Most of us who have been in real estate for longer than 3 days know a property inspection is an important element in the process. An inspection may be more critical if you are in the foreclosure/short sale real estate arena. I say may be because you may think its import is equal across the board.
My son has a friend I’ll call Paul for this story. Paul is into short sales and maintains he has made quite a few dollars at it. At first blush, one has no reason to doubt Paul’s words. One might even think Paul is Mr. Experience. However, when you read his last episode you may draw a different conclusion.
For all I know, to be fair, he suffers from bouts of forgetfulness. That is one way to explain what happened. As my son relates the story, Paul was tickled pink and all aglow when he left the title/escrow company. Visions of 5 figures on his check when he sold the property were dancing in his head.
Surprise, Surprise, Surprise
He headed straight for the property to inspect his latest acquisition. Read that sentence again. It is important to the story. You see Paul never inspected the property BEFORE he bought it. Not once. Not even a cursory peek into the windows to see what he could see.
When he arrived at the house, he noticed the yard was in disrepair which is quite natural for this type of property. Nothing out of the ordinary. He opened the door and was met with a musty smell but, again, nothing out of the ordinary. He went into the kitchen and noticed the drain in the sinks (double sink as in many other homes) were completely filled with concrete.
His smile started to sag. He then went into bathroom number one and noticed not only the drains full of concrete but so was the toilet and bathtub. The remaing two bathrooms mirrored bathroom number one. His smile evaporated.
The Cost Of Surprises Related to Home Inspection
This particular house sits on a slab much like many houses in the U.S. According to Paul’s repair contractor, the total cost to “right” the damages which went all the way down and into the slab was around $67000 to $70000. As Paul related the story to my son, all of his profit disappeared in an instant. In fact, he said, it is now going to cost him money. He was so distraught he started bad mouthing short selling.
No big deal on the bad mouthing of short selling as there are plenty of people and politicians who have said short selling is the root of the real estate bust. So, I’ll walk by his ranting against short selling. However, I won’t walk by his idiotness in violating probably the most basic of all principles in short selling.
In case you are new to real estate investing, here is the principle: Always, and I mean always, inspect the property before you sign your name at closing. If you can’t inspect the property, I say don’t buy it. Now I know some folks will disagree and some people will even have success stories about properties they didn’t inspect but I believe they are few and far between or it was a sweetheart deal.
What You See Is What You Get
Let me leave Paul and relate my thoughts on damages to property. We’ve all been in houses that were damaged by the previous owner. Probably the most extreme damage I’ve personally experienced was a home in which the people actually cut out the middle of the living room floor. When you looked down, you were staring at bare earth. They left about a foot of flooring around the walls. They took the bathtub, toilet, sinks, stove and everything else they could. It was quite a sight to behold.
Even this house had potential if bought at the right price. However, in order to determine the right price, you definitely would have had to walk through, some call that process inspection, the property before you made an offer.
We all know some properties aren’t damaged at all. Truth is, we probably salivate when we run across such a jewel. I know I do. On the other hand, when I see a country property in which the well went dry, the septic went kaput, the floor buckled and the garage floor is akilter, I have a tendency to walk away.
A contractor friend of mine loves these kinds of properties. He has even bought two and has them rented. Good for him. Damages are in the eye of the beholder and if you can turn a sow’s ear into a silk glove (is that how that goes?), fantastic. I can’t and won’t. I like frying fish I don’t have to catch.
Here’s a property damage story that would vault to the head of the line of almost anyone’s stories. It is my last story in my effort to make a point. The house was bought sight unseen as you will surmise after you read it.
Property buyer goes to the house, opens the front door and is knocked to the ground by the smell. He covers his mouth with a handkerchief and walks in and is met with not only the foul smell but he sees mold everywhere. Apparently the former owners, in the property buyer’s opinion, had sprayed milk on every part of the interior as they left and locked the door behind them.
Since it was in mid-summer and the house sat for several weeks, the nastiness had time to grow and culture. Mid-summer temperatures in this particular area of Nevada run up to 109 degrees during the day. I’ll let you fill in the gory details.
One More Time
These stories hopefully will save someone from making the same mistake. I know some of us have not only heard them but experienced them. Let’s hope they serve as a warning so no one has to make another post that warns people about the mistake of not inspecting a property before buying. On the other hand, I have a feeling we will be hearing it one more time.
Photo Credit: skitzianist
Article Author:
Tom KoziolTom has written 84 articles for us.
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{ 5 comments… read them below or add one }
i can attest to this. Bought a bank owned 18mos ago and did not get an inspection (foolishly). thought i did walk through. the realtor (who i find later is fraudulent) said not to bother since it was “as is” anyway.
found out from the neighbor after closing that it had flooded and the carpet had to be removed by the bank b/c of mold.
had to gut the house and rebuild again, at a time when that was way beyond our financial means.
donated hundreds of hours and every penny i had to get it rebuilt. 18mos later i just got the first rent check for it.
GET AN INSPECTION.
The key word in the story was process or in my world – systems. Buying real estate is a business and everything should be predictable before you invest your or other people’s money. After 35 years in the contracting business and doing countless reno’s, when I plan to buy we go systematically through the property and the deal. I said we. I like to run things quickly by my estimator or project manager to get another set of eyes to look at the deal. I know there will be surprises, but keep them small, affordable and within your contingency amount you should put in each deal.
Mike Piantedosi’s last blog post: Buying Foreclosures – Factor in Some Equity For Your Trouble
Seems like a no brainer to me to at least look at what you are investing in.
Yikes, that is quite the horror story. I’m gonna have to agree with Jim, home inspections should be a given for any new potential home buyer. It’s just ludicrous not to.
Wow that is horrifying!! I would have to agree with everyone…it’s quite foolish to not investigate what you’re investing in. I also agree that home inspections should be mandatory…it would weed out all the scandals and fraud realtors…