Should You Pay To Have Your Rehab Inspected?

So, at this point in my career I've done a few flips. Probably 15, give or take.

Up until recently, I've never used an inspector on either the front-end or the back-end of a renovation project. I'm a real estate broker by trade, and looking at houses is something that I'm pretty familiar with. That being said, I've had a few hiccups on recent deals that have moved me more and more in the direction of paying for an objective eye. Because after all, you don't know what you don't know.

Assuming that there's someone else out there contemplating doing the same thing, I thought I'd write a post to persuade you in that direction!

Without further ado, here are the 4 main reasons to get an inspection done before you put your rehab on the market.

1. Prevention of Future Liability

On a recent deal I had an issue with a septic tank. Unbeknownst to me, the property had one! It was in a neighborhood where the majority of the properties were on city sewer (you know what they say about assuming though). Long story short, the septic tank failed after I sold the home. I received a letter from the new homeowner's attorney asking to replace the septic tank. I'm sure an inspector would have pointed this fact out to me.

2. Cost Savings

Sometimes I find it to be penny wise but pound foolish to try and save money on contract labor (I.E. Electricians, Plumbers, Roofers, etc.). What I've found, is that saving a few hundred bucks up front typically gets washed out once a buyer has an inspection done and items are detected that should have been addressed initially. All of the sudden, the "low budget wonder" of an electrician isn't returning phone calls so you have to pay someone else to fix the problem. The inspector that I'm currently using has a background in construction and is now helping create the scope of work for projects, as well as doing check-ups once work is completed.

3. Saving the Deal

I used to be of the mindset that, "the buyer will have an inspection done and we can just do the punch-out repairs at that point." The problem with that mindset is, to the average homeowner sometimes a mole-hill can be a mountain. By that I mean this, what we as investors consider to be minor issues might cause your buyer to believe that the roof is caving in. The easiest way to prevent this from happening is to do EVERYTHING that comes up in your pre-listing inspection. Sure it's going to cost you a couple hundred bucks, and delay getting the home on the market by a few days, but that will be a minor investment compared to the catastrophe of having a deal fall apart mid-stream, and losing all of the momentum you had going. Take Abraham Lincoln's advice, "Give me six hours to chop down a tree and I will spend the first four sharpening the axe." Do things right the first time.

4. Trust but Verify

Speaking of U.S. presidents, I believe it was Ronald Reagan that said, "trust but verify." This is the 4th and final reason to have an inspection done as part of your renovation process. Certainly you should be hiring contractors that you trust. Even still, having a mechanism in place to ensure that what was supposed to be done, is actually what was done, is critical. For example, we replaced the electrical panel on a recent deal and to the naked eye everything looked fine. However, my inspector took a look and identified some serious issues. Here were his comments, "Blending of aluminum and copper branch wiring is a defect. Additionally, there is a grounding conductor at the meter location, however it is not connected to the grounding bar in the panel." In part, the electrician admitted his mistake(s) and fixed the issues. I would have never known this was done in error and I'm pretty darn sure the electrician wouldn't have brought it up himself. Plus, this is the type of issue that can blow a deal up when it comes up on an inspection report. So, I'm glad that it was brought to my attention now and could be handled appropriately.

Hope this is helpful if you're considering involving an inspector during your rehab process.

Cheers!

Jeff Riber

Real Estate Broker in sunny Jacksonville, FL