Home Inspections and Value

3 Replies

No, an inspector contractor cannot determine the value of a home.

I'll give you an example. I bought a pre foreclosure for $70,000, years ago, in 1983. My partner, a local realtor found the deal, and determine and the time the land value is $70,000. The ARV of the property at the time was $125,000, in good condition.

How did he determine the land value? Developers/builders will pay so much so they can knock the property down and build a new one. The realtor found such buyers. So with this analysis, how much can a contractor assign a value to the structure inside. Zero?

The seller found a contactor to do a rehab, bought the materials, and the contractor agreed to do the work for $10,000. The deal was, I took over the project. So my $70,000 contract includes about $10K in materials.

Long story short, it was supposed to be a flip. Found a buyer paying $130,000, but the deal fell through at the last minute. I closed on it, kept it waiting for the right moment to sell. I still have it, and it's value now about $400,000 according to Zillow. It's mortgage free. It cash flows around $2K/month at market rent. I charge a little below market.

So the question is, how would an contractor inspector be able to tell me about it's value?

Assuming you are speaking of residential property, like a single family home, the value is typically determined by comps or comparables. This would be the value other similar homes have sold for locally. If a home on the same street with the same number of bedrooms and bathrooms in similar condition sold for 150k, then it is safe to say you are in that ballpark. Take that same scenario but say the 150k home was a 2/2 but the home you are looking at is a 3/2, then the 3/2 would, of course, be worth more. The same goes for bigger lots, garages, condition, etc. You can look on realtor.com, zillow, etc and find comparables for properties in your area. 

Home inspectors will give you insight into things that normally can devalue a home. Such as a termite problem, electrical issues, bad roof, etc. They are important, but they also are not appraisers. 

If you have an appraisal done usually there is an appraisal contingency so you have an out from the contract if it comes in under market value. 

Lastly, no one person can tell you what a home is worth, especially if it is a personal residence. If it is your dream home or meets a specific need, it may be worth a lot more to you than it is to someone else. 

Originally posted by @Ian Whiteman :

Assuming you are speaking of residential property, like a single family home, the value is typically determined by comps or comparables. This would be the value other similar homes have sold for locally. If a home on the same street with the same number of bedrooms and bathrooms in similar condition sold for 150k, then it is safe to say you are in that ballpark. Take that same scenario but say the 150k home was a 2/2 but the home you are looking at is a 3/2, then the 3/2 would, of course, be worth more. The same goes for bigger lots, garages, condition, etc. You can look on realtor.com, zillow, etc and find comparables for properties in your area. 

Home inspectors will give you insight into things that normally can devalue a home. Such as a termite problem, electrical issues, bad roof, etc. They are important, but they also are not appraisers. 

If you have an appraisal done usually there is an appraisal contingency so you have an out from the contract if it comes in under market value. 

Lastly, no one person can tell you what a home is worth, especially if it is a personal residence. If it is your dream home or meets a specific need, it may be worth a lot more to you than it is to someone else. 

 Thank you Ian. This is a very helpful response