Dear Monty, I have several questions about home inspections. I’m talking to a small group of people about home inspections. I have personal experience and a work history that has exposed me to property inspections. My questions are: Should a new construction buyer have their home inspected? if the seller has already had the house inspected, can i trust the seller’s inspection? Should a buyer always choose a home inspector who offers a buy-back guarantee? do you recommend periodic home inspections for homeowners who aren’t selling? I want to make sure I’m giving sound advice. I would appreciate your comments.
No. 1: A new construction buyer should have the home inspected before the transaction closes. The home building business is one where many different subcontractors and technicians work under the direction of the home builder. The job of the builder is to coordinate the quality, timing and completion of the work. Here is a column that offers more information about the new building process and what can go wrong on the DearMonty website.
# 2: I think the seller should provide an inspection report. It doesn’t matter who orders or pays for the inspection. What matters is that the results of an inspection are complete and accurate. Full independence is essential, so choosing a different inspector is the caveat if the seller knows the inspector.
# 3: A buy-back guarantee is not a factor. I suspect that a 100% buyout offer is more of a gimmick. I studied a real home inspection buyout contract and calculated the costs associated with moving and finding a replacement. The costs were high, not to mention the inconveniences. I also interviewed a home inspector who proposed a buyout funded by a national body. He had been part of this company for years. I asked him how many houses the national company buys each year. He replied that he had only known one house for many years.
# 4: I wouldn’t recommend a periodic or annual home inspection without a reason. Visible observations are the basis of home inspections. Home inspections are expensive and, in a short time, one can easily pay for the repairs with the money saved by avoiding periodic visits. Homeowners can create a reserve account to which they contribute each month. When something breaks, they have the capital to pay for it. This article describes the plan.
# 5: Realtors, auto mechanics, doctors, financial planners, chimney sweeps, and many other types of services have great, good, average, and poor technicians. Plus, even the best in any industry still make mistakes. It is human nature to do so.
# 6: All service companies have at least one thing in common. The factor is called information asymmetry. Asymmetric information theory suggests that sellers may have more information than buyers, which distorts the price of goods sold. In the bestselling book Freakonomics, Steven Levitt and Stephen J. Dubner brought the term “information asymmetry” into the public domain. Three economists have been particularly influential in the development and drafting of asymmetric information theory: George Akerlof, Michael Spence, and Joseph Stiglitz. The three shared the Nobel Prize in economics in 2001 for their contributions.
Richard Montgomery is the author of “House Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home”. It advocates reform of the industry and offers unbiased readers
real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com
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