Should I get home inspection on investment property?

Question

Hi all,

I recently had my offer accepted on a duplex for 140k. Apparently, there were higher offers but the seller liked my terms better. With that said, because they are letting the property go for a lower price, they are not willing to fix anything that may arise during the inspection. After walking through the property (currently rented) there doesn't appear to be anything major to fix (at first glance).

My question is- because I will be on the hook to pay for any needed repairs, is it worth getting a home inspection? On one hand, it is peace of mind to know what may need fixing or what may need fixing in the future and at the end of the day it's only 400-500 dollars. On the other hand, because I am getting the property 'as is' essentially, it may be a waste of money. Thoughts?

After going through the purchase of a different duplex last year, the inspector didn't realize the heating system was installed incorrectly and two bedrooms weren't getting heat at all. $1000 dollars later, this is something he should have noticed. Needless to say I am partial to inspectors. In addition, their obligation is to inspect only “readily accessible, visually observable” systems and components of the home.

Thanks!

Christopher Giannino · Answer

@Michael Doherty

What's your background and experience level?  For what it's worth, my personal opinion is if you don't come from a construction background and you haven't done many deals it would be totally worth the $500 for the inspection (assuming you don't use the same inspector from last year) because something you didn't initially pick up on which could be a deal breaker to you may present itself in the home inspection report.  If this should happen, you can make a decision on whether to walk away from the deal or ask for some sort of assistance.

I know you said it's an as-is sale and you don't expect them to do anything to help (which is usually the case) but I'm currently working with a client of mine who's buying a bank owned foreclosure.  Bank is selling the property as-is and after the home inspection report came back we were able to negotiate $10k as a credit on top of an already extremely discounted property.  We realized the bank was very eager and motivated to sell so we figured we'd at the very least ask for money because the worst thing they could of said was no.  Who would of thought we'd be able to pull that one off.   Moral of the story, it's always worth a shot to ask...

Mitch Messer · Answer

Hi @Michael Doherty. Yes, you absolutely want to get your investment property professionally inspected. Even with the understanding that the seller will not make any repairs, you still want to know exactly what you're getting into. A detailed assessment of existing systems will inform the type and degree of renovation needed. Furthermore, there are always some "deal-breaker" situations that you would be willing to cancel the entire transaction to avoid.

What you don't need is the fancy, pretty (and pricey) "big-production" report that most inspectors offer to owner-occupants. Find an inspector who works with investors (ask your local REIA for referrals) and then get the no-frills version of the final report. This might shave the cost a bit. Also, if possible, plan to be on site while the inspector does their walk-thru.

Lastly, for critical systems like HVAC, ask one or two actual contractors who want your business to take a look and report back to you. Our HVAC guy now does this for us for about $75, and in exchange he gets most of our repair work.

Brian Pulaski · Answer

Depends on your experience and also if you have a trustworthy inspector.

I have one I use for my flips (not always but he charges significantly less than $400-500 to do a quick walk with me and no report) and he is awesome. I have seen others that were a joke and wouldn't catch any issues unless they were circled for them.

Shawn Ward · Answer

@Michael Doherty I'd always suggest having a good inspection done no matter what. Get recommendations from trusted agents.

Pat L. · Answer

But wait up here that inspection report should be available to the buyer as the seller should also have a copy.

Charlie MacPherson · Answer

@Michael Doherty  Unless you have the expertise needed to find underlying problems, then it's an unequivocal YES.  Get a state-licensed home inspector to go through the property from top to bottom.

Just because the seller states the property is "as is" doesn't mean that you can't go back and look for a price reduction if the inspector finds something major.  And the fact that they're taking your lower offer makes me wonder if the other buyers are known to be sharp and they think that they can get one over on the new guy.

Of course, they can say no.  At that point, you should (depending on how your contract is written) still be able to get out.

I've worked with plenty of buyers who back out of a sale because of what the home inspector finds.  If that happens to you, it will be the best $500 you ever spend.

Kyle McKnett · Answer

Really depends on your background and experience but I would still recommend one. Even though you are buying as-is it might uncover bigger issues that you previously were unaware of. I good inspector will also be able to estimate the lifespan of current systems so you have an idea of upcoming repairs.

Bryan Blankenship · Answer

Absolutely you should. We are licensed inspectors and general contractors so we do internally, but yes...definitely get an inspection. There are so many major issues you have to know before closing.

Michael Doherty · Answer

@Pat L. the inspection report would only be accessible by the previous buyer who didn’t go through with the property for various reasons. From my understanding, the seller would only be made aware of the report if certain items needed to be fixed.

Should I get home inspection on investment property?

Most Popular Reply