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Why not make Home Inspections mandatory?

We're in the middle of an economic and individual housing meltdown in this country. People are losing their homes, banks are losing their assets. To comfort the government, banks and homeowners, new appraisal regulations are being made left and right. Upgraded appraiser qualifications are being put in to place to keep honest appraisers honest, mandatory review appraisals are ordered, or two appraisals per property are what we are to expect under some loan conditions.

As an appraiser, I have had attic and crawlspace photos have been asked of me... I have even been asked to perform re-inspections for something that was noted by the home inspector.

Appraisers are not home inspectors.

These are some canned statement that I enter into each one of my appraisal reports in hopes that the underwriter and other powers-that-be might finally understand the difference:

"The appraiser is not an expert in the identification of hazardous substances or detrimental environmental conditions..... A property appraisal is a document that provides an estimate of a property's market value. Lenders require appraisals on properties prior to loan approval to ensure that the mortgage loan amount is not more than the value of the property. Appraisals are generally for clients such as lenders; home inspections are for home owners and buyers. "

When I reread these statements, however I see a flaw. Are home inspectors really there to protect just the home owners and buyers or are they there to back the validity of the value of the home that the appraiser has assigned to it?

When we purchased our first home in 1997, it was an FHA requirement to have a professional inspection done (this is no longer the case as far as I know). As first time home buyers, we also ordered a second inspection (the independent inspector came up with a few more issues than the FHA inspector did, I might add).

Even now as a real estate professional, I would never trust myself to catch all the details that a home inspector would... and you better believe I still hire home inspectors for my own assurance as well as recommend them to anyone purchasing a place whether it be a new construction or 100 years old.

Posted by Sara Goodwin - Portland, Oregon Appraiser on 03/17/2009 05:41 PM

Comments (83)

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83 Comments on Why not make Home Inspections mandatory?

MAR

It depends on how good the inspector is. Some are so good that they find everything and sometimes scare the first time homebuyer and others are too lazy. I have recently had one that came dressed up. If they are afraid of getting dirty then they aren't good enough for my clients

Sara,

Although it is not a state requirement to have a licensed home inspection in Texas, my firm's policy is to always point out the benefits of the inspection to buyers. Should the buyer decline to have the home inspected, we have them sign an acknowledgment that they waived the inspection, contrary to our advice.

Russ - I think that can be said for anyone in any profession. And yes, it could scare off a potential buyer but buyers need to realize there's more money to home ownership than just the upfront cost. Budgeting and general knowledge of a home is a good thing. As far as a dressed up inspector, I completely agree. Even as an appraiser, it's rare to find me in something other than jeans... it's not an office job!

Wayne - That is a great policy. Even if the buyer opts out, they have to acknowledge that a home inspection was recommended to them.

I think no matter what someone is buying they should have a home inspection. Even if it is an as is property. I want them to know what is wrong. They have to decided if they want to go back to the seller with it or not. I had one buyer who's Dad did the inspection. I made her sign off and noted that her Dad did the inspection. It we have to go back to the sellers with anything it has to be a licensed home inspector.

MAR

A mandatory home inspection is a good idea, but it is also a "Pipe Dream". About the only way it would happen is if the mortgage lenders made it a requirement to get a home loan. It would not need to be a full blown inspection, it could be as simple as a 4-Point inspection that covers the major systems in a home.

I just don't see NAR or the home builders getting behind a national requirement like this. Yes, it sounds good and everyone agrees that it is a good idea, but it would also cut into some commissions and sales. Don't get me wrong, I would be all for it.

MAR

Sara, I believe what your asking here is whether the home inspection industry should be regulated. I personally feel that this is not what most inspectors want. While most real estate professionals agree that a home inspection should be performed, making them mandatory would actually hurt the industry. You proved the point when you said the independent inspector came up with a few more issues than the FHA inspector did. Here in Minneapolis and many suburbs independent inspectors are licensed by the city to perform Truth in Sale inspections which are mandatory for the seller. I have followed some of these inspections with a private inspection and have proven time and again how these mandatory inspections fall short. I also would not want any entity dictating what inspectors should charge for their work. I have also had clients ask me about home values to which my reply is always "I am not an appraiser"

Tad

MAR

nice post thanks for sharing!

Interesting post in light of the present economic issues within the real estate professions. My company develops Home Inspection Licensing courses sold nationwide and we're seeing a trend toward the licensing of Home Inspectors in more and more states. In addition, it's becoming the norm in the process of buying a home. The arguments against usually center around negative impact on the sale of a home. I would venture that the vast majority of the time a home inspector points out issues that negatively impact the sale are to the benefit of the buyer, the agent, and in the long run to the seller. In the increasingly litigious society we live in today the devil you know is much better than the devil that appears weeks or months after the sale.

I've owned 4 homes and 1 condo. Only one home inspection done in all the purchases and home inspections done in all the sales by the buyers of my 4 homes. I regret for sure the 4 times I did not have one done prior to closing. Knowing what I know now, Home Inspection everytime!

Hi Sara. I always recommend a home inspection, but even home inspectors can't see everything. Up here in Ontario, we are dealing with a government that wants to make a "green" inspection (checking out things like insulation, windows, weatherstripping, etc.) mandatory for all home sales aat about $300 a shot. Imagine the effects that will have on transactions.

We do make a mandatory and if the buyer and seller doesn't pay it I do. But I would want to spread that around but it is only to protect us. However it would be difficult to make it mandatory across th eboard.

A home inspector needs to understand his/her position as well. Many will try to add CYOA and call cosmetic items as needed repairs. And as statedabove by Russ... Some inspectors really seem to miss many things that shoulf have been found.. Hmmmmm

Now I don't think an appraiser should have a copy of the contract to see what they value they are targeting... Just appraise the home and delive the TRUE value. I have seen to many cases where they have the contract and only appraise for sales price instead of TRUE value.

Sorry for the mini rant.

While I understand your thought process in wanting to make home inspections mandatory, I have to disagree. While I do agree that a first time home buyer or an average buyer (if there is such a thing) should have an inspection done, we should take into account all entities who buy homes. I work with a few investors, and they rarely do inspections. There is not too much about a house that they don't know. If the price is right, it doesn't matter. I will tell you, I do have them sign off though. I also recommend that they still have an inspection if the property has a well and septic. Just my two cents.

".....are they there to back the validity of the value of the home that the appraiser has assigned to it?" In my neck of the woods, what I do as an inspector has nothing to do with the house's "value"----I rarely know what it is selling for and don't really care. Usually the appraiser comes in after I am all done----so how would I be validating anything? I observe and report----and that is pretty much it.

We try never to give our clients a home inspection as an option. If the cost is an issue we offer to pay for it, or to help pay for it. We'd rather have an informed and happy client.

Sara - great to see you have a featured article! I was just talking about this with my wife tonight as friends of hers are looking for a career change, and she was wondering if people are still getting home inspections with mostly REO sales around here.

I commented that they should now more than ever get one! If a buyer is purchasing "as is" and the seller (bank) offers no repairs - then at least the buyer should go into the deal knowing what to expect? Outside of a full scale "gut the home" job - I would think that all buyers here in Florida would want one...and need one!

I agree 100% that everyone who buys a home should have a home inspection done. If there are issues with the home that scare of the fthb, that may be a good thing. Re: Regulating home inspectors; I would hate to see that. We see how great that has not worked out in the appraisal field.

This is also a problem with commercial real estate. I have known of investors who refuse to have inspections done to the property prior to making offers. Besides As-Is properties, I believe that it is essential to make thorough inspections to become familiar with the structure of the property just in case the buyer is actually buying the seller's headaches. The monies paid for inspection services are very well worth it than to acquire real estate that will cost tens of thousands of dollars in electrical, plumbing, roof repairs, etc., in the long run.

I think if we took things one more step and had the appraiser look at where the borrower lives. If the borrower to see how they maintain the property. If they never clean, let the trash pile up for months and years, punch holes in the walls, never cut the grass, the dogs and cats leave landmines all over the carpet and so on they most likely will destroy the home they buy. If the lender has to foreclose the home will most likely be a wreck.

If a landlord can and does call the former landlord to see if a tenant paid and TOOK CARE OF THE PLACE why can a lender who is putting out 100s of thousand of dollars do the same?

If I were going to lend my money to someone to buy a house I would expect them to take care of it as long as it was my collateral.

Someone can have pride in there home no matter if they are renting a $30,000 mobile home or live in a 10 million dollar home.

Let me know what you think. If you think I am crazy that is ok. We have two teenagers who have no problem telling me that I am wrong.

"Are home inspectors really there to protect just the home owners and buyers or are they there to back the validity of the value of the home that the appraiser has assigned to it? "

Hi Sara,
Thanks for posting an interesting topic. The home inspector is working only for the person writing the check, i.e. his real customer. If its a buyer, then he's working for the buyer. If its a buyers agent who hired the inspector, then he's basically working for the buyers agent, but these differing payees shouldn't change the type of inspection being performed (provided they adhere to some kind of "standards of practice")
As a full time home inspector myself, I make it a point to inform our clients that I am NOT there to assign value. That is something that the appraiser, the buyer and seller all have to negotiate and ultimately agree on. It would be nice, in a perfect world, if all inspectors did their inspections the same, but in the real world, there are so many differing organizations training inspectors, with many differing "standards of practice" and several large national organizations that they can belong to, that lead to many different types of your "typical inspector". And thats also the reason for why RE agents see lots of different types of inspectors doing different things on their inspections.

I believe it's my job to inform the client of the condition of the property, acting as "another set of eyes" and a "professional opinion" to assist the purchaser on only the condition of the components of the home, not the value.

It doesn't matter to me what the value of the property is in the eyes of the buyer and seller.
The condition of that property is sometimes used after the inspection, to negotiate on price, but again, its really not my call. I'm with Charles, I'm only there to observe and report...

Great post, and it is definitely something to think about. I doubt that it will be possible to achieve, as there is already enough red tape out there, but agents should always stress the importance of an inspection to their buyers.

I work in the investment side of the business, and I see too many Sellers trying to be slick and talk Buyers out of an inspection. What do you think they are doing? Probably hiding something! LOL

Have a Profitable Day Everyone!

Harrison Painter

Nice idea, but I don't think it's going to fly. Tonight I wrote an offer from an experienced buyer who wanted to waive all inspections. He's familiar with the house and construction and decided to waive them all, in hopes of negotiating a lower price. We cannot protect buyers from EVERYTHING.

I believe it should be mandatory for any financed home just as an appraisal is. It not only will protect the home owner, but the lien holder and insurance company.

I agree with Roland about appraisers receiving copies of the purchase and sale agreement. This should be a no no and It's a large part of why we're in the mess we're in now. Homes got inflated values because the appraisers valued the home at the figure on the agreement rather than at a truly calculated appraisal. How many times did you hear that the home came in "at value". I see no reason why a truly independent appraisal would need to have a copy of the purchase and sale agreement. The only reason I see is for the appraiser to make sure he doesn't blow the deal by coming in too low. But hey, if closing costs and other seller concessions are rolled in the price, should it really be factored into the appraised value? I think not! That's one of the reasons prices soared so high. If you keep appraising at value on inflated purchase prices time and time again, the market has nowhere to go but down after peaking out at ridiculous artificially inflated prices.

By no means should inspectors get involved with assigning value or backing validity of the appraiser. The inspector should point out flaws and let the buyer and seller figure out the rest.

Oh my GOD save me from myself PLEASE!!!! This sounds like more government interference in my life. If I don't want an inspection - EKG,MRI,DNA or other test then let me decide. I do have a brain and some common sense and if I want o buy a house without an inspection then I will. An inspection is only as good as the inspector and I have dealt with many that scared the hell out of me with their incompetence. A house can be great in the eyes of one inspector and on the verge of imploding to another and after a couple of years if the homowner doesn't do maintanace - are we going to start mandating that in the lender agreements? Seriously folks, if you want government housing, health care , education, etc. then face it your life as a Realtor is OVER - your job is taken over by the government, they set the price, the condition, who gets what and where. YOU don't even have a job any more (unless you are part of the plan making minimum wage by the way, approving people based on their position). As a former member of socialist government - you DO NOT want to go ther.

Sara, I agree. I even recommend many times over to get an inspection for new construction. The builders around here stress the dozens and dozens of city, and "independant" inspections every home they build must pass... You know what I say to that? WHATEVER! GET A HOME INSPECTION!

My company makes the buyer signa document as to whether they do or don't want a home inspection! I always, always, always suggest that my clients get a home inspection. Just to cover myself. A lot of buyers look to agents for their opinions and don't realize that we are not allowed nor worthy of giving professional advise as to the condition of the property.

Wow... Thanks for the feedback, everyone!

I should take two steps back and qualify what some of you already mentioned:

I do believe that inspectors should be licensed in every state (I know, I hear some grumbles).
I think that there should be circumstances where this is waived
I believe the lender should require it (once #1 is accomplished), but waivers might be acceptable in some cases
Although this is not inspection related, I do agree that appraisers should not see the purchase agreement... unfortunately it's mandatory and that's another blog for another time.

As I mentioned in this post there have been times when no inspections have been done and the lender sometimes calls on the appraiser to 'sign off' on an issue that we (as appraisers) are simply not qualified to sign off on. As more and more secondary appraisals are ordered on a house for the lender, it makes me think that energy and money might better be spent on an inspection from a qualified inspector.

I am 100% behind you. We order title....we order surveys.....I am totally game. Having worked for builders for 23 years, I have had perhaps 10 people over well over a 1000 sales that had inspections. Pretty shocking....and scary. Waaaaay too much trust out there in new home sales. Just a clause with an option to check seller to pay or buyer to pay. Shoot this to your state real estate commission. The worst thing is that they don't listen. It was not that long ago that inspections were not even made.....or thought of.

I don't think that inspections should be mandatory. Are they a good idea? Absolutely. Would I buy a house without one... aside from a teardown or a house that will be getting extensive renovation... I seriously doubt it.

There doesn't "need to be a law" about everything. People need to be responsible for themselves... you can't legislate good sense.

Sara,

Good evening. While you have touched on several good points- again we are faced with some interesting counterpoints. Most lenders require an Appraisal, as well as a Home and Termite Inspection. And while this is just a good pratice, even the most competent 'professionals [depending on the State- Licensing may Not Be a Requirement] are only rendering an opinion.

I have always recommended my Buyers obtain both an Appraisal, Home and Termite Inspections [required or not], though there will always those 'seasoned' [cash] Buyers that feel this is unnecessary. Then there is everyone's favorite"As-Is", but know this should NOT be an excuse Not to do your 'homework', for knowing prior is better than finding out later- it just give one more information to base the decision of proceeding with the purchase or not. Just an fyi~ I also recomend to my Sellers, prior to my Listing a Property, obtain the same Inspections- as a type of self-test.

That said, Please note; I Never Take a Referral Fee [for any 'secondary' services]. I am a Realtor- and I Only get Paid when a Property Closes [even if someone has gone out of their way to demonstrate (for their fee) that they do Not know the difference between 'functional and cosmedic].

:) Steven http://GulfHarbors34652.net ~ http://SeaViewPlace.Info

Sara, I agree that all house sale should have a home inspection, after all I am a home inspector. BUT! I want my clients to understand why they should be wise enough to want the information that will help them make a very important decision. Frankly, if they do not understand the value of a home inspection then they are probably not going to credit the information an inspection would make available to them. I am seeing more Realtors emphasis the value of a home inspection as opposed to only pointing out the cost of a home inspection. I appreciate this extra effort on their part even if it sometimes escapes some of their clients. The more insightful clients do appreciate it also. Marshall Brown, BSEE, CRI, CHI Serving home inspection needs in West Central Minnesota and Cass County North Dakota

Sara, I think you are exactly right. I get really frustrated with the buyers who tell me that they want the appraiser to count as their home inspection (when going FHA or VA) - and I try to tell them that they really should get a second inspection. It seems that most of the FHA/VA appraisers are looking for certain violations and not much beyond that! Thanks for sharing and congrats on the feature!

Denise,

While you may have a brain and some common sense, you might be surprised how many people don't. Just watch some of the "mortgage meltdown" shows on TV with interviews with people who "didn't know what they were signing" and "didn't know the loan terms" etc.
I (and other knowledgeable home buyers) may not always need an inspection, but if you were able to spend some time with me on the rare occasions I meet buyers at the properties they are buying, you would understand. I am a big believer in limited government, and am personally amazed at the amount of paperwork required to buy a house, but I regularly meet with people who are completely unprepared for home ownership. These people, with no home repair knowledge (let alone skills or tools), have only one thought process before making the biggest investment of their lives -- "I can save $400 if I blow off the inspection. And it looks fine to me!"
I've owned enough homes and fixed up enough properties to know what to look for, as well as what limitations a home inspection has. But on a regular basis I'm doing an appraisal with a first time home buyer walking through the house who is more concerned about what color to paint the living room than the fact that all the ducts have black mold growing out of them.
So yes, I completely agree with Sara that a home inspection should be highly recommended and perhaps enforced with first time buyers, or else a form should be filled out that specifically states that you were advised to get one and chose not to.

Exactly what Wayne said above. All my buyers either hire an inspector to have their home inspected or they sign off on a waiver.

Oh I can see the State of Illinois getting wind of this mandatory inspection thing. The state would probably add a $100 per inspection fee/tax...then the municipalities would tack on another $25.

I'm all for the inspections..I wish more sellers would get a PRE inspection done. Probably 75% of buyers are asking for a home inspection anyway. Better the seller find out sooner than wait until it goes under contract.

Sara,

While I recommend a professional inspection to all my buyer clients and it is clearly stated in our real estate commission approved purchase contract that the buyer has a right to inspect and cancel the contract, it does not need to be required! There are many circumstances where an inspection is not necessary for the buyer or the lender and to mandate it is to deny buyers the right and responsibility of making their own decision. I recently bought a patio home that I had sold 3 years earlier to the now seller, who had done an inspection when I sold it to him. I knew the builder and watched the home being built because the model home for a different builder whom I represented was directly across the street from the property. I have 30 years experience in new construction sales and have extensively remodeled several homes for myself and for resale. In addition, the patio home was vacant for 3 months while I had it listed and I did weekly checks on it for the out of state seller to make sure everything showed well and operated properly. Oh, and the HOA maintains everything on the exterior of the home. Should I be required to get an inspection? I knew the property better than most inspectors would after a 2-3 hour inspection. Lets all just do our jobs and recommend the inspection to the buyer, letting them make the decision. PS - I get home warranties for almost every buyer, paid for buy the seller. If seller doesn't agree to pay for a home warranty, then I do.

Sara,

Thanks for introducing the idea of home inspections as a required step in the purchase of real estate. As a home inspector in Dallas Tx, a real estate market that has remained relatively stable and not as volitile as other cities (you know who you are) ...I would love to have all the extra business that this would generate! I would probably only have to market to banks and lenders instead of the entire world of real estate players.

I think lender required inspections would be a good thing with limits, but if the FED & Freddie and Fannie got involved, it could mean the end of free enterprise as we know it. Lender required inspections with limitations is absolutely needed especially now in this market.

these are some of the situations that need physical inspections before trhe loan goes to underwriting; and maybe before the appraisal so you know what was addressed in the inspection. (saves appraiser time)

Foreclosed 1-4 family residences

properties that are vacant or abandoned.

all HUD, VA, FHA, alphabet soup homes.

first time home buyers, regardless of the above mentioned conditions.

homes that were built prior to 1950 (or WWII)

New constructions, re-fi's, cash deals, non owner occupied, inheritance transfers etc.....thats all I can think of right now but I think you get the idea...

the lender could make the call according to some guide lines, and any inspector qualifies if licensed or member of inspector groups like ASHI, NACHI, et al.

wattaya think? can we get it passed?

still looking for my bail out....

Rudy

Hi Sara, I really think that EVERY buyer for real estate should have EVERY property that they want to purchase professionally inspected! Even brand new construction. I have found plenty of problems w/ brand new houses!

RE; post my post above:

I meant to add that the new constructions, cash deals, non owner occupied could be exempt from a required home inspection....the lender could make the call.

Rudy

MAR

Sara, Sounds good, but in reality would it work? There are far too many houses there that need to be inspected or bulldozed. As some of the comments said, some inspectors are too picky or too lazy. It might work if there was a standardized form...

Your building consultant for life in Brentwood, TN

lender required inspections are pretty much the norm and that makes sense. But if I want to pony up my own money than I shouldn't be forced to find an underqualified person do it if I myself or a trusted associate is more knowledgable about building requirements and can do the job for less. I'm not advising that eveyone be penny-wise and pound-foolish, I just hate the idea of required anything. Just because in every instance that YOU do business it seems like a good idea does not mean that it's a good for all.

I agree also with some of the other comments, it could work if you knew you could secure a good thorough home inspector and he had a set of mandated checks that must be checked it probably would work. We advise our sellers to go ahead and have the inspection done upfront and to take care of any problems that would keep the house from selling. It's a great idea and a good post.

Ah Sara, a woman after my own heart.

Here in Kentucky, appraisers were hired by lenders and the like for the appraisal work, and would perform inspection services at the same time.

That may have made sense prior to home inspector licensing; reputable, consistent inspection services may have been hard to come by.

Kentucky home inspector licensing began in 2004, and became fully effective in 2006. Home inspectors can't perform services of engineers, appraisers, .... And only licensed home inspectors can perform home inspection services. A licensed engineer CANNOT perform home inspections under their engineering license -- they have to have a home inspector license for that. Same for appraisers.

When I bought my first home, the lender required a home inspection. I paid the fee. At close of escrow, I was given a $100 credit -- that was about 40% of the home inspectioin fee.

There are at least two reputable national home inspection organizations, with standards of practice that lenders could reference.

Just as (most) lenders require an appraisal to assess the value of the property being secured by a loan, so too, could lenders require a home inspection. It's all part of doing business, buying a home, ...

Lenders find the good appraisers. So too, lenders could find the reputable home inspectors.

Oh, and then I awoke from my dream.

Ah Sara, a woman after my own heart.

Here in Kentucky, appraisers were hired by lenders and the like for the appraisal work, and would perform inspection services at the same time.

That may have made sense prior to home inspector licensing; reputable, consistent inspection services may have been hard to come by.

When I bought my first home, the lender required a home inspection. I paid the fee. At close of escrow, I was given a $100 credit -- that was about 40% of the home inspectioin fee.

There are at least two reputable national home inspection organizations, with standards of practice that lenders could reference.

Lenders find the good appraisers. So too, lenders could find the reputable home inspectors.

Oh, and then I awoke from my dream.

Great points, Sara. I have pondered this issue before. Why would a lender not require a home inspection to be performed on a property that they use as collateral? This would protect their interests, and their borrower's interests, too.

Wow, how can possible make the single biggest purchase of your life without checking it out? I also see it from the point of the lender. This would effectively provide some reassurance and protection for both parties. I always recommend an inspection...no matter what the situation. Good point and food for thought.

I just hate to see more mandatory practices in our industry but if the case is to protect the lender home inspection should not be an issue but rather make sure the buyer qualify for the loan and make sure the house really worth What is being sold for, now if the issue is to protect the buyer's interest then I think we are doing just fine the way we have, it is not required to have an inspection but it is a good idea, however home inspectors should receive more training and be required to make clear what is an important structural and mechanical defect and what is just cosmetic, I see too many times inspectors missing the big picture and presenting a report with things that are not important, confusing and making every one upset and in many cases actually misleading the buyers to think the condition of the property is worth then it is, a real lose and lose situation, I can just imagine how worse would be if a home inspection becomes mandatory.

Yes, I'm sorry to disappoint you all.

What if this is not necessarily an inspection for the buyer, but an inspection to fully cover the lenders asset? If an appraiser comes up with a $250,000 value on a house, but an inspector finds that there are foundation issues with a cost to cure of $30,000 which the buyer does not have the funds after purchase to fix, where is this house going to be once repairs are absolutely necessary?

I'm sure these same arguments were being made about appraisals before FIRREA came into the picture.

Apparently I'm not the first to have this idea. See here and here and here.

I always insist my buyers get one. We just backed out of a purchase because of the inspection report.

The inspector found lots of rotten wood and defective workmanship. The big thing, though, was one corner of the house next to the neighbor's driveway, the only part of the house with thick landscaping. Behind these bushes the inspector found that someone next door had rammed the house with a car! The bushes hid thousands of dollars of damage. After seeing this, closer examination of the corner inside showed more damage hidden by the carpet and multiple layers of padding....

If a buyer doesn't want to do one, they shouldn't have to do one. Is it a good idea to get one? Of course, cause there might be things you miss that could have been found with a professional and another set of eyes. I recommend it for every buyer, and they sign a disclosure if they are or are not going to do one. For the $250 cost of peace of mind, particularly if its bank owned and no disclosures are coming your way. But again, if the buyer wants to save that money for use if they have to fix up the property aesthetically, that could be a nice sink, or half the cost of some flooring or something that they had planned it for.

I agree they're a good idea and we (buyer's agents) should RECOMMEND THEM. But mandatory? No.

I would say that REOs should have a mandatory home inspection that is paid for by the seller, before putting it up for sale. Since the banks are not required to supply any disclosures, under the premise that they have never seen the property, and have no knowledge about it, then they should provide a certified home inspection in lieu of a Transfer Disclosure Statement and a Statewide Buyer and Seller Advisory (in California). When the property is listed, then the inspection report should be available to all prospective buyers, prior to making an offer.

Sara, I just saw your reply... I guess to me that wasn't clear from the post. But...

My opinion doesn't change.

Basically, it would make good business sense for a lender to inspect a property. That $350 (or whatever) could save them tens of thousands of dollars. But, making it a law or requirement is a totally different thing.

Should 'best practices' in business be a matter of law? I don't think so.

MAR

I agree with Denise and Lane - there doesn't need to be a law about everything, and people should think for themselves and not expect the government to 'save' them, or do their jobs for them.

I see a lot of Realtors here. How many of you recommend inspections to all of your clients or run into lenders that have the 'recommend or sign a waiver' policy? Just curious... not trying to rile the masses.

"I would say that REOs should have a mandatory home inspection that is paid for by the seller, before putting it up for sale."

That sounds like a pre-list inspection offered by most of us inspectors. The idea of making the seller pay for this is interesting and bet would result in less "hidden" issues. But what if the inspection uncovers major defects in the range of 10k in repairs? Should the home still list at the appraised value?

As a home inspector I would probably benefit from such a law but the idea of forcing an inspection rubs me wrong. I want my profession to be seen as a valued service and not a forced procedure.

The picture you used is great for your article.

Good post, I think this has always been a topic up for discussion and I as much as I would love to see it be mandatory (being an inspector) I think that it would be very difficult to get everyone behind it.

MAR

Great picture in your post! I am sure the inspection recommendations on that one was a short statement, involving a lighter and a can of gas.

Should the Home Inspection be mandatory? I am not sure about that one. I am not one to believe that it should be a mandate by the state or federal governement. People should have the freedom to make that choice for themselves.

However, I would understand if the lending institution, supplying the money for the loan, wanted to make this a requirement. After all they are the ones' fronting the cash, they should have a right to make this a requirement of lending, if they so chose.

So I guess my answer is "Yes and No"

MAR

Some of the houses are in tough shape and the buyers know they need to fix it...to make inspection mandatory is tough, but I get your point on the First Time Buyer type of deals.

Sara,

I agree with you whole heartedly that a home inspection should be done on every home sale. This idea has been discussed by Freddie, Fannie, FHA and VA and their answer is they don't want to spend the money that would have to be passed onto the consumer. The say it would not only force borrowers to pay for the inspection, but force them to make repairs.

Instead, we as tax payers are paying for the lack of such requirement, because when the homes are foreclosed on, some of the repairs would not exist if they had been caught at the time they were financed. It is obviously an excellent idea that consumers get their repairs done before the home is closed on whether or refinance or a sale. Yes, fewer homes may get financed, but the result is a better, safer home to the consumer and a better home to the poor taxpayers that may get stuck with the bill if the home is foreclosed on later.

As usual, these GSE's and government agencies don't want to spend money on the front end and end up spending far more on the back end, but hey what else is new?

Regards,

Don

http://www.MartinAppraisals.com

As a home inspector I would like to see every home inspected BUT please no more government or lender requirements!

The home inspector CANNOT serve two masters. My client in 95% of my business is the BUYER and not the bank, Realtor, seller, etc. My job is to protect my client with knowledge. In fact, I advise my clients never to show the inspection report to their lender, it just muddies the water with the lender wanting to have proof of repairs, re-inspections, escrows, etc.

Inspections have been regulated in Texas since before 1995 when I got my license and licensing does not provide any protection for the public. I am for licensing since it lends an aire of credability to me in the eyes of the customer BUT I see inept and lazy inspectors and reports on a regular basis.

Most brokers here have a policy of having to sign off to opt out of an inspection and that is as far as I think it should be taken.

MAR

I strongly urge every buyer to have an ASHI certified home inspector, do the general home inspection. I also have an FHA Home inspection addendum that states an FHA Inspection is an appraisal and not an inspection. This also covers me on my E & O. Then of course the wavier or opt in or out wavier on the purchase agreement. As a courtesy I provide a list of ten ASHI certified general home inspectors. I still to this day have buyers who only want to use "uncle Fred" to save money and sadly enough cannot dissuade them. This has resulted in buyer's later on saying "we should have listened to you".

I can't believe some buyers still don't have it done. My favorite is the flip shows on TV where the people spend 100K or more on the house 30K or more on repairs, but want to save $300 on an inspection. I'm a former professional poker player, and these people are truly gambling.

While I DEFINITELY think you should ALWAYS have a home inspected. I don't think it should be determined by me what is best for you. In other words, let the consumer decide. I always counsel my buyers on the endless benefits of inspections and why they should invest the small amount in having a third party inspect the home. But, it is their money, and they ultimately make the decision.

I sell mostly older homes. For first time buyers and buyers who have only owned a few homes in their lifetimes, I, as their agent require that they have a professional home inspection (not Uncle Jim giving it a look over). The inspection is part of my working agreement with buyers, as well as a disclaimer, stating that I have no special expertise in the areas an inspection would cover.

For seasoned buyers, investors, who have had scores of transactions under their belts, it's their choice to inspect or not, but I always require that that read and sign the disclaimer.

Sara, As an old house aficionado I really hate to see that someone allowed the house you pictured arrive at such a state. It must have been a wonderful place.

Several of your respondents have noted no universal standard as an objection to inspections. I agree that some inspectors are just "looking around" and follow no recognizable standard but most that I am aware of follow the ASHI standard which I understand is the oldest and probably most recognized standard of practice. The NAHI SOP and the much newer interNACHI SOP track the ASHI one fairly well. These SOP's are available on line for review and guide an inspector through 2.5 to 3.5 hours on site and 1400-1600 checks.

I also disagree with making inspections mandated however I do believe all persons doing business as home inspectors should be required to carry adequate E & O insurance since many do not. This requirement is justifiable for the same reasons auto insurance is made mandatory in all States that I am aware of, it protects the innocents from the actions of others.

Marshall Brown, BSEE, NAHI CRI, CHI

Serving West Central Minnesota and Cass County North Dakota

Hello there!

I would love to see some comments on this topic from a few different appraisers, with different credentials! Our company does alot of the USDA 100% financing loans for customers...and especially 1st time home buyers. The home inspection on them is critical for two reasons. 1. If a home inspection is done, I can chose any liscenced and certified appraiser to do the appraisal. 2. If a home inspection is NOT done, then I have to use an FHA approved appraiser. That not only LIMITS my choices, but also means it will be more expensive to the buyer, as well as take longer, as they are more rigid and more in demand right now.

From a lenders perspective, a home inspection can be a hinderance..as it does bring up ALL the little items that are wrong with the house that truly do not affect value. However, being an ethical and honest person, I think it is GREAT IDEA, especially for 1st time home buyers!!!

Appraisers typically call for a Roof inspection, furnace inspection, foundation inspection, etc..etc.. when there is something of cocern. They are under so much scrutiny now that it has become routine to do, and truly, years ago, was done ALOT more regularly. In addition, if you start adding up the cost of the additional inspections, and the more expensive appraisal, you might as well have had a complete home inspection done!

This blog has made it abudantly clear that people have mixed emotions on this! Higher end buyers, buying higher end homes, probably dont need a home inspection, as the quality, age and additional information are all more readily available. Nevertheless, in recent years with flooding, oversaturation of water in some areas, and other enviromental issues where there have never been issues before, we are now seeing a "need" of home inspections more and more. I concur with many that commented though, that the quality and overall caliber of the inspector becomes even more important....and can truly affect either the transaction specifically, or if that loan closes or not.

In recent years, loans were made on and to the customer! NOW, they are made on the collatereal...!

Thanks for the post!

Darin/ One Source Mortgage, LLC

Morning Sara, Inspections should be a part of all sales contracts - existing or new !

A good inspection is worth its weight in gold adn conversely an incompatent inspector can give false comfort to the buyer. At least make sure the inspector is a member of the American Society of Home Inspectors (ASHI). It is not a guarantee of a good inspector but at least he/she has been vetted by exams and having performed 250 inspections. The real estate agent then needs to check the inspector for customer relations, performing a competant inspection, and willingness to work with the buyer and teach them about the house. Here in Atlanta we don't have state regulations so the real estate agent needs to due the due dilligence.

Tore

A home inspection is important, BUT do we need another government oversight bureaucracy to save people from themselves. Any purchase decision made must ultimately be the decision of the buyer.

A good realtor, and mtg broker will explain the difference between an appraisal (of value) and an inspection (of condition). If the inspector turns up so many things that it scares away your buyer, good. They'll be another house for the buyer and a more appreciative buyer towards you as agent. If you're representing the home owner, do you want to respresent an over-valued and flawed product, because that is what you're doing if the inspector finds major causes of concern.

But like anything else. The final decision lies with the buyer. Penny-wise / Pound-foolish is not a new saying.

If an appraiser feels that he is being asked to do something that is not in his scope. Then they should speak up.

To add laws and regulations means only to add costs and delays. Remember that most laws that protect the consumer are put in place to protect only the 1% who are dumb enough to put hot coffee between our legs at the cost of legislation and litigation to the rest of us.

Less laws.... more personal responsibility.

Interesting discussion. It seems viable to hang an inspection requirement, perhaps of energy & water efficiency as well as a traditional home inspection, upon sellers. The "requirement" could be optional and still retain value. I posit that adding energy & water efficiency will add value as strongly as classical home inspection.

Buyers would need keep in mind that the quality of the inspections provided may be inferior and that they may need perform their own inspection(s).

Transparency in real estate goes a long ways toward enhancing the industry's public image.

I agree with Denise and Lane. Good grief!! How much more government mandate do you want in your life! At some point we have to get back to people taking responsibility for themselves!!!!

Of course, I always, strongly, recommend a home inspection. But let the buyer make his own decision!!! There are many buyers out there who have the knowledge to go through a house and determine the condition.

In the big picture, we are slowly taking away all rights to make decisions on our own . . . right OR wrong.

Face it! You can not and never will be able to legislate stupidity!

Marcy Spieker

We recommend a home inspection when buyers purchase a home. 95 out of 100 will get one done. I find if the buyer is in the building trade, they just do their own, with help from others in the trade.

MAR

Does an inspection help? Not all the time.

A recent inspection of mine for a 90+ year old home "distressed" home had many problems typical for a building of this age. My client bought it as is and knowing it had many serious problems detailed in my report. After moving in things "failed" as my report outlined as a serious concern in NOT performing its intended function in response to normal use. These components have a high probability of incurring SUBSTANTIAL expense to repair or replace now or in the near future.

I recently received a bill for a large some of money stating that I am responsible and should reimburse them for this expense. I have not responded, yet.

Like my father told me, "Life isn't fair."

I can easily understand why it could be beneficial to make home inspections required. But I think the reason why it isn't (at least if it's not FHA) is simply because of the cost. Nobody want to say that you HAVE to pay for an inspection. If I'm representing a buyer who chooses not to have an inspection I have them sign something that says it is against my recommendation.

Appraisers and inspectors have nothing to do with each other out here in my market. the way I see it is that the appraiser is there to tell the lender whether the home is worth what they are lending on it. The inspector is there to let the buyer know the condition of the home.

Another concern I believe lenders might have in considering to make this a mainstay in their loan process is the responsibility they might be assumed to incur should something fail after the sale has gone thru (Paul's statement above reminded me of this).

I find it very interesting that most inspectors that have made comments here are either on the fence or against making it mandatory, too...

... and I applaud the Realtors that bring it to the attention of their buyers.

MAR

Sarah,

I had to RE-comment on this for all of your readers! Just had a VERY interesting situation arise, and thought I would share it with you and everyone. It involves appraisers AND home inspectors!

Here are the facts. This is friend of mine!

She is being transferred by her company from Georgia to Tennessee. The relo company that works with her employer had 2 seperate appraisals done. Due to the fact that there was MORE than a 5% variance on the appraisals, they required a 3rd appraisal. They ALSO required a home inspection on top of the three appraisals.

I have reviewed over 12k appraisals in my career, and have to tell you two things. 1. ALL THREE APPRAISALS STINK! 2 of the 3, used ALL REO's for comps! 1 of the 3, appraised the home for 100k UNDER the sale price. I could spend ALL day shredding the job done by these appraisers! None of them should be in this line of work, no matter HOW MUCH accredidation, training, or certification they have.

Regarding the home inspection: This person who did this, did a pretty good job. In many ways, better than the appraiser! However, there is sliding door under the garage,in the back of them home where the walk out is, to a BASKEBALL court that was poured! This idiot called it a garage, and is requiring that my friends put up a ceiling, fireproof walls etc....before the relo company will buy it! NONE of the appraisers said it was a garage, but this guy did!

Bottom line is that I called MY appraiser here to get a definition of a garage and she is providing me with a description. I have advised my friend to fight this tooth and nail, as well as doing an extensive write up for her on all three appraisals!

In the end, who is right?? Any appraiser who wants to look at these, or , home inspector, please email me, and I will show you directly...Oh, and did I mention, this home if for sale at 289k. 3200 sq feet in an exclusive subdivision of Nashville TN? Market to market, what is wrong is wrong!

Who is right? Who has more knowledge? Who is qualified or not?? Is the appraiser?? NO, is the home inspector?? NO, he doesnt even know what a garage is!

Many of the people who left comments disagree on this whole topic~! Great topic choice though, as it has created a TON of discussion! I do realize my example is a brief description, but I assure you, there is nothing important being left out! Who is in league with who?? Why is it that WE as lenders get attacked CONSTANTLY as to our relationship with appraisers??

These were independently chosen appraisers, by a RELO company??

Thoughts?? Darin @ One Source Mortgage, LLC

Darin@osmwi.com

OH, and I wanted to comment ALSO on PAUL's comment! In my humble opinion, PAUL notified them in a report that this is a problem area! If the lender, and/or funder, (In some cases more importantly) went through with the financing, then it is "too bad , too sad" for that buyer! THEY KNEW going in, and I am sorry if it sounds heartless, but they have to share the burden of responsibility!

Most appraiser and home inspectors that I KNOW, are legit, and WANT TO HELP and do a good job!
In the end, we all only have our reputation to fall back on!

Darin

Carrie and Kathy Sampron Sara: We completely agree with you. We've been lucky enough to find an inspector we can count on and that we trust.

MAR

Sara: Great post, love this one! I totally agree.

Mary

MAY

Sara, Nice to hear an appraiser's point of view on inspections. I urge borrowers to have inspections for old AND new homes...so much can be missed. Flashing or insulation installed backwards by cheap labor can really backfire...as our air quality expert from Clean Air NW refers to such a structure as: a 'self composting' home. Only a licensed, certified home inspector who is famliar with structural issues should ever be allowed to make those judgements.

A client came in today who is forced to sell her home due to toxic mold issues that she has been living with for five years and is now a detriment not only to her health but to her chances of selling her home very successfully. Having lived through a mold infestation myself I can tell you the articles on health are frightening and how easy it would have been to have an air quality and under the carpet view of the home before I put my health at risk. It's a big problem in the Pacific NW where are winters are wet and not quite cold enough to kill things...perfect conditons for mold.

It pains me to say some realtors and sellers will try to hide these things. The condo that sickened me had been well scrubbed when I moved in that summer (I was leasing with an option to buy)...yet neighbors in the ajoining unit had very sick children who myseriously got well when away from home. After I made complaints to the HOA their maintenance person arrived mysteriously to scrub the blackened interior walls but nothing was done to correct the problem. Thanks for bringing this subject of inspections up front and center!

AUG

Good Day. Before we set our hearts too much upon anything, let us examine how happy those are who already possess it. I am from Turkmenistan and learning to write in English, give please true I wrote the following sentence: "This is a green and graphic piece created by minneapolis–based graphic designer keith moore of pilotdesign." With love :-D, Filia.

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