Home Inspections Can Save Thousands | Real Estate Investing

As a licensed real estate agent, I recommend that all my clients — especially my first timers and my owner-occupants — get a home inspection. If you’re new to real estate investing, I recommend you get one, too. You never know what you don’t know.

What IS a Home Inspection?

A home inspection is an inspection of the major systems and physical attributes of a property. Think furnace, AC, plumbing, electrical, roof, basement. The inspector comes into the home and sets up any testing like radon or mold. Then the inspector goes around the house looking at everything.

Each inspector has their own system and typically works from a home inspection checklist. They take a ton of pictures as they go through the house and make notes for their report.

They look at the age of each mechanical and also test to see if it is in working order. (Testing AC units when there is a low exterior temperature can cause system failure, so if your inspection is taking place in January in Colorado, that’s not a system that will be tested.)

They’ll turn the furnace way up to see how easily it turns on. Inspectors check the status of the unit — clean, dusty, not working at all — and include a note about all of this in their report, along with a basic life expectancy.

Example: Furnace is 9 years old. Average life expectancy for a furnace is 20-25 years. It was in working order when tested. Verify service history with seller.

If the inspector finds damaged or missing items, they will note those, too. The image below was taken directly from the inspection report for my most recent sale.

The missing item is not a big deal — it certainly doesn’t affect the unit, and it’s an easy fix.

What a Home Inspection is NOT

A home inspection will not guarantee that the systems are going to last for X years. It is entirely feasible to have a home inspection today and have every system stop working tomorrow. It’s not likely, but it could happen. The home inspection is a snapshot of the home at that particular time.

A home inspection will also not give you any information about the legal status of the home — they don’t cover title work or get into liens or permits.

Make the Most of Your Inspection

Be there. Physically be at the home during the inspection if at all possible. Get there right on time, and walk around the home with the inspector so they can show you everything they are seeing.

If you have small children, this is an ideal time for a babysitter. If you can’t find someone to watch them at your home, at the very least have someone watch them where the home inspection is taking place. You need to be able to focus as much as possible on the home inspector and what they are saying.

Ask questions! This is the only time the home inspector is going to be in the house. Trust me, it is FAR better to pepper him with questions about the property than to leave something unanswered. You are paying for this inspection — so ask any question you want, and keep asking until you completely understand the answer.

Do I Really Need an Inspection?

Here’s my Home Inspection Rule of Thumb.

If you’re asking if you need one, you need one.

It doesn’t make you a bad person. I get home inspections for every property I buy. It makes me feel more comfortable about the whole purchase. Even though I’ve been investing since before dirt was invented, I still want to know what I’m getting into.

A few years ago, I was looking at a townhouse in an awesome area. Newly rehabbed, I wasn’t expecting anything to be wrong with it, but I still wanted a home inspection. As we were outside finishing up, the inspector casually mentioned that the exterior was not stucco, but something called EIFS — Exterior Insulation Finishing System.

Hmm, what’s EIFS? Thankfully Google existed even back then, and a quick search told me I wanted no part of any property covered in EIFS. When installed correctly, it looks like beautiful stucco at a fraction of the price. When installed incorrectly, water gets trapped behind the product and can cause massive mold damage — to the point that the property becomes uninhabitable.

I didn’t stick around long enough to deal with that. Mold isn’t my thing, and the property wasn’t enough of a steal for me to figure that out.

Another thing was that exterior issues in a townhome or condo become the responsibility of the association. And anyone who has ever tried to deal with an association knows what a difficult task that can be. So, I walked. And I was happy to spend that $400 to discover that issue. Maybe “happy” isn’t the right word — but certainly not mad about it.

Pre-Inspected ISN’T a Good Thing

I’m on the MLS all the time. I’m either looking for properties for clients or myself or doing research into prices in a certain area.

I look at a LOT of listings, and something that pops up frequently is “Home is pre-inspected and comes with a brand name home warranty!”

This makes it SOUND like a good thing, but is it really? Who did that home inspection? You weren’t there to ask the inspector questions. You don’t know what he did or did not look at. You don’t know how long the inspector was in the property.

A home inspection lasts a LONG time. Multiple hours. You don’t know if the guy came through on a scooter and spent nine minutes in the house or if he got up on a ladder and inspected every single thing with a fine toothed comb. Pro tip: Pre-inspected homes aren’t gone over with a fine toothed comb.

Cheaper isn’t always better. In fact, most of the time it’s NOT better at all. Do you think the seller spent top dollar on a home inspection to provide to potential buyers? Probably not.

Do your own due diligence. This includes a home inspection. Trust but verify.

It’s Brand New — Do I Still Need One?

There is a difference between a home inspection and a building inspection. The building inspection is what you get when you are constructing a home to make sure the home meets current building codes. A home inspection is what you get when you are buying a home.

My dad bought a home once. Actually, I grew up a corporate brat — similar to a military brat, but he was on the corporate track rather than in the military. Corporate brats still get to move around a lot, though. Three schools in second grade, and all of the sudden I’m no longer shy. We moved on average every three years. I’ve never lived in a home for more than five years.

So my dad bought this house, and since it was brand new, he didn’t get a home inspection. Once we moved in, we discovered there was no attic access. No soffit vents, no attic vents, and the basement flooded every time it rained. My parents no longer have a wedding album.

When it was time to sell, it was no longer brand new, and the people who were buying it from us DID get a home inspection. Even though we lived there for eight years, that home inspection discovered that the fireplace — you know, that giant stack of HEAVY bricks and mortar on the side of the house — had no additional support underneath it, and it had started to sink. Pro tip: That’s not a cheap fix.

Home Inspections Are So Expensive — I Know What I’m Doing

Not everyone needs a home inspection. If you are an inspector, go ahead and do it yourself. If you’ve done 500 deals, you might not need one, either. If the property is a 100 percent teardown, you can probably skip it then, too.

But to forego an inspection simply because it is too expensive is the wrong reason to skip it. And the “wasted” $500, $800, $1,000 can actually save you tens of thousands in unexpected issues.

You can almost bet that your end buyer is going to get a home inspection.

Additional Tasks

Check for permitted rehabs. If the property you are buying is recently rehabbed or has been rehabbed since it was built — think built in the ’60s but looks like the ’80s — check with the city to make sure all the permits were pulled, inspected and completed. This isn’t covered in a property inspection, so you should do it yourself.

My current home was purchased through foreclosure. It had an original house and a large addition. I’ve been investing since before dirt was invented, but I didn’t think to check on permits. Guess what happened? We applied for a permit to build over the existing large first-level addition and were told that the addition didn’t exist. Uh-oh.

The illegal addition didn’t meet current setbacks, but my city is gracious enough to grandfather in existing structures as long as they meet current code.

An inspector came out and checked the foundation, which I had to dig up by hand. (Jealous?)

It turns out that even though the addition wasn’t permitted, it was still OK. We had to do some monkey business around the foundation for freeze/thaw issues, but we didn’t have to tear the whole thing down.

I have heard of people with unpermitted basements who had to rip out several parts of the drywall and ceiling to have the electric and plumbing inspected. If you’re unsure, a quick call or stop into the permit office can tell you an awful lot about your property.

How Do I Find A Good Home Inspector?

I’m hoping you have a good real estate agent who can give a great recommendation, but even that isn’t always the best way to find a good inspector.

Get recommendations from several different people — the forums or a local meetup is a great place to start networking with people. Other investors don’t have any skin in the game, so it makes no difference to them if you close on the house — or if you choose to walk away from it due to inspection issues. They’ll be more inclined to refer you to a great inspector.

A home inspection isn’t cheap, and it isn’t a guarantee. But skipping it — and finding huge issues after you’ve bought the home — can cost you so much more.

Do yourself a favor and get a good, quality home inspection.

Have you found issues in an inspection that led to the cancellation of the contract? Do you have any tips for finding a good inspector?

Please share them below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.