Are home inspections worth the spend?
Here are 3 better questions to answer.
My wife’s coworker has been house-hunting for the past few months. After striking out on multiple listings, they finally managed to get their offer accepted on a 2 bed, 2 bath condo in Newark (CA).
Location is great and the floor-plan is the perfect amount of space, but the $800K price tag maxes out every penny of their budget. After tallying up their downpayment, closing costs, and reserves, there’s not much left for anything else.
Presuming the deal goes through, they’ve already decided to push back their renovation timeline and postpone the housewarming party. But the question she posed to my wife is this:
The property was built in 2020. It’s only had one previous owner and there doesn’t appear to be any major issues.
Nevertheless, we’d still like to carry out inspections to ensure we’re not missing anything. But we’re looking at $700+ for the home to be inspected from top-to-bottom.
Is it worth the spend or do we save our money and hope it doesn’t bite us in the butt?
My wife gave her a “no wrong answer” response:
If you can shake a few couch cushions and come up with the money for inspections—do it!
But if it’s truly not in your budget - yet you still wish to proceed with the purchase - then remind yourself that there was nothing that an inspection report would have revealed, that could have pushed you away from your dream home.
Hats off to the Mrs. for the safe advice.
No one wants to be on the hook for giving someone bad directions.
But if my wife’s coworker was a client of mine and I was guiding her through this purchase, this is the mental model that I’d walk her through.
Essentially it’s 3 simple questions:
If I can’t afford the inspections, can I afford the house?
Which inspections do I really need?
Repair, Credit, or Concession?
1. If I can’t afford the inspections, can I afford the house?
Buying the house is only the beginning.
There will be plenty of expenses that follow.
If the cost of having the home inspected is going to empty your bank account, then you may not be in a strong enough financial position to make the purchase altogether.
We’ve all heard the saying: “House Rich, Cash Poor.”
This is the textbook definition.
Your downpayment, due diligence, and closing costs shouldn’t bankrupt you.
If they do, you’re stepping into homeownership on the wrong foot.
And it may be worth it to reevaluate your budget.
2. Which inspections do I really need?
You can have every inch of a home inspected—but do you really need to?
Start with the inspections that are absolutely necessary, then add on as need be.
The core 4 include:
Home Inspection
Roof Inspection
Sewer Scope
Pest Inspection
A general home inspection will point out any issues throughout the interior of the property; as well as select areas of the exterior.
A roof inspection will tell you the age and condition of the roof, and whether or not its integrity has been compromised.
A sewer scope is when the inspector runs a camera through the sewer lateral to determine whether or not there’s any blockage, cracks, or impairments.
A pest inspection looks for signs of termite damage and rodent activity.
More often than not, these 4 inspections alone will reveal if anything’s wrong with the property.
You should treat any additional reports as optional unless you have reason to believe that something’s been missed.
3. Repair, Credit, or Concession?
Typically the choice is yours.
If you uncover any issues with the property during your due diligence, you have 3 options:
You can ask the seller to make the necessary repairs.
Provide the appropriate credit.
Drop the price.
Depending on the existing structure of the deal, some sellers will be more amenable than others.
But most are willing to compromise if they’re genuinely motivated to close.
For those who are looking to reduce their cash-to-close, this is the perfect opportunity to do so.
Rather than viewing your inspections as one of the many sunken costs of doing business, you can use these reports as levers of negotiation.
A $700 inspection can lead to a $5K credit or $15K price drop.
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