In Arizona, once you have contract acceptance on your new Scottsdale home purchase, you need to start working on setting up a home inspection - you have 10 days unless a different amount is agreed on between buyers and sellers. I always tell my buyers that this is Round 2 of negotiations.
When a buyer views homes with us, we point out anything we can see, such as peeling paint, ceiling leaks, visible water lines (could be dry) in a basement, rotting wood, old windows, etc. But we are not licensed home inspectors, and we will not be testing appliances, HVAC, electric, etc.
Why do I need to pay for a home inspection?
Purchasing a Scottsdale home (condo, townhouse, etc.), is probably going to be the largest financial investment you'll make. Compared to that, the price of a home inspection is small, and it can actually save you money in the long run.
I sold a house to a buyer where the sellers replaced the electrical box because the inspector said it was a brand that actually caused house fires. The sellers were shocked and changed it out without question. My buyer now had a brand new and safe electrical box.
When home inspections started becoming popular, I had a couple of buyers that had home inspections that scared them so much that they canceled the contracts because of what the inspection brought up. However, when they found another house, they didn't have a home inspection because they didn't want to be scared away again! Plus, they didn't want to pay for another inspection. Luckily, none of these buyers ever called me back with any complaints of things that went wrong, and I'm hoping they were lucky with their second choices.
Different Types of Home Inspections
Most buyers hire a licensed home inspector that will provide an inspection from the roof down to the basement or crawlspace. They will test any appliances that will remain with the property. They will walk the roof (if weather permits), walk around the house to inspect the exterior, including windows and doors.
Inside they will go into the attic if there is access and the same with crawlspaces. They will test the electrical system, HVAC, and plumbing. They will report on anything they see wrong. The items they report aren't necessarily things you can ask the seller to fix, but they are also giving maintenance suggestions.
Other things they will report are peeling paint, broken tile, low water pressure, leaky faucets and pipes, foundation cracks, the appearance of mold, they will check fireplaces, and more. But there are other types of inspections that are specialized and will usually cost extra:
- Radon inspection - these have become more popular recently. Radon is an invisible and odorless gas that can come up from the ground. It usually comes into a house through a sump pump or foundation cracks. This is a specialized test and more inspectors are providing it, but it is usually a different employee that comes to set it up and pick up the test equipment 72 hours later. This is a separate cost.
- Termite inspection - FHA and VA require termite inspections for buyers using that kind of financing, so it is usually a seller's cost. However, any buyer can request a termite inspection, whether they ask the seller to pay for it or pay for it themselves. They are not that expensive and could be well worth it. One of the inspectors we recommend offers a termite inspection with their regular inspection at no extra cost.
- Mold inspection - if your home inspector spots mold, they'll only tell you of the existence of it. They will recommend that you get an actual mold professional to determine if remediation is recommended. At that point, we usually ask the seller to pay for that, but it is negotiable.
- Lead-based paint - in the almost 4 decades I've been selling real estate, I haven't had one buyer pay for a lead-based paint test. Lead-based paint could be found in properties built prior to 1978. If a buyer is really worried about it, I have them do their own research on it. This would be a separate inspection and requires a company that provides this specific service.
- Well and septic - if you're purchasing a Scottsdale home with well and septic, you would want to get those inspected, which would be an additional inspection from a normal home inspection.
Sometimes a home inspector will tell you there is a problem, but they suggest you consult a professional for specific items such as:
- HVAC - the inspector might find something they're not comfortable with and will suggest an HVAC pro to certify that the system is working properly.
- Roof - same as above, the inspector may feel the roof only has 1 year of life left, but he isn't a roofer, so he might suggest you get the roof certified by a licensed roofing company.
- Fireplace - I've seen inspectors suggest the buyer hire a chimney sweep to clean out the fireplace. It's one of those things most people don't do on an annual basis, and there can be build-up. The fireplace might work fine, but the inspector wants to make sure you know that it would be a good idea to have a chimney sweep do some maintenance work. Another thing I've seen even more is that the inspector doesn't see a metal liner. One time it was a very steep roof & the inspector couldn't get on it, and there was a liner but he couldn't see it. So he requested certification that my sellers ended up paying and the guy that did the certification (it wasn't just one issue), couldn't believe how bad the inspectors were. They were not my inspectors (multiple guys that were policemen that did this on the side) and I threw their cards away because they were one of the worst inspection companies I have ever seen.
- Electrician - again, an inspector might suggest certification by a licensed electrician.
- Waterproofing - there are usually some kind of crack(s) in most foundations, starting with hairline cracks up to leaking, wet cracks. Most of the time we request the seller to fix an actively leaking crack, but the inspector might see a large crack that is currently dry, and they can't see any obvious water stains, but they suggest having a waterproofing company come in. Or they'll see a small crack with stains.
This is the start of inspection repair negotiations. Most of the time we just ask them to fix issues or provide proof that the item is working properly. Keep in mind, there is a time constraint on contracts and we can't always spend weeks trying to get multiple certifications.
Can't You Ask for Everything on the Inspection Report?
Sure, you can ask for everything but it doesn't mean the seller is going to oblige your request. I mentioned before, this is Round 2 of negotiations.
I give a suggestion to my buyers to "choose your poison," meaning that they should ask for the most important items (to them). If you go back to a seller with a laundry list of repairs, they're going to pick and choose what they will agree to fix, and those things might not be what you really want. Then negotiations continue on, and both buyers and sellers start getting angry, and many transactions have fallen apart.
The closest to perfection you're going to get with a home purchase would be new construction, although nothing is completely perfect. For a resale home, the home inspection is so you're not hit with having to repair or replace a major mechanical item within the first year of the purchase. FHA and VA usually want a major item to have a couple of years of life left.
If I'm Financing with FHA or VA, Don't They Do an Inspection?
No, and many buyers and sellers think this. FHA and VA have their own appraisal process. They require appraisers that are trained and certified to do an FHA or VA appraisal. They have certain requirements for major mechanical components and as mentioned above, they usually want to be sure that there is at least a couple of years of life left on these items. They will require repairs or certifications, and these would have to be done prior to closing.
I have had a couple of recent transactions that almost fell apart because the sellers refused to replace a very old, but working furnace in one case and a hot water heater in another. These were both my listings and sellers. I made a suggestion for them to pay for a home warranty that would protect the buyers for 12-13 months for these items and more. The buyer accepted the warranty in both cases, and the cost of the warranty was less than replacing the equipment.
Can't Money Be Deposited Into a Repair Escrow Account?
Years ago, we were able to have the title company and/or attorneys set up a "repair escrow." This is where the seller took money from the proceeds of the sale, plus a little more, to set aside for the buyer to make agreed-upon repairs after closing. Any money that was left (after providing invoices), went back to the seller.
When lending changes went into effect after the housing market collapse, lenders and title companies weren't able to do these repair escrows any longer. Now we have to build them into seller concessions. However, depending on the type of mortgage the buyer has, there is a limit on the amount of a seller concession.
In cases where the contract already shows a closing cost credit to a buyer, there might not be any wiggle room left to build a repair amount into that. In that case, the seller would normally have to make the repair before closing. Some buyers are fine with that, but many would rather get the cash and make the repairs their way, using their chosen contractors (or doing it themselves) knowing it would be done correctly, and possibly for less money.
You want to have a home inspection - it is worth the price, even if you end up not purchasing that property. And you won't get the inspection money back if you end up walking away because of repairs that come up that the seller isn't willing to fix. Consider it a cost to buy a home, even if you have to pay it more than once.
Once you have the inspection, you have to understand what you can ask for and what you shouldn't. I recently sold a house that had some glaring issues. The seller refused to fix anything (I thought it was a bad flip, but I was told it was an estate sale). My buyer wanted the house so much that she accepted it without one repair (she was happy with the price she got and that was the reason given by the seller for not making any repairs).
She contacted me recently with 2 issues. One came up in the home inspection and we asked for it to be fixed but the seller refused, so I told her she already accepted that. The other issue was that there was now seepage in the basement that no one could see before. We even set an appointment after a very heavy period of rain to check the basement prior to closing and there wasn't any water or seepage. But it happened after she moved in and she wanted to know what she could do about it. I told her the only thing she could do at this point was to sue the seller, but she'd have to prove that he knew about it. If this was truly an estate sale, he'd just say he never lived in the house and had no knowledge.
An inspector can only inspect what they can see and have access to. Do they miss things? I've only had an inspector miss an item once or twice since I started selling real estate in 1983. So it can happen, but it is rare. Can't they be sued by the buyers? If you read the fine print of their inspection contract, it usually states that the most you can sue them for is the price of the inspection. They're not 100% foolproof, but in the majority of cases, they are worth it.
I remember it was "buyer beware" when I first started in real estate in 1983. There were no home inspections. A young couple we knew (when we were also young), told of their horror story of buying a home and when the first rainfall happened they had to put multiple buckets throughout the house to catch all of the leaks.
It's because of stories like this that home inspections became mainstream. Most buyers today don't hesitate and are knowledgable that an inspection is a part of buying a property. We have a list of inspectors we can share with you if you don't have someone. Call Judy at 480-877-1549.Posted by Judy Orr on