is a discrepancy.
What To Expect From A Home Inspection
A home inspection can unearth many problems you did not notice during your visits to the home. Typical findings include:
- Crumbling foundation
- Structural damage to floors, walls, and ceilings
- Water damage inside and outside the walls
- Termite damage
- Porch railings or posts in poor condition
- Heating and cooling systems need to be cleaned or do not work properly
- Roof needs repair
- Sinkholes
- Broken or leaking pipes
- Electrical wiring not functioning or broken
- Broken water fixtures or light fixtures
- Windows that do not open
- Uneven doorways
- Improper insulation
- Mold
- Water contamination
- Septic tank issues, or
- Hazardous chemicals
Most homes will only experience a few minor issues, but some older homes may have more problems than they are worth.
The damage to the homes could cost you thousands of dollars if you are unaware of the damage prior to purchasing the home.
While disclosure of some problems is mandatory, many homeowners do not even know that some of these problems exist until they try to sell their homes.
On the day of the inspection, you should expect to hear about some problems. You should be given a detailed report of the findings that will outline drastic problems and those that can be fixed easily.
Some lenders will not approve the home loan until the problems are fixed and another inspection is conducted.
Specific Places That Should Be Inspected
When interviewing home inspectors, make sure to ask whether the following areas are inspected:
- Chimney and fireplace
- Attic and basement
- Crawl space
- Swimming pools, and
- Smoke detectors and appliances
These are important areas that can be very costly to repair once you have purchased the home. Many homeowners are willing to replace a chimney cap or remove mold from the basement. You should make sure that these areas are inspected prior to the closing. You should also inspect these areas during the final walkthrough.
Chimney And Fireplace
Inspectors should be looking for:
- Missing, broken, or intact chimney caps
- Mortar between brick chimneys is intact
- Metal chimneys are not bent or contain holes and have all screws in place
- Creosote – this is buildup caused from wood burning fireplaces, and is flammable if not removed
Attic, Basement, And Crawl Spaces
Home inspectors should be on the lookout for the following:
- Mold
- Fire damage
- Rotting beams
- Insulation
- Damage from water, and
- Damage from animals and pests
Swimming Pools
When looking at the swimming pool, the inspector should look at the following:
- Swimming pool plumbing, and
- Swimming pool shell
Smoke Detectors And Appliances
- Make sure they work
- No leaks
- Check for broken hoses or connections
- Broken door handles
- Inadequate wiring
Termite Inspection
A termite inspection is a separate inspection that will give you an idea of structural damage to the home that has been caused by termites and other pests. This inspection is required by most lenders before they will guarantee you the money to purchase the home.
Termite inspections are not covered under the standard fee of a home inspection, so you may have to pay for the inspection unless the homeowners are willing to do so.
The inspection should take about an hour and will entail the inspector looking underneath siding, in basements, attics, and on the foundation of the home to see if there are termites present or if there are other insects such as ants, or fungus that are destroying the wood.
The inspector will also conduct an inspection inside the home as well. Since termites can live in different weather conditions, you should have the inspection done even if you live in an area that has lower temperatures than other regions.
Termites can be removed using an insecticide that is specially designed to kill termites and their eggs, but the damage left behind can be immense. If the home has been infested for a long time, then it may be beyond repair.
You will then have to discuss a reduction in price, repairs being made to the property, or walking away altogether.
How Homeowners Will React
How the homeowner will react to the results of the home inspection could determine whether you continue pursuing the home or whether you let it go and find another one.
Homeowners have their own agenda when it comes to selling their home. These include:
- Buying another home
- Moving to another state
- Using the money to pay for family medical emergencies
- Retirement, or
- Making money on an investment property
This means that there are varying degrees as to what they are willing to pay for and what they are not willing to pay for. If the homeowner is not in a rush to sell, then they may contest the findings and refuse to repair certain items. If they need to make as much money as possible, they may agree to lower the price a little or make repairs that cost the least on the list.
Homeowners know they are taking risks when selling older homes. But what about new homes? If your new home does not pass inspection, it is up to the builder to make the necessary repairs. You should make sure this is included in the contract before signing it.
If you are buying a home that homeowners have already moved out of, you may be able to get the repairs paid for without having to be too pushy.
If the homeowners are paying another mortgage, they are eager to sell and may opt to pay for the repairs upfront or give you a price reduction.
This will depend on the circumstances. There is always a certain amount of luck that goes into buying a home.
Ways A Home Inspection Can Lower The Final Price
Even though you will have to spend money upfront for a home inspection, you may save more money than you anticipated once the results come back. This is especially true for older homes or new homes that were not built using the right materials or according to safety codes.
There are a few ways you will be able to negotiate a lower price on the home before signing the final contracts.
- Ask homeowners to make repairs
This is the best way to save money on your new home. While you will not see a reduction in the final price of the home, you will not have to make as many repairs down the road. Also, you will not have to worry about the repairs once you have moved into the home.
While all homeowners are different, you should be aware that many do not want to make repairs unless the home absolutely cannot be sold in the condition it is in because it will endanger the new owners. Even minor repairs may pose a problem for homeowners. You should be firm, but friendly when negotiating this part of the contract. If you do not want to make these repairs and you strongly feel that the repairs should be made by the homeowner, you can still walk away from the home and find another.
You should give homeowners a week to think about making the repairs. Most homeowners will make their decision quickly because they want the sale to go through.
- Ask homeowners for a price reduction
If the homeowners do not want to spend money on the repairs that you have requested, they may agree to drop the final price of the home. While the price reduction will not be too drastic, any reduction is a good one since you will have to make the repairs yourself down the road.
If the homeowners suggest a reduction in the final price, you should consider the offer and find out how much the repairs will cost you. If it seems like a fair deal, then take it. If not, you can always ask for a larger reduction. Most buyers and sellers eventually agree on a price that will suit both parties.
- Ask homeowners to pay for all closing costs
Another way to save money without relying on the homeowners to pay for the repairs is if they agree to pay the closing costs on both sides. This will free up some of your money so that you can make the repairs yourself.
You may have to have a separate contract drawn up that will explain what the homeowners are responsible for paying, and what you are responsible for paying. This will make buying the home much easier.
Any agreements that you make with the homeowners should be made in writing. Verbal agreements do not stand up in court, and are not common practice among real estate lawyers and agents when they are closing a deal. Your agent should make this clear to you at the beginning of the home buying process.
Do not be discouraged if there seems to be a lot of paperwork. This is necessary and the usual standard practice for those who want to protect themselves from wrong doing and lawsuits later on.
On the day of the closing, you should have a final walkthrough whether you are purchasing a new home or an older home. Final walkthroughs are a way for you to determine if there is anything else you will need to discuss, get in writing, or have changed before you sign the paperwork.
The final walkthrough will include you, the homeowners, real estate agents, and if necessary, your lawyer. Unfortunately, many buyers skip the final walkthrough in anticipation of moving into the home quickly. But you should have one more walkthrough just to be sure.
The benefits of a final walkthrough include:
- Making sure all repairs that were conceded by the homeowners have been made
- Be sure additional repairs are not necessary
- Walls are intact
- Plumbing is intact
- Garage door opener
- Test doors and windows
- All appliances that were remaining are still in the home
- Appliances are in good working condition
- Electrical systems are working by turning on all lights
You will feel much better after the final walkthrough for many reasons. You will get to see first hand the repairs that have been made, you will begin to see yourself living in the home, and you will be able to plan for the future in terms of what you want to keep in the home and what you want to remove.
In some cases, you will never meet the homeowners. If they have moved before putting the house on the market, you may be dealing directly with the homeowner’s lawyer. It is still a good idea to ask questions about the home before signing the final paperwork.
The Closing
The closing is your last chance to ask for changes to the contract, to bring up any concerns, and to ask the homeowners any questions you may have about the home and the property.
At the closing, you should bring:
- A notepad
- Financial notes and mortgage approval paperwork
- Signed paperwork you have received over the course of the deal
- Identification, and
- The home inspection report
At this meeting, you will be signing the paperwork that will make the home yours. This is a very exciting time, but you should maintain your composure to make sure that you are getting what you are signing for. If repairs have not been made, then you have the option to wait until they are complete.
When To Walk Away
Any time after the home inspection if you begin to have doubts about purchasing the home, you should contact your real estate agent and voice your concerns.
Many first time homebuyers need reassurance that they are making the right decisions. Your real estate agent will want the sale to go through, but they know that there are other properties they can show you, so they are not really losing money if you decide to not buy the home.
There are many reasons to walk away from a home sale. These include:
- A bad report from the home inspector
- The homeowners are unwilling to pay for necessary repairs
- You find another home that suits your needs
- The price for the home is too high
- You decide you don’t like the neighborhood
- Loss of your job, or
- A medical emergency
Walking away from a home is not giving up on your dream of homeownership. Unfortunately, there are times in life when buying a home is not possible. If the financial strain is going to be too much, for example, then you should seriously consider finding a lower priced home or a smaller home.
If you decide to walk away from a home, you should give yourself a few weeks to recuperate before going out there and finding another home. You should contact:
- The real estate agent
- The lender, or
- The builder
Let them know of your decision and that you will be in touch when the time is right. Many times after a bad report from a home inspector, it is just not worth spending the money on a home that will require a lot of repairs down the road. While all older homes will have some repairs, you should know the limits of what is acceptable and what will cost you too much money.
If you can get enough financing and you want to pursue the home regardless of the repairs that will have to be made, then go for it.
Sometimes buying an older home and fixing it up can be a fun activity for everyone involved. Only you can make these crucial decisions. A home inspection will help you realize how much work and money may be involved if you decide to purchase the home.
Next: Chapter 5: Financing Options
