Guidelines for Using a Home Inspector in Your Real Estate Investing Business

Home inspections have been around since the late 1980’s, so when I opened my home inspection company in 1991 it was still a pretty new field. In the real estate community “Buyer Beware” was still the unspoken word especially with the “old timers”. When it came to home inspections most Realtors didn’t like them, didn’t want them and would try to talk most buyers out of having one. That was the reality of how it was when I first opened my business.

Over the next few years, things began to change. A lot of that change came to pass because of the new generation of home inspection companies like mine that did something the existing companies didn’t do: marketing. We spent a lot of time educating folks about what we did and the value of our services. The rest of the positive change came from those more progressive Realtors that saw the benefits and were ready to help the consumers find the protection they sorely needed.

One thing that has changed very slowly is the number of real estate investors that use home inspections.

Can Real Estate Investors Benefit From a Home Inspection?

Well the answer is, “sometimes”.

If an investor is buying a house that will need to be gutted generally it would be a waste of money. After all, everything will be replaced. So when might a real estate investor need to hire a professional home inspector? However, here are 3 instances when a home inspection would be helpful:

Use a Home Inspector If…

1. If you are a newbie and you have no idea whether the major systems will need extensive repairs or even replacement then it would be a good idea.

2. For a pre-sale home inspection on your rehab

3. For a pretty house. The house might look really nice from a cosmetic standpoint. But if you are not confident that you can determine if the major systems are safe and have an acceptable life span left, then you should get a professional opinion.

Just ask yourself if you feel confident determining the age, the condition and the safety of these systems:

The roof
The HVAC system
The plumbing
The panel box and electrical system

Rehabbers and seasoned real estate investors get very good at evaluating these systems over time. For instance, I looked at a house last week that had a tiny, tiny panel box. Even though it had breakers, the house was built in the 1970’s and there was no way it would be acceptable for today’s electrical needs. You didn’t need to be an electrician to see that this panel box needed updating.

When I talk about presale home inspections, I know what you’re saying; I don’t need one. Let me ask you this; would you rather find out there is something you didn’t catch during your rehab BEFORE or AFTER you have negotiated the sale price with a potential buyer? Buyers won’t ask for a $300 or $400 reduction in price to take care of minor repairs. They are going to be asking for a number in the thousands. So do yourself a favor. Spend a couple hundred dollars and have a presale home inspection then go ahead and make those repairs in advance.

NAR put out a statistic a few years ago that stated that:

“Homeowners that had a presale home inspection, almost always sold their house more quickly and for more money than those folks that didn’t”. It’s something to think about the next time you get ready to list your rehab.

Won’t My Buyer Have Their Own Home Inspection?

Did you know that typically more than 50% of those buyers won’t have their own inspection if you can show them your inspection along with proof that the repairs have been done? I can tell you with absolute certainty that you will net more money if you take care of this yourself rather than finding a buyer, waiting for them to hire a home inspector and then dealing with their list of repairs after you have accepted an amount that is already below your asking price. Taking care of this upfront allows you to be in control of the process.

6 Important Questions to Ask When Hiring a Home Inspector

Not all home inspection companies are the same. Here are 6 questions you should ask to ensure you hire a qualified home inspector:

1. Is this inspector licensed?

You should know your states requirements for licensing. If your state requires licensing (and most do now) you will be able to look your inspector up on your state’s website to see if they are listed.

2. How long as the inspector been in business?

Let’s face it; you want someone with some experience. The more experienced your home inspector is, the less likely you are to have problems after the inspection.

3. Can They Show You Proof of E&O Insurance?

Errors and Omissions Insurance is very important and you will be very surprised to know that a high percentage of inspectors don’t have it.

4. Is the inspector a member of ASHI? (The American Society of Home Inspectors)

ASHI is a professional organization that requires its members to pass a stringent test before getting that designation. There are many organizations that home inspectors can belong to, but a lot of them just require you to send in an annual fee to become a member

5. Does your inspector provide a detailed written report with pictures?

Professional home inspectors provide a detailed report which can be 15-20 pages or more, they almost always provide pictures. If your buyer wants to hire their own inspector, insist that your buyer get a qualified, professional home inspector.

6. Does the inspector belong to their local professional organizations for home inspectors?

You want to know that they take their business seriously by investing in themselves and their education.

Finally; Learn How to Work Together As A Team

Today, home inspections are an integral part of most real estate transactions. As real estate investors, if we learn to look at the home inspector as just another part of our team, it will completely change the dynamics of the whole experience.

Have you ever had an occasion where a home inspector saved you money or kept you from making a big mistake on a property?

Photo: NashvilleCorps

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