Whenever I am talking to a Real Estate Investor about a piece of property or someone that is trying to learn how to invest in real estate, I always ask if they have had the property inspected by a professional, licensed Property Inspector. Many times my questions are met by a “deer in the headlights” stare or I am asked “why do I need an inspection since I am buying the property as-is”?
I realize that most properties are sold and purchased “as-is”. That is the main reason for having the property inspected. Many Investors do not take the time to educate themselves about the true meaning of “as-is”. They do not fully read the fine print contained in the addendums lenders add to the real estate contract. Lenders know this and are counting on the investor’s lack of knowledge. Not all “as-is” clauses are created equal. It is just assumed that they are so investors feel that they have no recourse. Remember that most lenders are out of state. They relay on the listing agent or the P & P Company to let them know about the condition of the property.
A Property Inspection Report should be used as a bargaining tool to negotiate the price. It is also important to know what repairs need to be addressed so that the cost can be accurately shown in the scope of work. Do not confuse a Licensed Property Inspector with a General Contractor. A General Contractor may not be licensed and bonded. His license does not require him/her to know the city and state code violations in detail. The Property Inspector is not a contractor so he/she is not going to try to exaggerate the repairs needed. They must successfully complete a class in order to sit for the state exam. Many rehab projects have gone astray because of violations or damages that were not initially addressed so the funds were not allocated. A property inspection often identifies areas that even a seasoned contractor may miss. A good Property Inspector will pull the list of code violations, if any, and ensure that they are addressed during the inspection.
The fee for a licensed Property Inspector ranges between $150 and $350 per report. This is considered a soft cost and can be included in most rehab loans. The report for an investment property is different from a residential home inspection. The Property Inspector knows that the investor is not going to live in the property but still will be responsible for the safety of the future buyer. The report may not be as long but it should be detailed and should contain pictures.
Seasoned investors have a team of professionals from an Attorney, to a CPA, to a Licensed Property Inspector. It is important to know what you do not know and hire a professional to handle it.
Gyna McElwee is a principal at Phoenix Real Estate Solutions, LLC. A full service Real Estate Consultant Company providing solutions to Real Estate Investors, including Licensed Property Inspectors.
No comments yet.