Property defect inspections- difficult and expensive, or no?

Question

I'm in the process of studying for my California real estate license. Not for the purpose of becoming an agent (I'm a software engineer by trade), but rather for the purpose of learning more about the real estate industry, with a view to perhaps starting a business tailored to the industry.

I recently learned about the inspections that a buyer's agent must conduct in order to make their client aware of any defects in the property (cracks in the foundation, mold and mildew, etc.). I'm wondering how this process works from the agent's perspective:

1) Does the agent hire a licensed home inspector to come vet the property? Or do they usually perform this inspection themselves?

2) Does the inspector need the home vacated in order to properly conduct the inspection, i.e. with all the previous occupant's belongings moved out for easier access?

3) If the agent hires an inspector, what price range should the agent expect the inspector's fees to fall in?

4) Have you ever experienced a faulty inspection, i.e. where the inspector missed something? How big a problem would it be if they did so, in terms of financial impact / wasted time / etc.?

5) How long do these inspections usually take, from the time the inspector is hired until they deliver their report?

Hope that's not too many questions at once, and thanks in advance for your opinions. This forum has really helped me level up my skills in this complex industry.

Don Alder-LaRue · Answer

It's not so much that they have no other remedy. If the defect is discovered prior to close of escrow, then you negotiate. If it's discovered after, you still try to negotiate. That's most of what this business is, negotiation. If a seller is being a real jerk about something they were obviously hiding, sometimes the threat of a court action can make them change their minds quickly. When it is that obvious they were hiding something, it's almost certain they will lose. I've seen sellers hide holes with furniture, and one guy even tried using contact paper to cover a hole in a wall. Not smart. Always disclose.

There's another clause in the C.A.R. purchase contract, one that I do not often recommend the buyer initial. The arbitration clause. Even if it is not initialed, a buyer and seller can go to arbitration if there is a disagreement, either before or after closing. If it's initialed, you're forcing the issue of arbitration and removing your opportunity for a day in court. I do not recommend the parties initial the arbitration clause because on the C.A.R. purchase agreement is binding arbitration without judicial review. One the arbitrator or arbitration panel has come to a decision it is binding and final. With judicial review the decision can still be appealed to a court.

I'm not an attorney, but I am married to one.

Caleb Heimsoth · Answer

@Richie Thomas I’ll give these a shot. Note it may be different in your area.

1. The buyer would hire the licensed inspector. You can always do your own “inspection” but that’s different then one being performed by a licensed inspector. The agent may attend the inspection, but the cost is on the buyer almost always.

2. No the home doesn’t need to be vacant. However if there’s a lot of stuff this may limit what the inspector sees. An inspector will not move stuff that’s in the way. They merely look at stuff that is visible and accessible at the time.

3. I’ve done about 10 inspections ranging from 250-450 in price, across several regions. I’d say the average for me is 325.

4. You may think it’s a “faulty” inspection but the inspector will have you sign all sorts of disclosures absolving them from all liability, therefore a “faulty inspection” is sort of an oxy moron. An inspector may miss stuff, but if you have a good one, in my experience it’s not likely to be anything large. Worst case they’ll tell you so and so is broken and have a “qualified contractor look at it”

5. This time of year, good inspectors busy. My main inspector is probably booked 3-5 days in advance. The actual inspection takes anywhere from 1-3 hours and I usually have the report within 24 hours.

Hope this helps, tag me if you have any other questions

Michael Driever · Answer

I bought two houses last year. For both homes the Realtor provided a list of inspectors for me to choose from. They provided recommendations of previous inspectors they had used and were happy with their performance. As the buyer, I had to contact my selected inspector and pay for the inspection. Both homes were vacant for the inspection. Inspector walked me through the property pointing out what he found. The Report was available within a few days. Not sure if this is industry standard, but worked for me.

Caleb Heimsoth · Answer

I have no idea how likely that is to Happen. What I can tell you is a simple liability release form that you have buyers sign will relieve you, as the agent of any liability.

This is only an issue when the seller knew of something (for example asbestos) and didn’t disclose it. Even if they did know about it, and said they didn’t know about it in the disclosure, you’d have to prove they did know (which would be difficult) and then spend a boat load of money litigating the case.

Good luck if you have other questions, I’d call a local inspector and ask them this stuff. They’d know better then anyone. I once asked my inspector “what’s the most inspections you have done in a day” and he said 6. So give one a call, they’ll have all the answers

Don Alder-LaRue · Answer

There are actually a few levels of inspections we use in CA.

1. When the listing agent takes the listing, he/she should complete C.A.R. form AVID, Agent's Visual Inspection Disclosure. The agent simply walks around the interior and exterior of the home and notes any defects seen. They do not open cabinets or drawers, move furniture, or test appliances.

2. After an offer is accepted, or better yet when showing the home and being pretty sure the buyer will make an offer, the buyer's agent completes the same form C.A.R. AVID. Most agents don't do this when they're supposed to and wait for the general inspection to come in and take items from that. This is not the way its supposed to be done but it seems to have become common practice.

3. Wood Destroying Pest Inspection (Termite Inspection). This is optional, though I never write an offer without one. Who pays for the inspection is negotiated in the contract. Locally it is customary for the seller to pay, but I do have a property currently under contract where my buyer is paying for the report (bank foreclosure, bank will not pay for the termite).

4. General Inspection. This is paid for by the buyer. Even if the seller has opted to have a professional home inspection completed prior to listing either by their own accord or at the request of the listing agent the buyer should have their own inspection completed. The inspector should check all the major systems of the home and search for deficiencies and deferred maintenance. Remember, not all homes will meet current building codes. A home built in 1972 will most likely not have GFCI outlets in the kitchen and baths for one example. It is from the buyer's general inspection a request for repairs is created and negotiated between buyer and seller.

5. Based on the outcome of the general inspection, the buyer may opt to have additional professionals check items the general inspector has declared borderline. If the roof appears to be approaching the end of its useful life, a roofer may be brought in for both an estimate and professional opinion. Same with AC, or other major system. Any quotes can be used as negotiating tools with your repair request. The seller may also request quotes based on the repair request.

6. In two local cities (Cathedral City, and Palm Springs) a fire department inspection is required prior to the close of escrow. They test the smoke detectors and ensure a carbon monoxide detector is present in the home. Escrow cannot close without these inspections.

In regard to items blocking defects (furniture hiding a hole in the wall for instance). Neither agent nor inspector is likely to know about this, and therefor you have issues with the seller not disclosing material defects in the home that affect the buyer's perceived value. In other words, you may have a court case and should consult an attorney.

Richie Thomas · Answer

Roger that, Caleb. Glad to hear a release form would do the trick. Thanks again.

Richie Thomas · Answer

@Don Alder-LaRue thanks for the thorough reply. It's unfortunate that a buyer would have no other remedy apart from legal action in the above situation, but I agree it's unrealistic to expect inspectors or agents to perform heavy lifting / moving of furniture to uncover every last defect.

Richie Thomas · Answer

No worries, I understood that to be the case.

Caleb Heimsoth · Answer

Obviously goes without saying (or should), I am not an attorney, the above is not legal advice. Consult an attorney

Richie Thomas · Answer

@Michael Driever thanks for sharing your experience. Feedback like yours gives me useful data points as I attempt to find product-market fit in an industry which is new to me.

Property defect inspections- difficult and expensive, or no?

Property defect inspections- difficult and expensive, or no?

Most Popular Reply

11 Replies