I'm a total newbie. I've never purchased any real estate before. I want to make a bid on a 6 plex. My question is concerning the inspection. I understand it is expensive to have it inspected. What happens if it does not pass inspection? One of the apartments doesn't have a heat source. They take in residual heat from the apartment downstairs and they use a space heater. If is should not pass inspection, what happens after that?
Typically when a buyer performs an inspection, there's not necessarily a "pass/fail", as this is subjective to the buyers. The purpose of these is more-so to assess what sort of liability you will be acquiring in your new asset. If the scope of repairs seems to high, you have the option to walk. If it is deemed doable, you can either request the repair work be done, or quantify a credit amount to be applied to closing.
Thank you so much much, Austin. This answer helps a bunch!!
Think of the inspection as a 'health check' on the home to see what's the condition and life expectancy of all items so to echo @Austin Parker 's comment, it's definitely not a Pass/Fail. It's informative for you to review the property and look at it under the microscope to see if it's worth moving forward, negotiate for repairs, or get out of the deal.
Thank you Lien! This makes me feel much better about knowing it is not pass/fail. I'm going to put a bid on it :)
I'm so excited to finally get this going for me!
@Dandy Reiner as everyone has stated, the inspection is simply to provide YOU more detailed information about the property. It's up to you to decide what you deem important versus other items as projects down the line. Be prepared, EVERY inspection will give you a laundry list of "deficient" items that may need attention. Some could be major, while a lot will be routine maintenance and minor repairs. Just focus on the top "deal-breakers" for you to decide if you want to proceed or not. Go for it!
Many people use an inspection as a haggle list. But don’t be the guy that uses it to haggle things that a blind person could see. It’s assumed you made the offer after you at least saw the property.
I’ve seen people say “the inspection says the drive ways cracked, I want the seller to replace it with a new one and they won’t…”. Did you not see the cracked drive way on the way in? Either your blind or it’s not that bad.
“The roof only has 8 years left on it, I want a new one and the seller won’t pay for it…” do you understand he would be charging more if the listing said new roof?
In your case, the heating situation. While I’m not excited about it, and like you said it might not pass a rigorous inspection (if you have one done, as only the appraisal is required.) don’t act surprised when the inspection lists the problem. Your current offer should already take that in to account.
Your inspection report is your "house manual as well as your opportunity to "kick the tires" and maybe even get the seller to do repairs or give money back so you can do repairs. Do not skimp on this step.
My inspection days are a flurry of activity where I also bring in some contracts and specialists for estimates on work I may do in the future, so I can see how much I will really be putting into the house. I surprisingly get more from these estimators sometimes than I do from inspectors. Inspectors by law are only required to report on "what they see". Some lazy ones will purposely not look very hard. I follow them around and ask questions like an annoying boy scout who wants to learn how to get a complicated Merit badge. I exhibit genuine curiosity and respect for their profession. I always bring is systems specialists as well as General Inspection.
I bring my plumber for sewer line camera inspection-extra $100
My roof guy for his opinion- usually free or I pay him $100 just to be cool and he appreciates it. These guys are giving free estimates all day long its not really a big deal
I bring in HVAC guys because gen inspectors just turn them on and are not required to analyze the real health of the system
There are some gen inspectors who offer some of these services though I personally prefer to have a range of trusted specialists opinions.
My goal is to find 10k in repairs. It keeps me motivated to hunt for issues. I have found up to 20k and had the sellers cover it. I've also had houses have zero issues and happily walk away and complete the transaction. Most owners defer maintenance however I want to know these issues before me or my client buys the house. If the owner wants to use their people to fix the issues, I am cool with that. You have a little bit of leverage here as most sellers do not want to fall out of contract over some deferred maintenance. I have told seller, "listen If I was a contractor I would buy it and fix it myself though I cannot walk into a situation where I am immediately fixing this property, as I am a realtor and investor- not a handyman." Most sellers warm up when it is framed this way.
Inspection day is the 3rd most important day when buying a property. Go big and don't be afraid to ask questions and get opinions. Some agents don't want you to find issues and walk. I would prefer we walk from the deal than you go underwater on an issue that could have been discovered with extra effort. I know someone who bought a place without realizing that every year it floods 4 ft in the basement. Someone messed up in inspection. That person is them. Sellers usually say no repairs though once you are in contract that dynamic shifts.