Just because a home might seem
perfect on the outside doesn’t mean it’s actually flawless. Major concerns
could be hidden in the smallest places or even invisible to the naked eye. You
might not notice cracks in the foundation or signs of a mold problem, or not
recognize that the roof, furnace or appliances may be beyond their useful life
and ready to fail, or not know if there are serious problems with the
electrical wiring. You need to choose the right inspector who can discover potential
problems before you close the deal.
The inspector you hire will
evaluate the home to identify any code violations, hidden damage, required
repairs and/or maintenance items. If you fail to take advantage of this
inspection right, you could be waiving your right to reject the deal or to
require that the Seller make repairs prior to the Closing.
The Value of a Professional
An experienced, licensed
inspector’s evaluation and identification of potential or actual health and/or
safety issues affecting the condition of the property, can provide you with
ammunition to negotiate repairs and/or repair credits. These credits can offset
the expenses you will otherwise incur after the Closing to fix or eliminate the
problems identified by the inspector.
You can either compel the Seller to make the
repairs before the closing documents are signed. Or, you can compel the Seller
to provide you with credits at Closing equal to 10% of the estimated cost of
the repairs/replacement costs. You should
always discuss these decisions with your attorney so you can weigh all your
options.
Without your inspector’s
expertise, you could be stuck making expensive repairs years after your
purchase when they might have been resolved during the Negotiation Stage at no
cost to you.
Since it is so essential to pick a
knowledgeable inspector, let me stress that it’s not in your best interest to fall
back on a family member or a friend for the job. Even if you feel someone in
your inner circle can investigate the property as well as a professional and at
a more modest cost, you could be setting yourself up for disaster. If the
inspection proves to be faulty, you have no meaningful legal recourse.
Therefore, I recommend you search
for an independent professional, licensed inspector to inspect your prospective
home during the Inspection Contingency Period. When you hire someone who is not
personally tied to you in any way, you’re much more likely to get an impartial
and professionally organized report of every potential issue in the home.
Avoid Limitations of Liability
While I strongly advise using a
professional inspector to protect your interests against expensive hidden
defects in the house, you must also protect yourself against the inspector. The
inspector you hire will most likely present you with a Service Agreement. This agreement
may contain fine print seeking to excuse the inspector from any responsibility for
making mistakes in performing the inspection. This exoneration is most often
found in a certain clause in your contract called “Limitations of Liability.”
Signing an agreement with the Limitations
of Liability clause means that if the inspector doesn’t inform you about a
certain issue and you discover at a later date that the problem is financially
devastating, you cannot sue the inspector. The most you will be able to recover
is a reimbursement of the inspector’s original inspection fee, which is typically
$250-$400 and probably won’t cover a fraction of your expense in fixing the
overlooked issue.
So if an inspector hands you a
contract with a Limitation of Liability provision, cross it off. Or keep
looking for an inspector who doesn’t insist on this exoneration provision.
Coming Soon
Concluding my series on buying
residential real estate, in my next post I’ll explain the attorney approval
process. This is the final stage of the Negotiation Stage and is a critical
part in ensuring you obtain the fairest deal possible. 
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