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A buyer may cancel a transaction after a home inspection! It may be tempting to blame an overzealous home inspector when a transaction falls apart after the inspection of some houses.
But there’s more to that situation than meets the eye.
Estate professionals know there are many ways that deals can fall apart, from credit, financing, appraisals to plain cold feet. But certainly, one of the more common deal killers is the home inspection.
But it doesn’t have to be!
Houses and Home Inspectors Do Not Kill Deals
Four home inspection situations lead to a cancelled transaction. Two things which are not on this list are the house and the home inspector. Some estate agents blame the home or the home inspector. However, let’s consider what happens in these situations.
Problems are caused when the home inspection report significantly alters the buyer’s expectations about what they thought they were buying. The client may say, “Gee, I thought I was buying a well-maintained home, but now that we have looked closely, I see the house requires a lot more maintenance than we expected”.
Therefore, the cancellation has everything to do with the client’s expectations coming into the inspection! Agents may wish that the home inspector had been less forthcoming about the condition of the house but this is not the solution! The solution to this problem is buyers having more realistic expectations before they sign the contract. My website and blog attempt to teach people skills that will help them look at houses and evaluate risk so they are more prepared to make an offer on the right house.
Here are the top four reasons buyers cancel a deal after the inspection.
1) Unprepared buyers
There are no classes in university or high school to teach people how houses work or where the risk lies in a residential building. Even professional estate agents have little or no training to help them understand how to look at houses and identify issues. A new generation of homebuyers, many of whom who did not grow up working on their houses with their parents, compounds this problem.
A Critical Home Inspection and Report include the really important parts of the home! It is a “Safe Home” inspection.
This inspection is an ideal inspection for both home buyers and sellers! The inspection is for those clients who do not require the full Buyers or Sellers Home Inspection.
With a critical inspection, I focus and report on the critical components of a home which are the roof, roof space, structure (inside and outside), windows and doors, and electricity and plumbing installations and any damp problems!
Therefore, a critical inspection is ideal if you only require an inspection of the major components of the home. Besides, it is more affordable! My fee for a Critical Home Inspection report is about ¾ of that for the Home Buyers or Sellers Inspection, depending on the distance I would need to travel to the inspection.
A Critical Inspection includes
A critical home inspection includes issues that are NOT plainly obvious to any observant layman.
These include structural cracks in walls, ceilings and floors. Issues such as all damp, roof leaks, illegal or unsafe geyser installations, windows and door issues. However, I only inspect the external and internal wall, floor and ceiling finish for signs of structural issues, damp or staining from moisture intrusion.
Unsafe electrical and gas installations are also part of a critical home inspection. I inspect and report on stoves, air conditioners and other built-in appliances. Moreover, I report on surface drainage, vegetation and foliage issues that may affect the structure and roof adversely.
Besides the geyser installation, I check the water supply to all other plumbing fixtures and fittings as well as the drainage from them. I report on all leaks or faults observed during the critical home inspection.
A Critical Inspection includes unsafe, functional or structural issues which, in my opinion, requires prompt remedial attention. Furthermore, I include any preventative remedial actions that are required to preserve the safety, functional or structural integrity of the home or major installation.
What is not included
Other external elements such as boundary and yard walls, the site, driveways, walkways, garden sheds etc. do not form part of the critical inspection. Furthermore, walls, floors and ceilings are inspected for damp and structural issues only! I also inspect BICs, sink and kitchen cupboards and counters for moisture intrusion only.
Imagine what could go wrong with your home purchase! Houses are made up of hundreds of different parts and materials from a nail to a roof tile and much, much more!
New or used, the home purchase will most likely be one of the biggest investments you’ll ever make! Therefore, with this type of investment, it only makes sense to have a professional home inspection done beforehand.
If you’re thinking, “Why do I need to spend the time and money on a home inspection?”
My question to you is “Why take any unnecessary chances with your hard-earned money?
Protecting your home purchase
An inspection and report will give you a clear, concise picture of the important components and systems of the home. Therefore, you can make an informed decision on the purchase of the home. In doing so, you avoid buying a new home only to spend thousands of rand on unexpected or unforeseen problems.
My thorough, impartial inspection will let you identify any minor or major repairs or maintenance issues. Furthermore, the inspection report is a valuable tool in the bargaining stage to address any issues before finalising your home purchase.
Moreover, you will have a highly trained, experienced and dedicated professional on your side. My report will help you make the right decision with your property purchase.
Don’t make the mistake so many other home buyers are making over and over again!
Protect your investment by having a home inspection!
Put a Home Inspection Contingency in Your “Offer to Purchase”
Home Inspection Contingencies
If you don’t believe in having a home inspection you should realise that your investment is at risk. In reality, a home inspection contingency is your only safeguard where the voetstoots clause forms part of the sales price and contract.
In South Africa, the voetstoots clause is part of the purchase contract in most of the property sales. But, unfortunately, you will not find any home inspection contingencies in any purchase contracts.
You may not consider that a home inspection contingency is a big deal! In that case, ask yourself why a seller will refuse to consider your offer that contains a home inspection contingency. It has occurred to some of my clients! I told them to consider it a lucky escape!
In addition, a seller selling a house below market value most probably has serious defects. Don’t fall for reasons like the seller is leaving for overseas or retiring to the coast.
A home inspection contingency should be added as part of the purchase contract when you have a home inspection. It means you can cancel the sale or try to negotiate repairs based on the results of the inspection.
In most instances, you should negotiate for at least a week to conduct a home inspection. The time can be shortened or increased during offer negotiations.
An example of a home inspection contingency
“The Buyers’ offer is contingent upon a satisfactory inspection within 7 (or _____ ) working days. Upon receipt of the results of such inspection, the Buyers may request in writing at any time within the agreed period that the Sellers make certain repairs or that the Sellers reduce the sales price to compensate for such defect(s). Such a request to repair or reduce the price does not terminate the contract and the Sellers shall have _____ days from receipt of such request to agree to make such repairs or reduce the sales price. If the Sellers do not agree, the Buyers shall have _____ days to waive the contingency and accept the property “as-is” or to declare the contract null and void. “
The contingency expiry date
The minimum time period you should try and negotiate is 7 working days from acceptance of your offer. At a squeeze, 5 working days may be sufficient if there are no serious problems, but it puts a lot of pressure on everyone!
Setting the date that a home inspection contingency should be released depends on the contingency you negotiate with the seller. It may not automatically expire unless you take a specific action such as signing a contingency release. That is if a release is part of the contingency agreement. Therefore, if it expires before you have it inspected, you lose the right to have the home inspected.
When your sales contract has a home inspection contingency, it is important to conduct the inspection as soon as possible. I may recommend that you call a roofing contractor to do further investigation of a problem in the ceiling space. But, for example, you might have to contact several roofing contractors before finding someone available in the time frame you need.
Therefore, it is very important to keep the seller and agent in the picture of what is happening. Furthermore, you should advise the seller on your decision to continue or to negotiate a better sales price or whether you intend to withdraw from the purchase contract before the expiry date. If you don’t, you may have to honour the conditions of the sale.
Types of Home Inspections
A home inspection involves many components, which are primarily structural and visual. However, if I discover defects beyond my area of expertise, I will recommend that you consult an expert.
For example, if the home’s water pressure is low, I will recommend an inspection by a licensed plumber. There could be a blockage the water supply system, or the plumbing pipes could be corroded. I may not be able to identify such defects by noticing the low water pressure. If I recommend further inspections in the report, you may wish to call a specialist for advice.
This is also why an inspection contingency and the time period is so important! It gives you time for specialist inspections if they are required!
Specialist inspections may include any of the following:
Disclaimer: This inspection contingency article is intended for educational purposes only and does not constitute legal advice. Real estate procedures and documents may vary. Consult a real estate professional or lawyer in your area if you have specific questions about this subject.