Inspecting Homes for Flippers

Every home purchase should include a thorough home inspection. This is true in most cases, but what about those times when you don’t have confidence you’re going to purchase the home, or can’t get in for a full home inspection. Over the past month I have worked with a few property flippers. 

Thanks to HDTV, and the current real estate inventory low, buying, fixing, and selling homes that have become run down or extended on the market has become increasing popular. Houses sold on auction don’t always have the opportunity to be inspected after contract, and even when they do, many items are shut down and can’t be tested. When the kitchen sink is in the middle of the living room floor and all the light fixtures are gone paying for a full home inspection may not feel like a good use of investment funds. 

Experienced house flippers go through a house with a checklist of basic renovation cost, they typically are looking at footprint, bedroom numbers, and estimating repair and remodel cost. If they are able to put in an offer a home inspection should be a contingency requirement, however, if the house is on auction, paying for a full inspection could be more than needed. Every good flipper needs a home inspector on their team. With just a flashlight, ladder, and four foot level a lot can be learned. For a nominal fee, about a third the cost of a home inspection, many inspectors like myself, will go out with flippers and evaluate a home’s structure. They evaluate the foundation to determine the house has not moved. A peek in the attic to make sure there are no surprises, review of the wiring, and an educated guess on the system like hot water and heat can be made even if they are shut down. 

This way the buyer can focus on what it will take to make the house appealing to the market again and let the inspector worry about the stability of the structure. After less than an hour in the home a conversation takes place and the flipper is armed with the information they need to make a decision. When this is done everyone wins, and if a bid is lost the buyer is not stuck with a useless report about rooms they had planned to gut anyway.

The Right Home Inspection Report Can Make a Huge Difference

Home inspections are a reality check. You fell in love with a home, the price looks right, but what’s this house going to cost you once you move in? Is the roof leaking, are there safety concerns that need to be addressed, what is the condition of the hot water heater, and will you be taking a cold shower the morning after unpacking? These and many other questions are what a home inspector is hired to determine. Unlike some states, New York requires home inspectors to be licensed and outlines clear training requirement for licensure. As a result the majority of home inspectors are competent in the inspection process, differing mainly on their customer service experience. The other area of difference is in the reporting system they use. Over the past month I was hired as a consultant to review and evaluate a number of systems available to home inspectors. Some were straight forward, others had several fancy features to set them apart. However, at the end of the day, they were all designed to do one thing, prepare a written report for the buyer. Your home inspection report should be thorough but also understandable.

What makes a good report, and what should you be looking for to ensure a timely closing process?

1. A clear concise summary

The first thing most real estate agents are looking for is a clear and concise summary. Preferably at the beginning, and outlining any major concerns that could end the deal if not addressed. Theses would be items of a particular dollar amount or safety level. The failure to have a prioritized summary means real estate agents, lawyers, mortgage brokers and such are required to review every line, looking for a major defect like a failing roof along side of a maintenance tip to clean the gutters. This not only wastes time, it minimizes the importance of the inspection, to find anything that changes the value of the home. Along with a clear summary is the use of understandable icons.

2. Understandable icons

A number of reporting systems on the market today don’t utilize icons. The use of codes or checks in columns require the reader to constantly refer back to the key or top of the report, something frustrating if you are reading a 30 page report on-line. Icons indicating a safety issue or repair item help the reader differentiate those items from the recommended maintenance items or comments throughout the report. Icons help the reader look for grouped items in a section, such as what are all the maintenance issues with the property, or what are the safety concerns in the garage. A good icon system will prioritize all the comments in a section, grouping them by icon.

3. Clear comments on every defect

Why is this an issue, and what should I do about it? Along with icons, any defects noted should include why it’s a defect, and what the next step is. Too frequently reports create more questions than answers. A good home inspection report will not only identify an issue, but will help the reader understand why they should address it or what may happen if the issue is not addressed. Finally, how it should be addressed or next steps should be included. Most home inspectors won’t recommend a specific course of action, however, if a professional is needed, a good report will share what kind of contractor, electrician, plumber, or other professional should be called.

4. Pictures

Finally, your report should include pictures. With today’s technology, there is no excuse to not have images in a home inspection report. After the inspector leaves, images are a great way to look at the problem again. Many home buyers won’t be able to reenter the house before closing to crawl through the attic or remove the electric panel cover again. Pictures are a time stamped document of the condition at the time of the inspection which helps everyone from the buyer, to the agent, to a hired contractor understand what was seen and what needs to be addressed. A home inspection is a visual inspection, the final document, the report, should also be a visual product.

Many reports today will include other items as home inspectors and reporting software all seek to individualize their service, such as seasonal maintenance ideas, product recalls, life expectancy of components and such. All of these are nice, but should be considered extras to the real purpose of the inspection.

When you hire a home inspector you are buying a service; the only physical item you walk away with is a report. Many home inspectors will provide samples of their work on their website or to real estate agents. Before hiring a home inspector, ask to see a sample of the report, look to see if they have one on-line and review it to make sure it has the items you are looking for. Most home inspectors will perform a professional inspection, but if you want to use that information over the next weeks, months, or first year you own your home, a good report makes all the difference.

A final thought; look for an inspector that uses an on-line reporting system. This way everyone who needs to see the report can do so easily.