Some people on here have said they put few or no contingencies when buying a distressed property, and don’t ask for Inspection, to make their offer better. Have you ever done this and ended up with a house that has a severe problem with the foundation or something else that can’t be corrected easily?
I do my own inspections before any negotiations and try to avoid all contingencies. I did buy a property in an executive neighborhood a few years ago and missed a hairline foundation crack on a pilaster (the basement walls were covered in old foam board insulation). My buyer’s inspector picked up the crack and we tore out the foam to reveal a slightly bulging (1/4" over spec) foundation wall. It cost me $1500 total for an inspection by a structural engineer and the resultant rod and grout reinforcement job to get it repaired. In retrospect, just another cost of doing business. This house had so many problems that this was just another one on the list. However, it was the only one I was surprised by. All the other problems I had identified by my own inspection and accounted for in my offer.
If you’re not comfortable doing your own inspections, by all means hire a professional.However, realize that a professional can miss a problem also, and you’re just as screwed. You can sue the inspector, but it’s usually more cost effective to just fix the problem, which you have to do anyway before you sell and almost assuredly before any court action against the inspector would be resolved.
jmd_forest
Thanks JMD. I actually like the idea of doing my own inspections (although I don’t know how to do that yet). I was just wondering how risky it is and what the worse case scenario is if you don’t catch something–like could you end with some hidden problem that costs $50,000 to repair for example?
Sometimes when you’re looking at a cheaper property, you just kinda go into it expecting to have to spend a few thousand on various things anyway. There are lots of foreclosures out there right now that aren’t going to have utilities turned on. I’m sure if you really wanted them turned on, you could make it happen, but you can also just look at the general condition of things and know you’re going to have to make some repairs. Some of our older houses have old floor furnaces in them. We just had to replace a couple of those with new gas wall heaters. That cost about $700 per house, but they’ll last for many many years. Some of the other places we’ve looked at, we realize we would have to build that cushion into our offers to end up where we want to be on the price.
Whats the worst that could happen on a 100K home? Furnance broke? $2000. Boiler broker $1000. Roof leaks $5000. These are costs of doing business. Find a Realtor with construction experience.
Thanks–that makes me feel a lot better. I was more worried about a nightmare scenario, not the kind of problems that you mention.
quote author=justin0419 link=topic=40951.msg194911#msg194911 date=1232764471]
Sometimes when you’re looking at a cheaper property, you just kinda go into it expecting to have to spend a few thousand on various things anyway. There are lots of foreclosures out there right now that aren’t going to have utilities turned on. I’m sure if you really wanted them turned on, you could make it happen, but you can also just look at the general condition of things and know you’re going to have to make some repairs. Some of our older houses have old floor furnaces in them. We just had to replace a couple of those with new gas wall heaters. That cost about $700 per house, but they’ll last for many many years. Some of the other places we’ve looked at, we realize we would have to build that cushion into our offers to end up where we want to be on the price.
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It takes inspecting surprisingly few homes to be able to distinguish between those with $5000, $15000, or $25000 in repairs, or homes that are a total loss. Every once in a while you’ll blow it, but if you flip enough homes it all works out. The key is buying so cheap that you can afford surprises. It doesn’t take more than a weekend or two looking at a few dozen homes with an experienced REO agent or builder, to get the hang of it.
More than likely, you’ll be putting your offers in through the agent 10 at a time and he’ll be happy to show you around and provide opinions. Unless these are auction properties, you’ll need an agent to view the homes anyway.
Once you get the hang of it, you can make the most money on homes with severe mold, foundation, or fire damage because these are the ones that scare investors off.
Being confident in doing you own inspections takes some experience. Once you’ve seen a few problems you know what to look for. Another way is to tag along with an inspector hired either by you when buying, or your buyer when selling. I watch every inspector my buyers hire and usually learn something.
A good starting point is to search the internet and find a good “Home Buyers Checklist”. I use an 8 page checklist when I inspect a property I’m interested in. Its good to have it in writing right in front of you to help determine your offer price and justify it to the sellers, or bank. It may be tedious but its worth the trouble.
jmd_forest