Do I need an inspection report if Im buying a fixer upper from a wholesaler?

Question

The water & electricity are both turned off on this fixer upper property that I have under contract with the wholesaler. Do you recommend that I get an inspection report? I plan to hire a GC to manage all the different sub-contractors on this project.

Bill B. · Answer

How do you know what your repair budget is without an inspection including water and electricity being on?

Is the foundation out of whack? Do all the pipes leak? Is it knob & tube. Asbestos, lead paint? Outlets grounded? How much life is left in the roof? Does the area have termites, carpenter ants or any such thing?

Certainly you can skip an inspection if the house is less than 5 years old surrounded by identical homes. But why not assume the seller and the wholesaler know more about the property than you and are happy to take your offer. So you’re probably not under paying.

Evan Polaski · Answer

@Susan Tan, this really comes from your comfort level both with your own ability to assess renovations and your trust in the wholesaler.

While there are good wholesalers out there.  I would say they are the needle in the haystack and most wholesalers a) don't know what they are doing and b) would tell you anything to get you to buy the house.

That being said, if it were me, I would feel comfortable NOT getting an inspection, but I have done enough flips and toured enough houses to recognize the major issues.  AND, if there is no water or electric on,  I would simply assume they both need fully replaced.  This assumption, alone, would typically mean my price is going to be what the wholesaler wants to get for the house, but I would rather not get a deal than pay too much and end up having a full rewire, including service, and all new plumbing, including main water and sewer.

If the wholesaler wants me to pay more, they need to get the services on and allow me to inspect, so I know what I am getting into.  In my experience, most wholesalers will tell me that isn't an option and will keep looking for the next person to buy it.

Dave Vona · Answer

Hi Susan, I've had inspections done on the rental properties that I've purchased.  I then go through the inspection report and make a list of any repairs I want to have done during the rehab.  And, I can see what maintenacne/repairs may be needed in the years ahead.

A GC can sometimes provide some of this feedback, but I wouldn't trust them to create a scope for me.  I like to create the SOW and give that to the contractor, rather than the other way around.

Jeremy H. · Answer

It is absolutely mind boggling to me that people are worried about a couple hundred bucks when they are making a 100k+ investment.

Literally sitting over here pinching pennies on an inspection report - unreal

Unless you're an expert in inspection/construction or getting an amazing deal that can overcome any problems you find about later - get the report

Joe Davis · Answer

The issue is timing - a wholesaler is going to move that property as quickly as possible. If you aren't contracting it from him (they will not give you an option). They will sell to someone else.

If you are prepared to leave EM at the table if the inspection report goes bad than so be it.

However - what i would suggest is to have a good GC on your team that can walk it with you, and just add in a contingency for the inevitable. You are never going to get to the penny on a rehab estimate but a good GC can account for the majors and the potential risks that might show up. By having a cushion on your rehab, it will allow for some initial oversight.

Andrew Syrios · Answer

I would try to get the water and power on to do an inspection, but that's not always possible. When we were buying lots of REOs back around 2011-2014, the banks would rarely turn the power/water on for us.

In such cases, you still should inspect it thoroughly. But you need to know you're rolling the dice on the power and water and build in a substantial rehab contingency into your budget to brace for issues with those things.

Alecia Loveless · Answer

@Susan Tan I always have my contractor walk the property and get an inspection. Depending on what I’m buying it’s between $400-800.

I’ve always found problems with the electrical systems during inspections and often my contractor finds out the smoke detectors and CO detectors aren’t up to code.

Where I live we find a lot of dry rot in support beams in basements and evidence of homes needing sump pumps.

I’d still recommend the inspection even if you can’t get the water and electrical turned on.

Ryan Kelly · Answer

@Susan Tan if you are under contract using an official TREC contract, it requires all utilities to be active during the entire contract window. Many wholesalers use this contract as well.  You could point to that clause and require utilities to be activated so you can do an inspection. Most wholesalers have contracts with no contingencies, so you wouldn’t be able to terminate. It would just give you a better sense of what work is needed.

Tim Delaney · Answer

@Susan Tan if you are super comfortable with the condition and know the worst case scenarios of what you may be getting into then don’t bother. However, if you aren’t certain then it is probably a good idea to have a professional take a look. You don’t necessarily need a formal home inspection with a report. A trusted contractor may be sufficient. One big variable is whether the sellers are willing/able to turn the water and utilities back on for the inspection. If they don’t then you still may not know some of the issues.

Did your contractor already walk the property with you?

Bruce Woodruff · Answer

Especially with a fixer upper from a wholesaler!!! It's only about $400....why wouldn't you?

Do I need an inspection report if Im buying a fixer upper from a wholesaler?

Most Popular Reply