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(And Why You Should Never Skip Them)

Certified home inspections are an important part of the real estate acquisition process. Yet it is not uncommon for buyers to agree to waive the inspection in favor of a faster closing time. While speed is of the essence in many investment transactions, certified home inspections should never be sacrificed. This is true whether you intend to resell the property quickly (i.e. flip it) or put it to work as a long-term investment property (i.e. a rental). Let’s discuss the importance of certified home inspections and how they can be used to inform your investment choices. 

What are Certified Home Inspections?

A certified home inspection is a thorough examination of a property’s condition conducted by a qualified, third-party professional. These inspections cover various aspects of the property, including its structural integrity, electrical systems, plumbing, HVAC systems, roofing, and more. The goal is to identify any existing or potential issues that could affect the property’s value or pose safety hazards to its occupants.

Why Certified Home Inspections Are Important

Certified home inspections serve several crucial purposes for both potential homeowners and real estate investors:

Identifying Hidden Issues: Even properties that appear to be in good condition on the surface can harbor hidden problems that may not be immediately apparent to the untrained eye. A certified home inspection can uncover these issues before they become costly headaches.

Negotiation Power: A certified inspection report give the buyer flexibility when discussing terms of the sale. If large repairs are required, for example, the investor could ask the seller to lower the asking price or complete the repairs themselves prior to closing.

Risk Mitigation: In general, certified home inspections help mitigate some of the risk that is associated with real estate investment. You cannot know precisely what your ROI will be on a property, but you can at least have peace of mind knowing you won’t be financially strapped due to unforeseen repairs. In some cases, the findings on the report may be enough to pass on the property all together. In this way, a simple inspection could help you avoid major losses (see below).

Deal Breakers Found on Certified Inspection Reports

While every property will have some issues uncovered during an inspection, there are certain red flags that may be deal breakers for potential investors as well as their lenders. A property may “fail” a home inspection of one or more of the following issues are identified:

Foundational Issues

Problems with the foundation can be extremely costly to repair and may indicate significant structural issues with the property. Minor issues can allow pests and moisture to enter. More significant damage can compromise the stability of the entire house, posing a risk of collapse. Certified home inspections look for signs of a compromised foundation, such as:

Major Plumbing or Electrical Problems

Issues with plumbing or electrical systems can pose safety hazards and require expensive repairs. Old pipes may be made of lead and will need to be completely replaced. Damaged or leaking pipes will lead to water damage or worse, an outright flood. Old or broken electrical can spike your utility bill at best, and pose a fire risk at worst. 

Roofing Issues

A damaged or deteriorating roof can lead to water damage and other issues throughout the property. Certified home inspections look for signs of serious roof damage from the outside, identifying broken or missing shingles, signs of hail damage, sagging, or damaged siding. They may also inspect the attic for signs of poor ventilation, water damage, or pests that have made their way in.

Mold

Mold and water damage not only compromise indoor air quality but can also indicate larger issues with moisture control and ventilation. Long-standing mold can also wreak havoc on the support structure of your home, since it is often accompanied by moisture and rot. 

Pests

Every homeowner encounters pests at some point. But intruders that have gone unchecked for too long may have caused irreversible damage to the property. Mice and rats can chew through electrical wiring; termites can annihilate a home’s wooden support frame; droppings and urine can leave permanent stains, damage, and unpleasant odors. 

Toxic Substances

Certified home inspections will test for the presence of noxious gasses and toxic materials present in the home. If radon or carbon monoxide is detected, the house will not pass inspection until the issue is addressed. Although not present in most modern houses, toxic materials found on inspections may include asbestos insulation and lead-based paint, which will need to be replaced.

Drainage Problems

Homes and other properties are meant to have adequate drainage systems in place to avoid foundational issues caused by pooling water. Certified home inspections look for signs that a home is unable to adequately direct water away from the home. This includes the presence of mold and mildew, salt formation on basement concrete (“efflorescence”), areas of flooding in the yard, and blocked gutters.  

Should You Ever Waive an Inspection?

In a competitive real estate market, some investors may be tempted to waive the home inspection contingency to make their offer more appealing to sellers. However, this can be a risky move that leaves investors vulnerable to costly surprises later on. Unless you are highly experienced in assessing property conditions or are willing to take on significant risk, waiving an inspection is generally not advisable.

Furthermore, many lenders require certified home inspections as part of their due diligence process. This is especially true of private loans backed by the property itself, like bridge loans and fix and flip loans (i.e. “hard money” loans). These loans are already considered high-risk, so many hard money lenders will require a certified inspection to ensure the property you wish to buy is a sound investment. 

Real Estate Loans Colorado

Whether you are looking to invest in an existing property, build a new one, or secure financing for a commercial project, Pinetree Financial Partners is here to help. We offer fast, flexible loans to suit a wide variety of projects, including land acquisition, new construction, fix and flip, mixed-use properties, and more. Call or go online today to get your free quote

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