Real Estate Blog - Inspection fraud - or not. Anyone versed on this issue?

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Inspection fraud - or not. Anyone versed on this issue?

Inspection fraud - or not. Anyone versed on this issue?

In the past two weeks I have (pleasurably) sat through 2 inspections, another one is tomorrow (Monday). The first one (already closed) was a 3,800 square foot home located close to the beach which was built in 2004. The cost for this inspection was $425.00. It took 3.5 hours and included a termite inspection, pool inspection, and alarm system inspection as well as a full home inspection. Normal transaction - not a short sale or REO.

The second home (closed as well) included all of the above as well. It was a 2,400 square foot home located a mile from the ocean and was built in 1964. The cost was $375.00. It took 1.5 hours.

I use this company frequently because I trust the inspector and he is great with the customer's as he explains his findings to the owners and prospective buyers when he is finished. Normal transaction - not a short sale or REO.

So, that being said, I have another customer who I suggested call this same company. This home is 900 square feet. Has NO pool, no alarm system and is located on a canal and is an REO. Built in 1967. Estimated cost for this inspection was $525.00. I ALMOST HAD A HEART ATTACK! My customer called me and was in shock as was I. I said, call around and see if you can get a better price - he did and he found another company/inspector that offered to do it for less than half of the price. I asked my customer what was the reason for the ridiculous price for this inspection. He said, "They said it's an older house and they had to check more things." Geese, house number 2 was built in 1964. OK, it is an REO; however, this house has a brand new kitchen, granite countertops, newer roof, brand new appliances (which of course the inspector/company is not aware of).

A FEW QUESTIONS HERE:

On REO purchases, are the banks required to update homes to be "move in ready". If the kitchen is gone, do they have to put a kitchen in order for it to sell? I would think "yes," especially if the buyer needs a loan. No one is going to lend money for a home without a kitchen - or? Am I wrong?
To you inspectors/Realtors® - what are the criteria that are used to make an estimate for an inspection and how do they determine the cost?

Curious about how this works, can you pro's please enlighten me?

http://www.KarenMonsour.com 954-464-4194 cell

Posted by Karen Monsour,REALTOR® Broward,Palm Beach,Miami/Dade! 954-464-4194 anytime! on 07/20/2009 09:09 PM

Comments (6)

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6 Comments on Inspection fraud - or not. Anyone versed on this issue?

JUL

Karen,

Banks and other lenders don't have to put a dime back into an REO. Depending on the home and condition, the only way some REOs can be financed is via FHA 203K or some sort of construction financing. I've seen a lot of homes without kitchens, furnaces etc etc and the banks don't have to do a single thing to them (in fact they usually refuse to for liability issues). Most of these properties go to cash buyers at a really low price.

As far as inspection prices, shouldn't be the same across the board according to square footage? Inspectors really should be checking all points, not picking and choosing based on age or REO status. I've seen new homes that were complete wrecks directly from the builder, and then the next home be a REO that the inspector can't find 3 things wrong with. That's just my 2 cents though.

Daniel,

Thanks for your response. I have found that REO's are move in ready for the most part in south east Florida. They are allowing financing as well.

I think I just found a new inspector today...half price and a great guy to work with.

Thank you for your opinion and commenting on my blog.

JUL

Karen,

The banks do not have to do anything to the property, I sold an REO last year that the entire kitchen, all fixtures, both bathrooms were gutted. The buyers paid cash.

I would be very careful about interjecting yourself into inspections. It could come back and bite you. We won't attend a home inspection just to limit the liability.

Jeff,

Don't worry, I don't interject at all into the inspections. Not sure why you though that. I am only there to let the inspector in and lock up the property when they are done...Did I say that?

Maybe it's Broward county. However, The REO's that I have shown and sold lately were in move in condition. As far as I am told, unless it's a cash deal, no one will lend money unless it passes an inspection...as you said above - your deal was cash.

Nope, I didn't say that I interjected anything. I merely asked 2 questions. I know nothing about a home/condo inspection.

In Broward County, all of the agents attend the inspections, at least the ones in my CB office. We are only there to open the door and lock the door...who else would do it? The seller's agent also accompanies the inspection. There is no liability Jeff unless you intervene in the inspection.

How else are the inspector's going to gain access to the property - they do not have SUPRA key access?

I'm not sure I understand your liability issue.

JUL

Hi Karen,

I did not really think that you would make yourself party to the inspection. I was actually referring to your statement .I use this company frequently, makes it sound like you are choosing the home inspector. We see alot of agents who do think it is their job to choose the home inspector when actually it is the buyers who should be choosing.

I do not and will not attend a home inspection if we are working with the buyer because I do not want any problem to come back to me if the home inspector misses something and the buyers might think that we were in cahoots to cover up the problem. The home inspector is doing the inspection for the buyer and should be discussing the inspection with the buyer only. If the buyer is asking for any repairs, that is where we come in, we present on the buyers behalf.

As far as letting them in, home inspectors do have Supra Keys in our area, they have a CBS code that they call before the inspection to get from the listing agent.

Our REO properties are also mostly move in lately, I sell REO for BofA and they basically give us a budget to get the house back to move in condition before it hits the market.

Jeff,

Great info. Most of the agents in Broward County attend the inspections. I think they also do that in Palm Beach counties.

If you sell REO's for BoA...can you link me to any here in Broward? I have tons of people looking and we are about dried up...

See this is what I thought:

"Our REO properties are also mostly move in lately, I sell REO for BofA and they basically give us a budget to get the house back to move in condition before it hits the market."

I thought as well, otherwise they would sell...that was what I was trying to say above.

Oh and BTW...I just tell them to hit the phone book...if they ask, I have piles of cards..they choose, not me.

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