Conducting a home inspection is the first step in a distinct three-step process for determining the rough cost of buying a house.
- Conduct all inspections. General home inspection and additional expert inspections as called for.
- Determine which of the findings actually requires immediate repair.
- Consult repair contractors for rough pricing.
Background on prioritizing.
Most real estate purchase contracts contain a provision for an option period. This essentially affords the buyer time to conduct due diligence and re-negotiate pricing, as needed, before finalizing the contract. While the home inspection is a critical step, it is not all that needs to be done. It may not even be the only inspection conducted. Sometimes, a general home inspection will find larger issues that need additional expert inspections. One advantage to expert inspections is that these experts are the technicians and can quote the repairs. As an example, if an inspector determines that the AC is not producing adequate cooling, he will recommend that you have a reputable HVAC contractor evaluate the system. That contractor (expert) can tell you if the problem is a $125 cleaning, a $500 circuit board or a $4,000 bad evaporator coil.
It is difficult to set down a hard set of rules on how to prioritize items for repair negotiations. Each home and situation is different. Normal considerations include buyer skill set, the age of the new occupants, any mobility issues and what is acceptable wear for the age and quality of the home. Even a three year old home is not a new home and some level of wear is expected. The wear level on an 80-year-old house will be different than a 30-year-old home.
Another consideration before setting priorities is code and building standard changes since the time of construction. Depending on state, municipality and real estate rules, some code changes are reportable repair requirements during an inspection. Others are not. In general, an independent home inspector is not a code inspector and is not charged with enforcement. At the same time, most state licensing rules and association standards call for certain code items to be reported as a safety interest to any occupant. The most common example of this is the requirement to write up lack of Ground Fault Circuit Interrupter protection installed to current code regardless of the age of the home. Most states and all of the national associations require this write up on the part of any inspector. GFCIs can save your life by preventing you from grounding out a circuit to water. They came into code in the 1980s for all exterior, garage, bath and kitchen counter general use outlets, but all home must be inspected for this item, regardless of age.
Here is a sample report as an example: TIP Sample Report 0709
Priorities 1 through 3 can routinely become part of a negotiating process, while 4 and 5 normally do not. The following basic list can be helpful:
Priority 1: Safety
Repair any item that can be construed as harmful if not fixed. Opinions on what is a safety issue will vary. Good examples include GFCI repair or the replacement of a copper gas line. If a buyer has small children and a seller is an “empty nester”, it is likely that they will not agree on some safety issues. It is always best for the seller to defer to the buyer’s definition of safety as long as it is reasonable. The seller does not want to find themselves explaining why they refused a safety repair that resulted in an injury.
Priority 2: Structure
Repair any item which causes a weakening of the structure or opens the structure up to environmental damage. Before you can occupy a house it must be structurally sound. Normal examples include rotted wood, roof shingle damage or ineffective flashing. More significant examples include excessive foundation movement or a basement leak. These items must be addressed to maintain stability and to protect the home and its occupants. It is critical to note that exterior paint is a structural item because it is a protectant for wood and other siding materials.
Priority 3. Mechanicals
Repair any major appliance, which is not preforming as intended. All homes need a place to cook, bathe and there should be some level of environmental control. Most municipalities that issue “Certificates of Occupancy” have rules about what appliances and fixtures constitute a “kitchen” or “bath” and require that they be present and functional. Even in an unenforced region these traditional definitions tend to be the real estate standard. Examples of problems would include the kitchen range is missing or the heat is not functional. Be sure to consult your agent or home inspector to better understand what is normal if you are moving regions. As an example, an AC is required in the Gulf coast south, but is optional in northern California.
Priority 4. Routine Repairs
Some items are perpetually part of a normal maintenance program, but need attention right now. These items may be capable of causing damage if left unattended, but are inexpensive and traditionally considered normal homeowner maintenance. Examples include trimming the bushes, caulk repair around windows and minor paint touch up. It is possible
in some cases, for these type of items to move up if a seller has really ignored maintenance. The problem is that sellers don’t always understand the line between routine maintenance and lack of maintenance.
Priority 5. Cosmetic issues
Any interior paint, wall coverings and flooring are generally considered cosmetic. Ancillary fixtures (such as towel bars, cloths rods and crown molding) are cosmetic items. These items are not reported as part of a home inspection report unless the issue is related to structural movement or water penetration. As an example most home inspectors will not write up wall paper steamed loose near a shower enclosure, but will write up stained wall paper at the ceiling to wall junction as an unknown leak. Whether or not a cosmetic item rises to a negotiation item depends on ware level and situation. Carpet allowances are not uncommon in dated or extreme wear situations. However, do not expect a carpet allowance just because you do not like the color.
In the end, you should never forget the first rule of real estate: Its all negotiable. Do your due diligence, have a number in mind and stay flexible. As long as the seller really wants to sell, your agent and the listing agent will work it out. Don’t be surprised if it all comes down to compensating you with a lowered purchase price. Baring major failure in systems or structure or the presence of wood destroying insects, compensation is becoming more the norm.