Is a home inspection required? It’s a matter of risk management!

In this seller’s market, is there still a need for a home inspection? What is the home inspection report’s purpose and how should it be applied? This post provides answers to these important questions.

Market Conditions

Market conditions are such that some realtors are advising clients to not consider using the inspection report to re-negotiate their offer. Rather, buyers are advised to use the report for information only. Really? As both a professional engineer and a property inspector, I too would question the value of a home inspection when the report is issued for information and not actionable.

Latent Defects and the Disclosure Statement

First and foremost, every buyer should review the disclosure statement for completeness. Many of the questions target latent defects. A latent defect is a fault that would not readily be revealed by a reasonable inspection. The seller is in the best position to have the answers. Seller’s agents have a responsibility to ensure that the disclosure statement it is answered in full. When answers to important questions are left blank or replied to with ‘don’t know’, then buyers should request that the missing information be provided.

Patent Defects and the Inspection Report

The home inspection is used for identification and description of patent defects and their implications. Patent defects are those that are not hidden and should easily be discovered by a reasonable inspection. As such, it is non-destructive and non-invasive. The report discusses building components, systems, remaining service life and safety concerns. Reported issues have cost impacts.

Issued for Information Versus Issued for Action

In our region, real estate purchase prices are among the highest in the nation. As a result, our real estate agents have exceptional commissions, since their fee is percentage-based on the sales price. The real estate fees are such that exceptional services should be the expectation. An informational report does not carry the same burden of follow-up as an actionable report. Every report EKAN produces is issued for action. As a buyer why would you not want to make use of the findings?

See Note 1 at the bottom of this post to see how home inspection fees have trended over this same time period.

Report Application

In our inspection world, we consider defects valued at $1,500 to $2,000 as a minimum threshold for being included in a report. For example, for 10 issues, that cost could be $15,000 to $20,000 for corrections, repairs or end of service life. This is not an unreasonable amount of deficiencies based on our experience.

Issued for Action

The reason that an inspection report is valuable is precisely because major defects and deficiencies are identified. It is up to the home inspector’s client to determine the appropriate course of action… follow-up by seller, follow-up by buyer or ignore.

 

Note 1: By contrast, home inspection fees have remained relatively flat over that same time period because of increased competition due to a low barrier to entry (in our opinion) and the inability or unwillingness of any national inspection organization to agree on a minimum fee structure. Yet inspector certification, annual continuing education and insurance costs have continued to increase year after year.  All this adds up to amazing value for the consumer that chooses to have a home inspection done on their property!

 

 

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