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Everything you need to know from my Home Inspector, Marc Anthony!
Click Here for the audio only version on the Lady Landlords Podcast!
Finally, you found that property! The numbers work for your cash flow. You even got your offer accepted at the number you wanted. WOOHOO!
But, now there is the Home Inspection! 😱 😱 😱
This could absolutely be make it or break it for your deal! At this time, you are now relying on someone else to review the property and let you know what problems there are and may be moving forward. The results of this could greatly affect the work needed which directly impacts your monetary bottom line.
So let's review what a Home Inspector does. A common misconception is that everything that a Home Inspector finds will be the responsibility of the Seller to fix. And, that is just not the case. Yes, you have the option after the report is complete to ask the Seller to make repairs, negotiate the price, or walk away, but not every item listed means that the property is a dud.
The Home Inspector's role is to observe certain systems and provide a written report for documentation purposes. The systems may include but are not limited to:
· Heating System
· Cooling System
· Plumbing System
· Electrical System, and
· Structural Components, such as foundation, roof masonry structure, exterior and interior components.
What you do with this Report is up to you!
When you get the Report, you might feel REALLY overwhelmed. I know I did my first time when I got a report back with 180+ pages! My instant reaction was, "OMG, there is way too much wrong with this property! I'm out!" But, then I learned how to read the Report and realized how it was broken down. There are really 3 sections, what I call the Good, the Bad, and the Ugly. The Good is the minor items that are really just imperfections on the property. They don't directly impact the safety or the structure but they can be good tools for negotiation down the line. The Bad are the items that you need to pay attention to. This is where you might need to spend money asap. It is important to understand how big of a problem it may be and how soon you will have to deal with it. The last is the Ugly. These are the safety and structural hazards that can be deal breakers. These items need to be evaluated carefully as it might just be what has you walk away from that dream deal you thought you found.
Here are 3 Tips to working with a Home Inspector to make sure you get the Good, the Bad and the Ugly correctly.
1. Find the Right one:
You only get one shot for a Home Inspection so it is important to find the right one from the start. This is where building your network and referral partners will be important. Make sure to ask your trusted team members for recommendations. You can also ask in Lady Landlords who they have used in the past to ensure you will find a good fit. And as always, make sure to check references! Having an Inspector that works with other investors can really be an added bonus for you. Using that lens, an Inspector should be able to advise you differently than if you were buying it as your personal, forever home. Need help building you team? Click here to learn the exact questions you should ask!
2. Clarify Roles:
Everyone works differently so it is important to make sure you have a fit for work styles. Have an open conversation with your prospective Home Inspector about how they like to work. Some like to work independently and then review everything with the buyer while others are happy to have you walk along with them so they can show you items in real time. You can also learn how you can support the Inspector to ensure they do the best job for you possible. Ask the Inspector what you can do as the buyer to help. You never know what they might say!
3. Understand Expectations:
Inspectors are trained and licensed. But, they are human too which means they can make mistakes. Yes, they have a duty to you to do their job properly but if they make a mistake, reach out to them for clarification as soon as you are made aware of it. Remember, they do have insurance for their business. But, all because a property has a problem, does not always mean that it is their fault. Inspectors are limited to things that they can see. For example, I recently did an inspection for a property that was built into the side of a hill. The foundation was mostly hidden which was a risk for me as the buyer. It was not the responsibility of the Inspector to ensure the quality. He was solely responsible for noting that it was not visible for inspection. The decision to move forward was mine. Always make sure to understand what the Inspector can and cannot do for each particular property.
Hope this helps for your next Rental Purchase!
Have a happy Tuesday!