Home Mis-Inspector

photo by Mark Moz

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Realtor.com quoted me in Yikes! What If Your Home Inspector Missed Something Huge? It opens,

Your offer has been accepted, and there’s just one more obstacle between you and your new home: the inspection. It can be a stressful event for both buyers and sellers as they wait for the report, hoping no major issues will surface that could sideline the deal.

But what if you make it through that day, let out a big sigh of relief, seal the deal, and then a few weeks or months later find an issue in your new home—a bat infestation, a leaky roof, a CDC-level mold problem—that the home inspector didn’t catch? Just how much peace of mind does a home inspection really buy you?

Find out how you can protect yourself.

Sadly, there’s no insurance home buyers can take out to protect themselves from a faulty inspection. As such, the most important step home buyers can take to prevent that scenario is to select a reputable inspection company.

Make sure you choose a firm that has been in the residential inspection business for a while and has a strong reputation (real estate agents and lenders often have recommendations).

But most important, your home inspector should have adequate insurance.

Keith Balsiger, president of Balsiger Insurance in Las Vegas, says buyers should ask for a current certificate of insurance that shows the inspection company has both general liability insurance and professional liability insurance (also known as errors and omissions insurance). This is what would potentially cover you as a buyer if there was a major “miss” on the part of the inspection.

If you want to be extra safe, you can call the insurance agency of the inspection company to confirm the coverage on the certificate is still valid.

You also want to closely examine the terms of the liability insurance. David Reiss, professor of law at Brooklyn Law School, says some contracts will state that the company is liable only for the cost of the inspection, which won’t be much solace if you find yourself on the hook for repairs that could cost hundreds of thousands of dollars.

“Ideally, you would not want there to be any limit on the inspector’s liability in case he or she was negligent in doing the inspection,” says Reiss. At the very least, make sure the limit exceeds the cost of the inspection alone.

Why buyers should attend the home inspection

As an added safeguard, buyers should be physically present during the inspection. If an inspector balks at this idea, that’s a red flag. Make sure to find out what is covered by the inspection, and if there’s anything you want the inspector to scrutinize in particular (say, you know the boiler is old or the basement has water stains, suggesting flooding issues), state that upfront.

“It’s a buyer’s job to make the most of the home inspection,” says Bryant Dunivan Jr., a real estate and consumer protection attorney in Brandon, FL. Here are some things to watch for during the inspection:

  • The inspector is working off a checklist of items that was in the contract.
  • Major systems (air conditioning, heating, water, etc.) are tested.
  • The inspector actually enters attic and crawl spaces.
  • A report complete with pictures is provided.

What to look out for in a home inspection

Robert Pellegrini Jr., president of PK Boston, a real estate law firm based in Boston, says a typical red flag disclaimer on the inspection report is a statement that there was a problem with “access” to roofs, eaves, and areas behind locked or blocked doors or crawl spaces.

“That serves to absolve the inspector of any liability,” Pellegrini says.

Urge the home seller to remove all barriers that might prevent an inspector from doing a thorough job. Some home buyers even take the process into their own hands and hire drones or robots to view inaccessible areas.

Uh-oh! You’ve closed, but there’s a problem

No matter how many precautions you take, the nightmare scenario does happen: You move in and then discover a problem. A big one. Can you bring it up with the seller? After all, sellers are required to disclose any known issues about the home.

Well, here’s the rub: Proving the seller knew about something after the fact is nearly impossible, and the legal cost involved in trying to prove it is often too steep to make an attempt.

Which brings us back to the home inspector. If you encounter a problem, bring it up with your inspector. As long as you used one with decent liability insurance that covers more than just the cost of the inspection, odds are decent you’ll be compensated for any damages. Again, you’ll have to prove it. For example, if the inspector said the roof was in good condition, but there was a leak months later during a big storm, you would have to prove that nothing happened in the intervening time that damaged the roof.

“Bottom line: You would probably need pretty clear facts on your side to win,” Reiss says.

Buying A First Home

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Realtor.com quoted me in Buying Your First Home? Better Make Sure It Has These 4 Things. It opens,

Finding the perfect starter home is a journey as well as a destination. You’ve got to know what you want, then adjust expectations to meet the reality of the market. In the end, you don’t have to settle on your “forever home”—just a place you’ll call home for at least five to seven years.

But that’s a long time in homeowner years, especially if you wake up each day in a place you wind up hating.

“You want to buy something that’s going to last,” says Carol Temple, an Arlington, VA, Realtor® who loves helping newbies find their first home.

So how do you know what’s going to stand the test of (a decent amount of) time? You’ve never done this before. You’re taking a leap of faith that you have the money, skills, and temperament to maintain the biggest purchase of your life so far.

We know—it’s scary. And overwhelming. But there is a foolproof formula to picking the right starter home.

1. Manageable monthly expenses

If you’ve been renting all your adult life, you’ll be surprised by how much owning a home actually costs. There’s a mortgage, real estate taxes (usually wrapped into your mortgage), insurance premiums, utilities, and the drip-drip-drip of maintenance costs. And here’s the fun part: All these costs usually increase with time!

“New homeowners are often not aware of how expenses can add up when they own a home,” says David Reiss, who teaches real estate law at Brooklyn Law School in Brooklyn, NY.

When calculating how much you can spend on a house, figure in all these costs, and then add a little more for unexpected expenses. Like replacing LED lightbulbs at $20 a pop. Or hiring a pro to prune that gorgeous oak in the backyard. Or maybe replacing your Grand Palais range that spontaneously combusted.

Make sure your final choice truly fits your budget. Got it? That may mean buying something smaller, older, or farther out than you originally intended.

2. Low maintenance

Maintenance costs are the great unknown in homeownership—the older the house, the more it will cost to keep running. So unless you have the handyman skills and desire to fix whatever comes up, it’s better for your starter house to be newer construction (less than 10 years old).

You may even want to consider brand-new construction, which costs more but whose parts are typically covered by a warranty. Standard coverage would be a one-year warranty for labor and materials, two years’ protection for mechanical defects—plumbing, electrical, heating, air conditioning, and ventilation systems—and 10 years for structural defects.

Whether you buy a new or existing home, don’t forget to hire a good home inspector to thoroughly identify potential problems.

“Even if the home buyers are handy, they may not want to be spending their time up on the roof looking for a leak or in the basement up to their knees in water,” Reiss says.

The Low Cost of Homeownership

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TheStreet.com quoted me in Why the Extra Costs of Owning a Home Are Lower Than Consumer Expectations. It reads, in part,

First-time homebuyers are often apprehensive about the extra costs of owning a house, fearful that routine maintenance and repairs will add up quickly, exceeding their original budget.

But their estimates about replacing air filters, mowing the lawn and conducting minor repairs are often much higher than average costs. Consumers have trouble estimating the actual amount and said it would cost $15,070 for home maintenance repairs each year, according to a recent survey by NeighborWorks America, a Washington, D.C-based organization focused on affordable housing.

The actual amount is more likely to be in the range of 1% to 3% of a home’s value or $2,000 to $6,000 nationwide, said Douglas Robinson, a spokesman for NeighborWorks America. Even some current homeowners’ estimates were above the average amount and predicted repairs to cost $12,360. The perception among current renters was even worse with a prediction of $20,503.

“The important thing to remember about buying a home is that there are costs after the purchase that go beyond the monthly mortgage,” he said. “By setting up a savings plan and budget for these costs – items such as landscaping, air conditioning and heating system maintenance – a homeowner will be better equipped to take on the expenses without having to use a credit card or worse, a high-cost emergency loan.”

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Home Emergencies

While they might appear to be rare, homeowners annually should prepare themselves to handle at least one unexpected major emergency such as replacing the boiler or roof in the aftermath of a major storm or flooding in the basement where water needs to be pumped out immediately to protect the foundation, said David Reiss, a law professor at Brooklyn Law School. Establishing an emergency fund would help protect a homeowner when these problems arise so consumers are not forced to turn to more expensive options of debt such as credit cards.

“If a homeowner has an emergency fund, he or she will feel like a genius when it comes time to use it,” he said. “The next step, of course, is to start saving up immediately for the next problem because as most homeowners know – there will be a next problem.”

Some homeowners might find that chronic problems such as the leaky roof are worse than the “acute ones such as the boiler giving out in the winter,” Reiss said.

“This is because we will do whatever it takes to turn the heat back on,” he said. “But we learn to live with the occasional leak and end up feeling like we can ignore it. However, water damage is bad for a house and always gets worse.”