What to Do If the Home Inspection Fails

The truth is there is no perfect home on the market, that kind of means that all home inspection reports are negative. That question is, what can you live with and what is a deal breaker to you? Whether selling or buying getting the home inspected is very important, that’s because you know exactly what you are buying or selling. The point is, a negative home inspection report should not be a cause for panic, instead think of it as the first step in buying or selling a home.

Expect the unexpected

As mentioned above all homes have problems, the question is how costly or severe is the problem? If you are selling, a negative report may mean selling them at a lower price. That may mean sacrificing profit, to ensure that you get what you wanted or something close to it. You should put some money aside for unexpected expenses.

Can you afford the repairs?

How much extra cash did you set aside for this type of problem? If its zero, you should consider renegotiating the price. A major flaw doesn’t necessarily mean that you will lose your dream home if you can get the seller to agree to lower the price so that you are left with the amount needed to make repairs you should go for it. Another option is to ask the seller to make the repairs, there is no guarantee of that happening but asking never hurts.

The good news is when a problem is found it boosts your negotiating power ie it makes it easier to ask for a price cut.

Make repairs or sell as is?

If you don’t have the money or resources to make the repairs needed you should consider selling it as is, but if you can, make the repairs. The benefit of making the repairs is most buyers prefer move-in-ready homes thus you will find it easier to sell. On the other hand, if the home requires costly repairs, getting someone to buy it can be problematic.

Talk to your lender

What most people don’t realize is your mortgage interest rate is affected by a number of things including home location and equity. Some lenders want inspection reports and some don’t, also the condition of the home and its market value may affect lender decision. This makes it very important to talk to your lender about the current condition of the home before committing to anything.

Deal breakers

The following problems will cost you a lot of money to repair, if you don’t have the money to make the repairs or if the seller doesn’t agree to make them you should consider looking for another home:

  • Damaged foundation
  • Roof maintenance problems
  • Water damage
  • Pests
  • Faulty wiring
  • Mold
  • Unstable ground beneath the home
  • Septic system problems
  • Toxins in walls
  • Furnace issues

 Generally its all up to you, you decide what you can live with and what is a deal breaker to you.

Things to Look for Before Selling Your Home

Did you know that your emotional connection with your home is as strong as your connection with your pet or kids? Your home is not just four walls that you grew up in or raised a family in, it is where you sleep, eat and it is part of you. When it comes time to part with it your emotions might keep you from making the right decisions.

Think about it, in your head, your house is the best thing ever. That might make you think that it is more valuable that it is. The problem with that is you might be setting yourself up for disappointment when you sell the house or home for let’s say half of what you thought its worth. Why am I telling you this?

Before you sell your home you must first disassociate yourself from it

Selling your home is a business transaction; there is no room for emotions here. You have to think like a businessman/woman. The idea is to change your mindset from “selling your home” to “selling a house”. This will allow you to make the right decisions. You should put yourself in the buyer’s shoes and ask yourself this “would I buy this house at the proposed price?”

If you are short of time or want to sell a house fast, you should shave off 10% off the price after comparing it to similar homes in the area. 10% doesn’t seem like much but buyers love discounts meaning they will flock to you.

Are my documents in order?

Talk to an accountant and find out if you have any tax issue that you must deal with or if there are permits you need. The next step is to makes sure that you have all the paperwork needed. This is what you need:

  • Original sales contract for your house plus the purchase price.
  • Certificate of occupancy, compliance with zoning and building codes and property survey.
  • Financing and mortgage documents
  • Home repair and maintenance records
  • Natural hazard reports
  • Deed recent tax statement
  • Transfer disclosure statement
  • Listing agreement
  • Comparative market analysis
  • Appraisal and home inspection report
  • Lease agreement (if renting)
  • Homeowners insurance information

 You will need these documents in different stages of the selling process; this makes them important to keep them at arm’s length throughout the process.

Once you have the documents the next step is:

  • Find a realtor
  • Prepare the home for sale. Mow the lawn, make repairs, plant flowers etc
  • Decide whether or not you will offer a warranty

Things to Consider When Buying a New Home

What most people don’t realize when buying a home is your kids will grow up and move out and you will grow old. As you grow old, your ability to do simple things such as climbing stairs will diminish. This makes it very important to think long term; you don’t want to be left in a 10 bedroom home all alone when you are 70, do you? The thing is a home is not just four walls that keep you safe, as you live in it, the home becomes part of you.

If you go ahead and buy a home without any forethought, the experience can be very different from what you expected. Think about it, unexpected repairs, problems with the neighbors and lots and lots of bills. The good news is most of these problems can be avoided before you sign anything.

I assume that you already or are close to having enough money to buy a home, that’s why you reading this right?

Buying a home is not something that you wake up and decide I am going to do. It requires careful planning. The first step is to gather enough money to buy what you want, you have a number of options here, one you can save for it which I must admit is impossible for most of us, or two you could get a mortgage.

Can you afford a mortgage?

How sure are you that you will still have your job five years from now? There is no way to know that, a lot of things might happen.  In my opinion the fastest way to pay off a mortgage is to put down more than 20% of the purchase price as down payment.  The reason for that is very simple, the more you put down the less your monthly payments will have to pay.

If you are paid weekly or bi-weekly, you should consider paying let’s say $500 every two weeks instead of making one payment monthly. Doing that will get you out of debt faster.

 The thing you should be most worried about is the interest rate. Mortgage interest rate is affected by a number of things including:

  • Home location
  • Credit score
  • Home price and loan amount
  • Down-payment loan term
  • Loan type

The most important thing here is interest loan type, it is in your best interest to get a fixed interest rate, why? The amount won’t change over time, talk to your lender or financial advisor and find a rate that suits your pocket.

What will the future look like?

Remember where you grew up? It doesn’t look like what it used to look like 20 years ago, right? If you are planning to raise kids or live there forever it is very important to think long term:

  • Look at the infrastructure in the area, are the roads, sidewalks in bad shape?
  • Is it safe to walk around at night?
  • Are people leaving the area because of crime?
  • Do the neighbors and people in the area feel safe?

The point is, before you buy a home, make sure that you can afford it and you and your family will be safe to live there 10 or twenty years from now.  

Home Inspection vs. Appraisal

Is home inspection the same thing as home appraisal? To some people it is, but there is a difference. It is important to understand that during the selling or buying process your home turns into a product.

Here is the thing, Customers or buyers want value for money i.e. most buyers don’t want to buy a home that will cost hundreds if not thousands of dollars to make it habitable. Because of that homes need to be evaluated and there are two ways to do that, one you can get it appraised or two you can get it inspected. Some people choose to do both, why?

It makes the selling or buying process smooth and the results can be used during negotiations.

Home Appraisal

Your home is a product thus it has value, an appraisal is simply a professional opinion of a home’s value. When you borrow or get a mortgage, your home turns into collateral. The thing about lenders is they don’t want to lend you more money than they have to or they don’t want you to over borrow. That’s because if you fail to pay they will be left with the house, if the house was overvalued it means that the lender won’t be able to sell the house or property for enough money to cover the loan. In simple terms, an appraisal is the bank’s way of protecting itself.

 Although the report is sent to the lender, you will have to cover the cost.

During the appraisal process, the appraiser compares your property or home to similar properties in the area sold within the last 90 days. The factors that determine value include:

  • Square footage
  • Condition
  • Amenities
  • appearance

Home Inspection

Just like home appraisal, home inspection is done for the benefit of the buyer, seller and lender. The simplest way to define it is a complete inspection of a home or property intended to check and evaluate the safety and of the structure and mechanical condition. The buyer normally foots the bill.

Home inspections are important in that they give you a clear picture of exactly what you are buying. The benefit of paying for one is it helps you avoid buying a home that has problems that you can’t afford. For example, if a foundation or structural issue is found, you can decide the best way forward i.e. either buy as is, look for another property or negotiate repairs.

Generally, the major difference between an appraisal and inspection, an appraisal is an expert opinion of the value of our home done primarily to protect the lender. On the other hand, a home inspector is there to educate you about the true condition of the home you intend to buy or sell. They are not substitutes for each but both options are there to protect you or to make it easier for you to get funding.

Both options will cost you money but in the long run you will be very happy that you got them done unless of course if you hire an inexperienced person to do either.

Common Problems Found During Home Inspection

The home you are currently living in may have lots of problems that you are not aware of, if you decide to sell, the person buying in his/her best interest might decide to get the home inspected. There is nothing wrong with that, the only issue is, the inspection report will heavily influence the buyer’s decision.

Although different, homes generally share the same problems. The most common problems found during home inspection are:

Damaged roof

Ever been out in a storm? If you have you noticed your skin takes the most damage, right? The roof on your home is very similar to your skin. It takes damage from the sun, heavy winds, hail and rain, Kids throwing rocks, animals and many other things. A damaged roof means that water and moisture enter your home and that can lead to even more problems such as mold, water damage and in some cases structural problems.

 The funny thing is some home inspectors don’t climb up the roof to look for problems. To be safe make sure that you get your inspector to check your roof, trust me replacing the entire roof is not cheap.

Poor drainage and grading

This problem may be hard to detect in areas that receive little to no rainfall, the problem is if left unchecked it can lead to water seepage which may lead to foundation issues and other problems. When buying a home it is important to make sure that drainage and grading was done properly.  If a grading or drainage problem is found, you have no option but to regrade before things get worse. By far grading and drainage issues are the most reported problems found by home inspectors with close to 40% of home inspectors reporting it.

Poor overall maintenance

Most of us notice problems only after bad things happen, think about it, remember that time you were in the shower and the hot water didn’t work? Or that time you turned on your tap and smelly brown water flowed?

Maintaining a home especially those hard to reach places is hard work and most of us are not willing to do it. The problem is if you don’t do it for long enough, problems will accumulate and sooner or later. You will have to spend lots of money on repairs or replacements.

The most common problems caused by lack of maintenance are:

  • Plumbing problems
  • exterior problems including wall surfaces, windows, doors, water stripping etc
  • Poor ventilation
  • Deficient heating systems

Mold and pest problems

Pest problems are common in homes that haven’t been lived in a long time. What usually happens when humans leave is, rats, raccoons, ants, and many other animals find a new home. On the other hand mold and moisture problems are caused by water, there may be an indicator of something worse such as a damaged roof or poor grading and drainage. The funny thing is some home inspectors don’t check for these problems despite the fact that mold and pests are found in almost all homes.

Some other common problems found during home inspection are:

  • Faulty wiring
  • Foundation flaws
  • Old systems
  • Damaged gutters

Advantages of a Pre-listing Home Inspection

There are good and bad surprises, getting $100 from grandma on your birthday is a welcome surprise but being told that the person who recently bought your previous home is suing you for $100,000 is an unwelcome surprise.  If you are the type of person who doesn’t like unwelcome surprises it is important to take measures to keep them from happening. The truth is there is no sure way to eliminate unwelcome surprises, but there are a number of things that you can do to lower the possibility of them happening after selling or buying a home.

The problem with most sellers is they don’t know that they have the option to get a pre-listing home inspection. It is not a must to do it but the benefit you get is a smooth selling process, why? One it gives you the opportunity to make repairs before listing the home and two it strengthens your negotiating power and make you look trustworthy. See the thing is if the buyer finds problems with your home, he or she may decide to give you less than what the property is worth. You may have no option but to settle because finding a buyer who is willing to buy a home as is may be difficult. According to realtors we talked to buyers prefer move-in-ready homes because it saves them time and money.

Not convinced yet? Here are some other advantages of pre-listing a home inspection:

  • Smoother efficient transaction: imagine being locked in negotiations for three or four months and the buyer decides to pull out. That’s wasted time and money. The benefit of pre-listing a home in this scenario is all issues are disclosed ahead of time meaning no surprises.
  • Accurate pricing: overvaluing your home will make it difficult to find buyers, undervaluing it means little or no profit. If issues are found and you don’t have the money to repair them, you can factor the repair cost into the asking price. In other words, the buyer will know exactly how much he or she needs to get the home up to code.
  • It builds trust: buying a home is a huge investment; this makes it very important to know exactly what you are buying. Pre-listing inspection shows the buyer that you are trustworthy i.e. you are not trying to hide anything.
  • Faster financing: very few people buy homes in cash, pre-listing a home makes it easier for the buyer to secure financing meaning the process will be faster.
  • Repairs ahead of time: if problems are found before listing the home, you can make repairs ahead of time in effect minimizing unwelcome surprises and giving buyers a few reasons to do their own inspection.

Generally, pre-listing home inspection takes out the guesswork out of the equation, if you leave it to the buyer to do his/her own inspection. You may end up selling the home at a loss. The point is you get a clear picture of your property’s true value.

Common Mistake Home Buyers Make

We live in a time where almost every device you touch gives you an opportunity to spend money. That’s part of the reason why some people can’t afford homes. Do the math.

Homes don’t come cheap, that means that it might take you lots of years to gather or save enough money to buy one. Nowadays, Banks and other financial institutions offer mortgages and loans like candy to people who have a good credit rating, but did you ever think about how you go from good credit to bad?

It’s very simple really, you sign a contract, get yourself into a situation you can’t afford and your credit goes to shit.  When buying a home there are lots of mistakes you can make, some are easy to correct and some might change your life forever. Remember back in 2008 when banks gave out loans to people who couldn’t afford them, what happened? The houses bought were foreclosed meaning all the money those people put in was lost. Picture yourself losing your home after paying a mortgage for let’s say 10 years. Doesn’t sound pretty, right?

You don’t think long-term

Not thinking long term might result in costly mistakes such as:

  • Putting down a tiny down payment
  • Buying when you are not financially ready
  • High-interest rates
  • Choosing the wrong type of loan
  • Not getting the home inspected

Remember that a home can stay in the family for generations, so you have to think about how close it is from schools, hospitals, and other amenities or desirable features that you might need. There is also the issue of safety, are there sex offenders in the area? Is the crime rate high or expected to rise in the area? Can you monthly mortgage payments and interest rates?

You don’t get everything in writing

Let’s assume that a problem is found during a home inspection and the seller promises to fix the problem via word of mouth. If you go ahead and sign the contract there is nothing keeping the seller from refusing to make the repairs, why? There is no evidence that he or she agreed to make the repairs. Any agreement made between you and anyone during the home buying process should be done in writing. Remember, a document becomes a contract only when both parties sign.

You buy at the wrong time and you lack negotiation skills

Before negotiations start, you should know exactly what you are purchasing. For example, if the house has problems that you can’t afford, you can ask the seller to fix them or lower the price.

As a buyer, there are a number of things you can do to strengthen your negotiation power, they include:

  • Do your homework: find out how much similar properties go for in the area and look at current market conditions.
  • Keep your options open: don’t show too much interest in one property.
  • Use market value instead of asking price
  • Learn to say no.
  • Negotiate in person or on phone before signing anything