Real Estate Inspections |
 When it comes to buying an investment property,
having a good inspection report can make the difference between turning
a healthy profit and buying a money-pit!
Investors will always run into opportunities to purchase where having no inspection contingencies will give them at an advantage. In general, such opportunities should be left to experienced investors who thoroughly understand what to look for when previewing a property with an eye to buying it as an investment. For the majority of investors, a licensed inspector should undertake a thorough property inspection. Any offer to purchase should include an option to cancel the offer or renegotiate the price if a subsequent property inspection reveals defects that had not been accounted for when making the offer. The Right Inspector ... Good vs Mediocre A good inspector can find the problems associated with your potential investment that you miss; a mediocre inspector may only report on things that are obvious. As well as being licensed, you should check into the background of any inspectors you might be considering. Even if you are using a large inspection company with many inspectors, you can ask for about the experience of their inspectors before determining who to select. Once you find a good inspector, you'll want to keep the same one for all your properties, so it's worth taking some time upfront to do your homework. Look for experience in the construction industry prior to their work as an inspector. Some inspectors may have worked as building inspectors for local towns. You want to find an inspector who is willing to have you walk the property with them and explain their findings to you as they go. This allows you to get a thorough understanding of the property and forces you to examine the property in more detail. A thorough property inspection can take over two hours [I've even had inspectors take four hours{ed}]. Hidden Problems Property inspections do have their limitations. In general, inspectors are not required to inspect anything that is covered up or inaccessible. This means that some problems may never be revealed unless the inspector has a good eye for telltale signs of something beneath the surface. Your inspector should point out the potential existence of a defect and recommend further, more explorative inspections inspections be undertaken to determine the extent of any hidden damage/defect. For example, damp penetration into structural timber may result in mold, dry rot, wet rot or insect infestation, any of which may be hidden from view. A sharp-eyed inspector will spot the source of damp penetration and point out the potential danger of hidden damage. Most damp problems leave telltale signs. Buyer Beware Damp penetration can be a big problem because it can cause significant hidden damage. A small roof leak left unattended for several years can result in rotted roof sheathing, mold behind walls, insulation deterioration, rotted timber framing, rotted floor joists and floor sheathing. Unattended damp can also result in dry-rot, which can eat through all the timbers of a property, regardless of whether they are damp or not.
When A Problem Is A Plus Not all problems are actually negative. As a buyer, you want to find properties in need of attention because you are more likely to be able to negotiate a lower price and help the seller out by taking a problem property off their hands. Some things that can be relatively easy to fix include:
These problems often cause unsightly internal damage through water penetration. The result is frequently a property that looks unappealing but is easy to fix, particularly if the water penetration is relatively recent. Care needs to be taken to determine the extent of any water damage and rot in order to budget the repairs accordingly. Provided the source of the water penetration can be fixed, you can purchase a problem house and turn it into a pleasant home while making a healthy profit in the process. [I purchased a property that had a big puddle in the basement that was putting most buyers off the purchase. Upon close inspection it was revealed that the source of the water was a downspout that had been crushed by a lawnmower and which overflowed during rainstorms. The water flowed down the basement foundation and penetrated at a joint in the walls. Unbending the downspout to allow the water to flow into the drain resolved the issue resulting in a perfectly dry basement! {Ed}] The Inspection Report Take time to review the report in detail. Make sure you have budgeted for all of the repairs required to bring the property up to standard. Remember, anything you don't take care of will likely come up in a future inspection done by potential buyers when you are ready to sell. If there are items on the report that are unclear, contact the inspector for clarification (Tip: always get the direct phone number of your inspector). If the inspector recommends additional inspections by specialists, negotiate with the seller for an extension to the contract to allow you reasonable time for these inspections to be completed and reviewed. Remember, problems uncovered during an inspection shouldn't necessarily put you off the purchase, but be sure to budget for their correction in determining the current market value of the property. |
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Signs of structural damage to the foundations may be
revealed as a result of an inspection. Most inspectors will be able to
identify this potential problem through telltale cracks in the walls and
foundations. Where large structural cracks are present, it makes sense
to get the opinion of a structural engineer.
Not
all inspectors will undertake a pest inspection, so it is wise to check
and be sure you receive a pest inspection at the same time as you
undertake the structural inspection. Termites and Carpenter Ants can be
a particular problem since their damage is mostly unseen and can be
extensive.
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