On house flip TV shows, why do none of the investors get inspections??

28 Replies

I personally like the tv show "Holmes Inspection." they start with a home inspection and then move to the rehab, awsome.  I would never buy a house without a good home inspection done, i like to know what i am getting in to. Hope thjs helps....

In the flips I have done I have never purchased an inspection. I have viewed the inspection report from the buyers when they buy the property. I have also seen a few inspection reports from a friend, and a family member, when they purchased their house. The reason I do not pay for an inspection is I think the reports are largely worthless. When I buy a house that is totally trashed and I know I will be gutting the bathroom out, and the kitchen, and updating everything, I don't need some namby-pamby report with arrows pointing out that there is some dry rot on the front door, that I'm going to rip out anyway etc. here are some things that have been noted i n inspection reports from my buyers.

some insulation in the ceiling was not touching a furnace duct so there would be heat loss. Now instead of just moving a piece of insulation a little to the right, this joker took a picture, printed in color, had a computer arrow put in, and then warned the buyer about it. Another put in his report that there was no garage door opener. Duh. One noted that the sidewalk out front was cracked, which anybody could see without paying for an inspection. One said that there needed to be a gas cap over a dryer gas line, which was a reasonable observation, but the fix was $.59. So instead of asking for a new water heater, which I probably would have given, this buyer asked for a gas line cap and a few other ridiculous items. By the way this was only a secondary hazard because there was a valve up line and the buyer was going to put in the dryer first thing

I have also seen these guys miss numbers of things. So yes there are times when an inspection would be reasonable and practical. But in reality, the inspections are geared towards retail buyers who are looking at nitpick flaws. If you are in the business of flipping and you cannot notice these things yourself you are in big trouble. I think it is much better for an investor to have a contractor come through. I am all for having two or three sets of eyes check out a property. My realtor will even help me find things. But I do not need to pay for a prima donna report to to tell me the gutters leak or that the bushes should be trimmed back, or that there is a slight leak in a vanity that is coming out anyway.  It's the same reason that dealers, when buying a car auction, don't test drive the cars, don't worry about whether they are vacuumed, and the the little scratch in the paint.  A buyer on the lot worries about that, sure, but the dealer focuses of price and big issues knowing the little stuff can be fixed.  When I buy a primary home, I will get an inspection.  But if I'm paying half price, my focus is, how do I get this under contract, and are there big ticket disasters lurking.  

LOL, Account Closed.  I couldn't have said it better myself.  Great examples of the garbage in a lot of these reports. I guess it sums up why I haven't bothered with a home inspection on six or seven hundred of my flips. 

Having a contractor or two look the place over, on the other hand, has value. Setting an accurate rehab budget is a critical component of the strike price calculation and the uninitiated would be well-served with an expert's opinion.  There is also some value in the inspection reports if there is a need to cram the seller on price and you need evidence to back up your request. However, if you find renegotiation is necessary it's likely you didn't do your job correctly when making the offer in the first place.

Medium praxis capital logo cmyk stacked 900pxBrian Burke, Praxis Capital, Inc. | [email protected] | http://www.PraxCap.com | Podcast Guest on Show #152

I agree with you, John P. There's no sense in getting an inspection for a house that will be gutted. However, I have used an inspector to save around $11k on two duplexes. My inspector is very picky and the things he identified were used to renegotiate with sellers. I'm also using the same inspector in a contractor dispute.

MT Agent # 539039464

The shows are all about creating drama, not realism. They close the sale without an inspection and then suddenly discover a major problem and it's all "oh no! What are we gonna do?" and then they manage to fix it just in the nick of time. It's about good television, not actual business, like the flipper didn't notice the gaping hole in the ceiling before the paperwork was signed.

@Melissa Searing I agree with Account Closed, with a chuckle as well....

If your rehabbing all the major issues you'll see, However, I'd recommend seperate inspections on the hidden items..

I'm house hacking my second home, i bought on short sale a year ago.   Hoarders were living in it, so after looking past the fact that the previous owners probably haven't cleaned in 5 years I still had to get some things checked out.

The home was built in 1997 so I wasn't concerned about structural issues but mor of preventive items like plumbing.   The septic tank...  Without getting graphic, let's just say "shitter was full"..   Free inspection and a pumping saved me some future issues.

thats a damn good question that i have asked many times. everyone of these shows, they run into something they " did not see at first". guess why they didn't see it at first???? because they did not hire a trained eye to see the items that they wouldn't. my guess is that they figure that they have done so many flips that they are trained enough to catch it all. well, how well does that work out for them??? being a home inspector, i see the value in hiring a home inspection done. its cheap enough and may save you thousands in the future, might steer you away from a flip that would be a flop, and gives you a lot of information to make a lowball offer on a house. kind of like a cheap insurance policy i would say. most inspectors, like myself, would do a simple inspection for you on a flip house, maybe not a full value inspection, but at least a good look over at a discounted price that gives you a general overview of what you are looking at. its worth the price. 

one other reason to not get an inspection is that you will have to disclose it when you sell. So if you fixed major problems the buyer may see your inspection and get turned off from buying. 

Originally posted by @Mark Elliott :

thats a damn good question that i have asked many times. everyone of these shows, they run into something they " did not see at first". guess why they didn't see it at first???? because they did not hire a trained eye to see the items that they wouldn't. my guess is that they figure that they have done so many flips that they are trained enough to catch it all. well, how well does that work out for them??? ...

The "surprises" are a necessary element for TV, otherwise there would be no drama. 

I've done both.  Actually, I think it is more important on a paint and carpet flip than a total rehab.  There are things I miss or don't understand.  An inspector will catch those.  As Account Closed said, it doesn't really make sense when the place is a wreck and you know you are going to have to gut it.

Originally posted by Account Closed:

... One said that there needed to be a gas cap over a dryer gas line, which was a reasonable observation, but the fix was $.59. So instead of asking for a new water heater, which I probably would have given, this buyer asked for a gas line cap and a few other ridiculous items. By the way this was only a secondary hazard because there was a valve up line and the buyer was going to put in the dryer first thing

I have also seen these guys miss numbers of things. So yes there are times when an inspection would be reasonable and practical. But in reality, the inspections are geared towards retail buyers who are looking at nitpick flaws....

The uncapped gas line is a code violation and safety issue, so the inspector is just doing his job by reporting that. Imagine if prior to installing the dryer somebody got the bright idea of opening the shut off valve. And shut off valves do sometimes leak in the off position. 

Some inspectors seem to try to make their customer feel they got their "money's worth" out of an inspection - by finding items deficient of enough total value to equal or exceed the cost of the inspection. I did use the word "seem" for those who might take offense at this ;)

I use inspection reports to negotiate lower sales prices and better deals for my clients, whether it be a retail or investor client. I love it when I get handed a 100 page inspection report with minor things @John P talks about. More pages = more $$ in my client's pocket :)

I agree that generally a home inspection will identify a lot of things that are meaningless to an investor in a FLIP where you are doing fairly major renovation.

I think if you talk to your inspector and let them know what your plan is for the property they will focus on the items that could be potentially expensive to repair if you didn't factor that into your budget. In my area you can get an inspection for under $300. That is cheap insurance.

I also agree with the idea of having a general contractor view the home with you. They are able to spot potential problems and can also give you a cost to repair.

So that brings me to the question of which one should I hire?

IMO it would depend on the amount of work you anticipate putting into the property and whether you intend to hold it. If i were to purchase a fairly new property for a rental that needed simple updating (new flooring, paint, etc.) I would hire the inspector. I would want to know all the "little" things that should be fixed. If I were doing a major renovation I would hire the general contractor as I would want to know my repair costs.

When we bought our first duplex years ago we got a home inspection. 2 weeks later we had to replace the water value connection to the house Home inspections only warrant what they can see. I would rather spend money on a home warranty for the first year it covers all the major systems

The market where I live is so hot that often if you ask for inspections you won't win the house. Either way we don't need a "whole house" inspection but have done oil tank locate and septic tank inspection.

I know you guys are speaking from experience and I respect that.  I on the other hand plan on getting inspections done when I (hopefully) find my first couple rehab projects.  Mostly because I want to know what to look for when I do it on my own and also just to make sure there are no big gotcha's on the big ticket items like the roof, hvac, foundation, mold etc...

I never get inspections.  If the property is not condemned and it is much cheaper than the surrounding properties then I consider it a win.  I always plan to spend about 5,000 or more renovating a property anyway.  More than half of the time, the plumbing works.  Most of the time the electrical works.  Sometimes there's damage to the structure.

Thanks for all of your replies! @Mark Elliott It's great to know that I can do a simple inspection. For me, as a new investor, I think I will get a simple inspection as well as have a contractor look at any property I am seriously interested in. Then, someday when I know a lot more than I do now, I might be able to start cutting that corner. 

Melissa Searing, Palmetto State Home Buyers | [email protected] | 843.790.4689 | http://www.PalmettoStateHomeBuyers.com

I have always wondered why they didn't use inspectors as well on TV. It cost me $250 to have one done and I always get that back and a lot more from the sellers. This gives a third independent party looking at the property. I have done a lot of construction and rehab but I miss stuff. Granted most of it is trivial items but the sellers think they have just lost the deal when this 40 page report with multiple problems comes in their email. Its then renegotiation time! I put together an estimate line by line and give it to the sellers. I always give them the option of getting the work done themselves by professionals or I will do it. Their choice. I save a minimum of $2000 to a high of $7000 per house this way. Also the sellers are now aware of the problems and either have to fix it or at least disclose it to the next buyers. (State of Illinois)

here is my inspection list : 

1. drive by property - empty - check!

2. there is a roof, siding, garage, windows and basement

3. first position mortgage gets foreclosed

4. taxes were not sold

5. foreclosure case is uncontested - they never showed up in court - score !

6.house is not in a flood zone

7. comps in the area are solid

8. room count based on archive mls

@Melissa Searing

If you are a new investor and not a contractor yourself, you should get the home inspected. Once you buy and sell a bunch of properties, you will no longer need the inspection to determine what needs to be addressed on a property and how much it will cost. For me, that was about our 5th renovation. Keep in mind, neither you nor the inspector is likely to discover any latent defects, so I always budget a bit extra to cover those.

-Christopher

Medium 2016 04 25 cp logoChristopher Brainard, Contemporary Property | http://sellnow.vegas

As a home inspector and an investor, I inspect a lot of homes for real estate investors in the Cleveland, OH and Akron, OH area. I would say that if you are experienced, and you know what you are looking for, then you may not need an inspection. However a good home inspector will most likely find things that you may not have encountered before, and may save you money by making you aware of it. You may negotiate a lower price with this info, or decide to walk away from the deal. I don't know why it's called "reality television", it takes a lot more work and effort than 30 minutes of scripted drama to flip houses. Best of luck to you. Cheers, Aaron

I didn't  get one on my first 2 flips and I wish I did.  They weren't gut rehabs, mostly cosmetic.  There were a few minor issues that we didn't recognize when we bought it that an inspection would have pointed out.  AND I've realized that the findings on an inspections are a great negotiating tool.

Unless you're gutting it, and you're experienced, I would say to get one done.  It could cost $300 but could easily save you more.