Before You Make an Offer
How do I get the real scoop on homes I am looking at?
What's a home inspection?
Do I Need A Home Inspection?
Pre-Purchase Inspection
Inspection Contingencies
Finding a Professional Home Inspector
How do I find a home inspector?
Should I hire a home inspector for a new home?
House Conditions To Avoid
What are the standard contingencies?
What Is A Home Warranty? How Does It Work?
Who Would A Home Warranty Help?
Whose obligation is it to disclose pertinent information about a property?
How do I get the real scoop on homes I am looking at?
Home inspections, seller disclosure requirements and the agent's experience will help. Disclosure laws vary by state, but in some states, the law requires the seller to complete a real estate transfer disclosure statement. Here is a summary of the things you could expect to see in a disclosure form:
- In the kitchen -- a range, oven, microwave, dishwasher, garbage disposal, trash compactor.
- Safety features such as burglar and fire alarms, smoke detectors, sprinklers, security gate, window screens and intercom.
- The presence of a TV antenna or satellite dish, carport or garage, automatic garage door opener, rain gutters, sump pump.
- Amenities such as a pool or spa, patio or deck, built-in barbeque and fireplaces.
- Type of heating, condition of electrical wiring, gas supply and presence of any external power source, such as solar panels.
- The type of water heater, water supply, sewer system or septic tank also should be disclosed.
Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems. The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property. Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any major damage resulting from earthquakes, floods or landslides. People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions.
It's important to note that the simple idea of disclosing defects has broadened significantly in recent years. Many jurisdictions have their own mandated disclosure forms as do many brokers and agents. Also, the home inspection and home warranty industries have grown significantly to accommodate increased demand from cautious buyers. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
What's a home inspection?
A home inspection is when a paid professional inspector -- often a contractor or an engineer -- inspects the home, searching for defects or other problems that might plague the owner later on. They usually represent the buyer and or paid by the buyer. The inspection usually takes place after a purchase contract between buyer and seller has been signed.
Yes. Buying a home "as is" is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.
When evaluating a home, it is important to understand the difference between acceptable and unacceptable problems. Cosmetic items like peeling paint, worn carpeting and unattractive wallpaper can easily be remedied and can be used as items to negotiate. However, major problems are clearly "red flags". Items such as major foundation cracks, water damage, outdated electrical systems and inadequate plumbing would qualify as unacceptable items and could cost you dearly in the future.
A proper home inspection is meant to evaluate, at minimum, the structural and mechanical condition of the property. It is not the same as an appraisal, which evaluates the market value of a property. When involved in a real estate transaction, homebuyers and sellers need unbiased information about the physical condition of the property. The contract should include a contingency that you, as the buyer obtain a satisfactory home inspection report.
What is inspected?
Every inspection should include, but not be limited to, an evaluation of the following:
- Foundations
- Plumbing
- Electrical
- Doors
- Ceilings
- Walls
- Floors
- Roof
- Attic
- Heating and air conditioning systems
- Hazardous materials concerns
- Common areas (in condominiums)
- Drainage
- Insulation
- Ventilation
- Garage
- Porches, Patios and Decks
- Siding and trim
Pre-Purchase Inspection
Buying a home wisely means taking a thorough look at what you are about to invest in. A few simple checks can reveal a lot about a home and you can save yourself time and money by conducting your own inspection before making an offer. In almost all cases, you will still want to include a professional inspection contingency in your contract. Here are some major areas of the home to check out:
WallsWalk the walls from the right when you enter the house, keep following to the right. This way you will look at every wall that way. Check for settlement cracks, separating joints, defective plaster or other signs of stress or damage. Check wallpapered areas for crinkling or gathering, which may mean walls, are settling or shifting.
FloorsCheck the floors while you are walking the walls. Are they shaky or squeaky? Walk heavily and jump. If they are slanting, the home may have a foundation problem. You can also test for slope with a ball or marble.
LeaksLoose or wrinkled wallpaper could indicate a water leak somewhere. Watch for water stains on the ceiling and walls, look closely in case they have been painted over or repaired. In the bathrooms and areas with pipes, check for leaks and drips. Run the shower and basin, and flush the toilet to check water pressure. Look for cracked or loose tiles and missing grout or mildew stains on the walls or floor, which could indicate a leak behind the wall.
Electrical Check each room to determine if there are enough outlets and if they are located where you will need them. Try every electric socket or outlet, using a night light, turn every switch on and off. Check every appliance to make sure that it works well. Compare amps to appliance requirements to establish if the home has sufficient voltage.
Doors & Windows Open and close every door and window. Watch and listen for squeaking, sticking, or a tendency to close on their own. Pay attention to weather stripping, is it tight and in good condition. Check for evidence of shifting or settling around the front stoop, chimney, walks and areas where the driveway and fence meet the house.
Sills, Beams & Pests Look for rot or spongy spots caused by moisture or pests. Look for termites and ants, especially around the foundation, doors and entry points of wiring and pipes. Check the grading of the yard to be sure water runs away from the house.
Roof Check the attic with a flashlight, looking for water or water stains. Look at all sides of the roof from the outside, determine the condition of the shingles and check for accumulations of shingle gravel at the bottom of downspouts.
Land Walk around the lot checking for low areas, water gathering spots or areas of erosion. The grade of the land should slope away from the house. Make sure the trees and landscaping look healthy.
Deck & Garage If the home has a deck, check it for sturdiness and look for rotted wood. Go into the garage and check the walls, floors, doors and automatic opener.
If everything looks acceptable to you and you decide to purchase the house, be sure to require a professional home inspection prior to settlement. A home inspector will do a thorough inspection that includes; getting down into the crawl space, climbing onto the roof, and checking out the attic, appliances and major systems. You can then use the written report from the inspector to estimate any repair costs and negotiate those with the home seller.
Final Closing
It is important to have the house inspected before the final closing occurs. Inspections for insects, radon, and building quality should be performed. Your homeowner's insurance and mortgage should be finalized also. Make sure all the necessary paper work and deposits have been completed before you arrive at the closing. Other tasks to complete include: turning on electricity, phone service, subscribing to the local paper, setting up an alarm system, cleaning or replacing the carpet, etc.
Inspection Contingencies
An "inspection contingency" protects the buyer in a purchase contract by allowing the buyer to cancel the contract if an inspector finds problems with the property that cannot be resolved. If the contingency is not stated in the contract then there could be costly legal implications stemming from the buyer backing out of the contract. Keep in mind that contingency clauses should satisfy the concerns of both the buyer and seller.
Finding a Professional Home Inspector
A good source is a referral from satisfied customers or your Realtor. You can also try the local consumer affairs office in the Yellow pages under "Building Inspection Services".
You may want to ask if the inspector is a member of the American Society of Home Inspectors (ASHI). ASHI has established standards of practice, which include the specific services, limitations, and exclusions that can be expected from private home inspectors.
How do I find a home inspector?
Your realty agent is one source. But keeping them independent from the agent may be a good idea. Inspectors are listed in the yellow pages. You can ask for referrals from friends. Ask for their credentials, such as contractor's license or engineering certificate. Also, check out their references.
In order to find a home inspector, Dian Hymer, author of "Buying and Selling a Home A Complete Guide," Chronicle Books, San Francisco; 1994, advises looking for someone with demonstrable qualifications. "Ideally, the general inspector you select should be either an engineer, an architect, or a contractor. When possible, hire an inspector who belongs to one of the home inspection trade organizations." The American Society of Home Inspectors (ASHI) has developed formal inspection guidelines and a professional code of ethics for its members. Membership to ASHI is not automatic; proven field experience and technical knowledge of structures and their various systems and appliances are a prerequisite. One can usually find an inspector by looking in the phone book or by inquiring at a real estate office or sometimes at an area Realtor association. Rates for the service vary greatly. Many inspectors charge about $400, but costs go up with the scope of the inspection.
Should I hire a home inspector for a new home?Most experts recommend having a home inspected, new or old. For new home, ask the builder to provide copies of any inspection reports on the property, architectural plans, surveys and pertinent construction documents for your inspector to review. Your inspector should either be a professional home inspector, an engineer, an architect or a contractor. If you hire a professional inspector, look for one who belongs to one of the home inspection trade organizations. The American Society of Home Inspectors (ASHI) has developed formal inspection guidelines and a professional code of ethics for its members. Membership to ASHI is not automatic; proven field experience and technical knowledge about structures and their various systems and appliances are a prerequisite. Rates for the service vary greatly. Many inspectors charge about $400, but costs go up with the scope of the inspection.
House Conditions To Avoid
Whether you're selling or purchasing a home, you want to ensure that the home in question is in good condition. ASHI (American Society of Home Inspectors) recently completed a survey and found the following to be the most common problems in homes today.
- Improper Surface Grading and Drainage Over 33% of the inspectors surveyed rated this problem as the most troublesome. Improper surface grading and drainage can be responsible for household disorders such as leaky basements and crawl spaces. The grading and drainage problems can be fixed either by regrading the ground away from the house or replacing gutters and down spouts.
- Improper Electrical Wiring 20% of the surveyed inspectors rated this as the most common problem. Some inspectors suggested that over 70% of electrical wiring in homes is installed incorrectly, mostly by do-it-yourselfers. The problems included insufficient electrical service, inadequate overload protection and amateur wiring connections.
- Roof Damage Leaking roofs ranked third in the survey, resulting most often from old or damaged shingles or improper flashing and drainage. Asphalt and wooden shake shingles have a life span of between 20 and 30 years, slate shingles can last more than 100 years.
- Heating Systems The heating system is an item that must be dealt with if it fails the home inspection, and the majority of real estate sales contracts require it to be in working order. The most common problems include broken or malfunctioning controls, blocked chimneys and unsafe exhaust disposal. Problems in this area should not be overlooked, as they can be dangerous if left unattended.
- Lack of Maintenance While this problem is common, it is also avoidable. Signs of poor maintenance include: cracked, peeling or dirty painted surfaces; crumbling masonry; makeshift wiring and/or plumbing; and broken fixtures and appliances.
- Structural Issues This area includes damage to structural components such as foundation walls, floor joists, rafters and window/door headers. Many of these problems are a result of some of the conditions listed above.
- Plumbing Faulty fixtures, waste lines and the existence of old or incompatible piping materials are also common problems.
- Exteriors While these flaws may not affect the property structurally, defects in windows, doors and wall surfaces can cause discomfort to residents via moisture and air penetration. The most common exterior problems are inadequate caulking and weather-stripping.
- Poor Ventilation Over sealing a home can trap excessive moisture inside resulting in rotting and failure of structural and non-structural elements.
Fortunately, many of the most common problems in homes can often be fixed quickly and inexpensively. The ideal solution is to fix them before they can cause significant damage to your home.
What are the standard contingencies?
Most purchase offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. As a buyer, you could forfeit your deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. The purchase contract must include the seller?s responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
What Is A Home Warranty? How Does It Work?
A Home Warranty is a service contract that offers protection against the expense of repairing or replacing existing home appliances and mechanical systems, which may breakdown due to normal wear and tear. A home warranty plan is usually a one-year contract covering a multitude of systems and appliances existing in your home regardless of age, make or model. The basic items covered include:
- Electrical
- Plumbing System
- Interior Clogged Drains
- Garbage Disposal
- Whirlpool Tub
- Exhaust Fans
- Refrigerator
- Stove, Oven and Hood
- Built-in Microwave Oven
- Dishwasher
- Built-in Trash Compactor
- Central Vacuum System
- Water Heater Heating System
- Heating Ductwork
- Garage Door Opener
- Sump Pump
- Door Bell
Most home warranty companies do offer additional coverage to include items not listed above. There is an additional charge for increased coverage. In most cases, there are no waiting periods (excluding rust or corrosion). Since warranties do not cover pre-existing conditions it is still wise to have a home inspection done.
How Does It Work? The moment something breaks down, you call a 24-hour, toll-free service line and make a service request. The warranty company will then contact a local service technician, who will contact you and schedule an appointment. In almost every case, you must use the company that is selected for you by the warranty company. This is to ensure the technician is qualified and has agreed to the prices set by the warranty company. This process is similar to a health insurance plan. When the service technician arrives you will pay a trade service fee usually around $50 (this varies by warranty company) for each occurrence, regardless of the actual cost to repair or replace the broken item.
Who Would A Home Warranty Help?
Homeowners & BuyersA typical home owner will use their home warranty more than 2 times per year on costly covered repair or replacement items. A warranty contract helps to protect the buyer from unforeseen costs and provides an element of security.
Home Sellers Even one breakdown of a major covered household system or appliance can be very expensive. Sellers coverage while the home is listed can help eliminate potential problems by protecting against the high cost of covered repair and replacement systems and appliances. In addition, this can be considered a selling feature to many buyers.
Investors & Landlords Your tenants know where to call for emergency repair 24 hours a day. Since the trade service fee is minimal, this can save you time and money. Remember that a warranty is not a replacement for a home inspection and you may need to purchase additional coverage if your home includes items such as hot tubs, pools, wells and septic tanks.
Whose obligation is it to disclose pertinent information about a property? In most states, it is the seller, but obligations to disclose information about a property vary. Under the strictest laws, you and your agent, if you have one, are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible only to you. This might include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as a dog that barks every night or poor TV reception; any death within three years on the property; and any restrictions on the use of the property, such as zoning ordinances or association rules. It is wise to check your state's disclosure rules prior to a home purchase.