Home inspections have been a sore spot with real estate investors ever since I first began investing in real estate in 1998 and not a lot has changed since then. As a whole, real estate investors think of themselves as a fairly self-sufficient bunch of folks. More often than not, a rehabber will be doing major work on a property and they feel qualified to determine the repairs needed. And I am the first to say that for the most part, they are very good at what they do.
Licensed professional home inspectors are required to have extensive training, must pass a difficult test, and they must complete annual continuing education in order to keep their license. In some states they also must serve an apprenticeship before going solo. So what you have here are two very knowledgeable professionals that occasionally butt heads.
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The downside of not having a home inspection.
Having been in the home inspection business for 17 years before becoming a full time real estate investor, I have personally witnessed some situations that turned out to be very costly problems for real estate investors. Recently an investor who is a rehabber friend of mine did a beautiful job on a property he had purchased at a great price. You could even say this was a “smoking hot deal.” He found a buyer for this property pretty quickly and was already searching for another house to flip. Once the house was under contract, the buyers ordered a home inspection. During the course of the inspection, the inspector pointed out some subtle defects which indicated there was a structural problem. There was a crack in the chimney on this house which was on a pretty normal fall away lot. The investor had noticed this during his initial inspection of the property and had done a good job of sealing the crack to prevent water penetration.
Big problems on the horizon
This is the point where the story changes. This home inspector had years of experience, and he began to look for other telltale signs of structural issues. He walked around to the opposite side of the house where he found a similar crack which is pretty typical in this situation. Next he went into the home where he found other signs of a structural problem. The windows in these areas were difficult to open due to movement in the foundation. There was some drywall tearing on the walls above these same exterior cracks on the interior walls. The drywall was also beginning to separate in the corner in this room. Whenever you see drywall that is torn rather than just cracked, this is a sign that have a potential structural problem.
As I said, these were pretty subtle changes to the average person. But to a seasoned home inspector, they were definite red flags. They buyer got a structural engineer to look at the house, and after installing piers in the problem areas the deal moved forward. But this happened only after the rehabber spent thousands of dollars on structural repairs. Had he not gotten this house at a killer price, he could have lost a lot of money on this deal.
So what’s the answer?
Real estate investors get better and more experienced with each house they buy. Those that are lifelong learners are always at the top of their game. Make it your priority to be the best, build a top notch team, and know when to call in a specialist or another team member for a “second opinion”.