Are Home Inspections Really Necessary for Real Estate Investors?

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Maybe, maybe not. While that may not seem like a good answer, it really depends on a number of factors. Most real estate investors get pretty good at assessing the condition of properties over time. This process is a lot tougher for those folks just starting out. One thing that I have found time and time again is that investors underestimate what it is going to cost to flip a property until they gain experience. Spending a couple hundred dollars on the front end can save you thousands down the road in some instances. Home inspectors cannot give repair estimates, but they can give you a list of the defects in the home. They are trained to find problems that may not be obvious to the untrained eye, and they can also let you know the seriousness of those items found during the inspection.

What special skills are needed?

Few people have the experience needed to determine the condition of a furnace and whether or not it is safe to use. If you are planning to keep the furnace in the property you are buying, my advice is to have it checked out by a professional, whether or not you have a complete home inspection. The same is true of the electrical system. You need a high level of knowledge to know whether or not the electrical system in a house is safe, and whether or not it meets today’s electrical needs. Failing to notice that the wiring and the panel box will need to be updated is a costly mistake; and it is a mistake most likely to be made by rookie investors.

If you overlook something where the plumbing is concerned. it will probably cost you some of your profit. But more than likely, the worst thing that will happen is someone or something will get wet. That’s not true of the furnace and electrical systems. If those systems are faulty, the house could burn down or someone could even die as a result of those types of problems.

Do you know what is required in your state?

For instance, in my state it is required that a water heater be installed by a professional (unless the owner is installing it in their home) and that it be inspected by the city/county code officials and display the green inspection sticker. The water heater must pass that inspection even if the homeowner installs it. 

It’s important that you are knowledgeable about these types of things, because they will ultimately be pointed out when your end buyer has a home inspection. What if you are fixing up the property to rent it out? What do you suppose will happen with something major occurs in one of your houses and a tenant is injured or becomes ill for instance from carbon monoxide? I can tell you with absolute certainty that you will be held to a higher standard in a court of law. This will be a case of “you should have known”.

A home inspector cannot do a code complaint inspection (only a code official can do those), but he or she will certainly know the codes for your area and will be able to advise you on whether or not a particular system meets the code. In most cases, they will also be able to point out safety concerns during the home inspection.

Are there some guidelines I can follow?

Yes there are. Here are 5 tips to help you make your decision on whether to get a home inspection:

1. Save your money on a home inspection if the house is a complete rehab and all of those major systems will be replaced.

2. If the major mechanical systems in the house have all been updated you may be able to skip a home inspection if you are an experienced real estate investor. Ask yourself if you have the skills to identify the other defects in the house. Is it a risk you are comfortable taking? We’re not talking about leaky faucets here, but defects that are more serious.

3. If you are just starting out, are you certain you can catch the signs of serious structural damage? They can be subtle and very hard to spot. Be especially vigilant when you are considering a house built on a hillside or fall away lot.

4. If you find that you are uncertain about the condition of the major systems in the property, it will probably be better and cheaper in the long run to get a complete home inspection. The inspector can tell you then whether or not you are going to need to address those systems with a professional.

5. Last but not least, remember that the purpose of a home inspection is to determine the condition of the major systems, and the safety and habitability of the home. It’s not to tell you things that are obvious like cosmetic concerns.

Having a home inspector on your team is just one more tool to pull out of the toolbox when you need it.

Photo: Justin Baeder

About Author

Sharon Vornholt

Sharon has been investing in real estate since 1998. She owned and operated a successful home inspection company for 17 years. In January of 2008 she took the leap of closing her business to become a full time real estate investor.

16 Comments

  1. I think a home inspection is important especially for novice real estate investors. I think an investor or home buyer should follow the home inspector because a lot can be learned during the home inspection.

  2. Sharon, I agree that a home inspection is crucial for first-time investors. Untrained eyes could miss out on potentially costly needed repairs that will impact your budget. Unless you’re truly an expert in real estate, an inspector is the way to go.

  3. A home inspection is an absolute must for a retail buyer!

    They are also very important for investors in many instances. If the house is a gut, then there is no need for one. But spending the money for an inspection can save you thousands of dollars in many cases.

  4. I know in the past when I’ve purchased properties from out of state that home inspectors have saved me thousands. I can bring what they find back to the bargaining table and get a price reduction…or get it fixed. Either way it’s a win scenario.

    • That is so true Mark. I’ll have some examples in the future where a home inspection would have not only saved the investor a lot of money, but actually helped hold the deal together in the end. You can also look for an article on “Presale home inspections” soon.

      Thanks for reading Mark.

  5. I def. agree that a home inspection is a must for novice investors. As time goes by I get a better idea of what I need to look at. On my current house he pointed out that all the outlets are revers polarity (wired backwards) that can be fatal. I would never thought to check for that. But I’ve added it to my list for things to look for in the future. Eventually I feel I will stop using them though.

  6. Great article Sharon! As a novice, I wouldn’t dream of not getting an inspection done. Thanks for the tip on not necessarily needing one if the house is a gut. I can see the logic in using an inspection to make a deal stick or negotiate a better deal, I look forward to your “Presale home inspections” article.

    Thanks!
    Melinda

  7. I wonder investors if selling a property would need a disclosure agreement on the property Buyer beware if no pre sale inspection was made and this investor maybe trained but trained for the money end not the home buyer or end buyer in mind. Inspections are a must just find one you can work a deal out with on property they have passion and I feel are worth everyone in the transaction process…. After all are we all jack of all trade master of zero just saying ?

    • Mark,

      In my state, if the house is listed with a Realtor a disclosure form needs to be filled out. I always filled one outon my house after it was rehabbed, because there were too many questions I simply did not know the answer to. Our form says “Has the property ever had/ever been…. any one of these things”? You had no way of knowing the answer to these questions.

      I would always recommend a pre-sale home inspection. Not having one always costs you money. If you spend the money on an inspection BEFORE you have negotiated the price, you can make those repairs and figure those in your sales price. If you wait for the buyer to order one, it almost always takes place after you have taken a cut in the price and it surely will cost you profits.

    • Mike – I do not do them on wholesale properties. I can look at them and figure out how much to allot for repairs. The rehabber is usually the one that will deal with a home inspection, because the buyer will order one. Presale home inspections are a good tool to use before selling your property, or before buying your home.

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