Buyers are responsible for performing adequate due diligence during the escrow period, which basically means making sure you are getting what you think you are paying for. Along with the careful review of disclosures, documents and reports provided by the Seller and Agents involved, inspecting the property is the most important part of such due diligence.
The Purchase Agreement typically contains provisions allowing you to perform any inspections and investigations you desire to ascertain the condition and circumstances of the property you are in the process of purchasing. Performing such due diligence with qualified professionals is absolutely vital if one doesn’t relish unpleasant and often expensive surprises after close of escrow.
Inspections do not guarantee the condition of the home; instead their purpose is to educate you regarding the home’s current condition and how to maintain it in the future. Inspections are completed within a contractually specified time period, typically 10-15 days. If you are satisfied with the condition of the property, you remove the inspection contingency and proceed with the sale. If you are not satisfied, you may cancel the contract or negotiate with the Seller. In a negotiation, the purchase price may be adjusted, a credit may be given in escrow, or the Seller may perform work prior to close of escrow.
The two most common inspections are the Structural Pest Control Inspection and the General Contractor's Inspection:
* Structural Pest Control Inspection: Sometimes referred to as a “Termite Report,” it examines all types of insect and fungus (water) damage (Section 1) as well as conditions that could lead to damage (Section 2). This inspection is performed by a specially licensed contractor who must inspect properties according to criteria established by the State Board of Pest Inspection.
* Contractor Inspections: A general contractor’s inspection will check the overall condition of the home from the foundation to the roof, including electrical, plumbing and heating, the basic structure, as well as the quality of the finish work. It is important that you use a professional who specializes in home inspections in the area in which you are purchasing, is bonded and a member of one of the major home inspector associations. Do not use a regular contractor (such as your brother-in-law) as there is a huge difference between building and repairing homes and inspecting them thoroughly for issues pertinent to the home purchase decision. The inspection period is also useful for obtaining estimates for repairs and improvements you plan to make later.
Other Common Inspections:
1. Structural Engineer
3. Environmental Hazard
4. Review of Building Permits
5. Sewer Line
7. Lot Line Survey
Who Pays for Inspections?
Sometimes the Seller will provide pre-sale inspection reports to prospective buyers during the marketing period of the home, but more typically, the Buyer pays for inspections. Pest Control Inspections generally range from $350 to $500 and Contractor’s Inspections range from $400 to $800 depending on the size of the home. It is important to use qualified professionals and we can recommend inspectors in every category.
What circumstances might justify an offer without inspection contingencies?
1. Seller provides new pre-sale inspection reports by well known and highly-respected local inspectors the buyer’s agent would have included on his or her list of inspectors worth consideration for these tasks. These reports are current, comprehensive and carefully reviewed for caveats and disclaimers. A walk-through with the inspector, or minimally a buyer-inspector phone conversation reviewing the reports, is still advisable. Buyer has no unanswered questions and feels confident they now understand the condition of the property.
2. Buyer performs complete inspections using qualified professionals prior to making offer.
3. Buyer plans to tear down or perform such comprehensive remodeling that buyer doesn’t care about the current physical condition of the property. Though even then they may wish to investigate permit issues with the Planning Department as part of their inspection contingency.
Having a brother-in-law who is a contractor look at the property is not a valid reason for not having comprehensive inspections. There is a huge difference between being a contractor and being a highly experienced home inspector, especially in San Francisco with its incredible variety of styles, age and architecture. Besides which, if there is a lawsuit regarding property condition, the brother-in-law will probably be brought into it.
A description of “Totally remodeled” or “Extensively remodeled” is not an excuse for not having inspections. Or that the property “looks like it’s in perfect condition.” Many buyer lawsuits pertain to new construction and recently remodeled properties. One cannot know what the condition of a property is, no matter how it appears, without having comprehensive inspections by qualified professionals.
It is in everyone’s interests – buyer, seller and brokers – that the buyer fully understands the true condition of the property prior to the completion of the sale.