Intent of Home Inspection is to Address Major Repairs

We used to think the home buying battle was over when we heard the buyer qualified for the loan. Today that's only half of it. Sometimes the greater worry is whether the property will qualify for financing.

Like many real estate issues, concern over property condition is cyclical. Lenders are peaking at maximum nervousness now.

Their hearts are in the right place, bless them. Lenders don't want to be stuck with a bad property that will be expensive to repair if they foreclose. Behind the phi­losophy, however, can lurk the heart and soul of an unthinking bureaucrat.

That's when both buyer and seller need to watch out for fear of losing the entire transaction.

Buyers and sellers bring on themselves some of the problems you hear about.

Sellers, for instance, shouldn't play ostrich with serious property defects. The facts are going to come out. If they don't before closing, there's a law suit in the future.

Sellers should address property defects before marketing. A seller can make lem­onade out of that lemon by marketing a property that has been "fixed." Show a copy of the engineer's or contractor's report describing the problem. Show the paid repair bill. And show a sign-off letter saying the work was accomplished as recommended.

A buyer who knows how the system works can take steps to keep his purchase from being caught up in property problems, too. What the buyer tells the inspection service to do and the type of report he or she wants can make a big difference.

At one extreme a buyer can hire an inspection service and tell them to do a com­plete code compliance review, structural, electrical, mechanical inspection—and check the appliances, too. "Give us a complete write-up," the request goes.

The other extreme is for the buyer to hire someone he or she trusts to walk through the property and only point out anything of interest. No report.

Guess which costs more.

Remembering lenders' low threshold of pain for property condition, one has to ask whether long, detailed report that probably will wind up on the underwriter's desk is what everybody really wants.

You can anticipate what's going to happen. No underwriter concerned for the lender's liability—or his or job, for that matter—is going to ignore even the less conse­quential observations in the report. What the inspector might intend as an aside or in­formal information runs the risk of raising an eyebrow at the bank.

Underwriters have a big rubber stamp for this situation: it reads "FIX EVERY­THING." It doesn't matter whether the buyer and seller earlier agreed that the price they negotiated reflects the actual as-is condition. It doesn't matter that everything has been property disclosed and the buyer is prepared to take the property anyway.

The lender is the buyer's partner in this purchase. The major partner, when you think who has the most money invested.

Probably the buyer only wants to know whether the property is a turkey. If he or she asks for a report in writing, particularly from an engineering or professional in­spection service, the author is going to take liability and write a long report. There's no lying to the lender, so if the lender asks for it, there's little choice but to cough it up.

Why not instead ask for a report that covers only the issues that are so impor­tant that the buyer would not proceed without negotiating a repair? Wait until during the inspection to specify what is going to be written up.

Why not, indeed, have an agreement in the purchase contract that the only re­ports to be written will be on potentially deal-killing issues? The seller in making this request is not discouraging the buyer's due diligence The seller is only suggesting a "keep it simple" approach to the transaction that keeps both parties from making the lender say "FIX EVERYTHING."