When you are buying a home today, a vital step in the process is the professional home inspection. It is a very important part of the process and needs to be done correctly.

BEFORE THE INSPECTION

Generally when you find a property that may be “the one”,  you  view it, walk through the entire house, open the  closets and cabinets, check out the basement, and even might poke your head into the crawl space. Your first look is what tells you that you may have found your ideal home. Typically you are looking at several and at the end of the day it can be difficult to remember details. So most people go back to the house they are interested in pursuing and spend some time checking everything.

Normally you would not hire an inspector at this point, not until you have made an offer and worked out the terms of the contract. It may seem a little backwards, but the rationale is simple. The inspections normally take around 3-4 hours and can cost from around $350.00 and up. You wouldn’t want to spend the time and money on that unless you knew that you were under contract, and that nobody else could step in and buy the house while you were performing your due diligence.

PRE-INSPECT THE HOUSE YOURSELF

But because of the expense of hiring a professional inspector, I think it is important to do as much really careful looking, before you make the offer. There are things that you might catch yourself that could be deal killers. Large cracks in the foundation wall, separation and cracking in the brick siding, swelling and de-lamination of the siding, obviously old and rusted heating systems, old roofs with curling corners and moss growing, water in the basement or crawl space, mold… these things are issues that you should think carefully about before you make your offer.  Read the seller’s disclosure and see if there are any issues that may be too much to handle. Go into the attic and the crawl space (really). Only when the house passes your inspection are you ready make the  offer and get a contract. You might think you aren’t qualified and don’t know what you are looking for, but give yourself a little credit. In the crawl space, things like  standing water,  crumbling foundations,  lots of extra support beams or jacks, obviously rotten wood… these are all potential problems and do you really want to pay someone $350.00 or more to tell you things you could have seen yourself in 10 minutes?

Now if everything looks good, you make your offer and see if you can come to a meeting of the minds with the Seller. Make sure you specify in your offer the right to inspect for at least ten days after the contract is accepted. Georgia contracts used by Realtors, have a section  for “due diligence” and give you the right to cancel the contract if you are not satisfied with the results of the inspection for any reason. Make sure that you check that section and specify how many days you have to inspect. Understand that if you do not respond during the time period you have forfeited the right to cancel the contract or negotiate repairs. When you do negotiate for repairs, understand if the seller does not respond favorably or does not respond at all, you still have to exercise your right to cancel the contract in writing before the ten days is over, or you have bought the house “as-is”

If you get an accepted offer with the right to inspect, then you are on to the professional home inspection. You will want to get this done as quickly as possible because you want to make sure that you are buying the home, before you pay for the appraisal, so time is of the essence. The other reason to inspect quickly is in case there are issues that require further testing.

INSPECT THE INSPECTOR

The home inspection field is not heavily regulated in GA so there are a wide range of skill levels out there. It is important to do your homework when it comes to selecting an inspector. Ask what professional groups the inspector belongs to, and what kind of training he has had.  See if there is any kind of guarantee that the inspector won’t miss anything. Most inspectors only guarantee their report to the price of the inspection (in other words they will refund the price of the inspection if they miss something). Some have a bond up to a thousand dollars if they make an error. Look for referrals from people who have done this before.

UNDERSTANDING THE INSPECTION PROCESS AND THE REPORT

It is important to understand that the inspector is only giving you their opinion. If something seems fishy about the furnace or some other system, they will normally recommend bringing in a licensed HVAC contractor to do further evaluations (or an electrician, or a structural engineer). They do not look behind sheet-rock, or take off fixtures to see if they were installed correctly.  They can tell the age of the systems from the serial numbers and can measure the output of the A/C. They can test the walls with moisture meters to see if ceiling stains are active leaks. When they look in the furnace the see if there is rust or flickering flames or other telltale signs of problems, but they basically just look.  They won’t be able to tell if there is a cracked heat exchanger. So sometimes if the inspector thinks something may be amiss, or even if the systems are just old, it may make sense to get a licensed heating and air company (that you can trust) to check the systems during your inspection period. If there are structural issues you may need to call in a structural engineer. Same with electric or plumbing.

INSPECT MORE THAN THE HOUSE

There are things that the seller is not required to disclose that could have a profound impact on value. Things to check for are: sexual predators in the neighborhood, pedifiles, proposed changes in school districts, crime rates, and more. For crime rates call the local precinct. Call the local schools and ask if redistricting is in the works. For the various predators check: Georgia’s Sex Offender Registry All of these things need to be checked by you during your inspection period. If you are buying a condo, get the bylaws, budgets and minutes of the last meetings. In a condo, find out if the association has a cap on rentals and if they are within the limits set by Fannie Mae and Freddie Mac or FHA (not more than 25% renters).  It makes sense to check these things before you hire the inspector.

Disclosure in Real Estate Sales - What can be kept confidential?

What is Disclosure?

First of all, a disclosure is a part of the purchase and sale contract that gives the Seller the chance to tell you about any defects he may know about his property. Why would he ever want to do that? Well, because it’s the law. It’s illegal for the seller to hide defects from the buyer. Yet there are some things that the seller doesn’t have to tell you, some things that you may really want to know.

Do you have to tell if you have ghosts in the attic?

Well, I will start with the silly stuff, like is the house haunted? That’s a grey area in disclosure. The courts tend to rule that if the buyer thinks that something is detrimental then it is detrimental. Yet what if the rumor is that the house is haunted but the seller doesn’t believe it? Is he still required to tell you a story he doesn’t believe at all? It would be like me telling you that there was something wrong with the house because it was built while Mercury was in retrograde, if I don’t believe in astrology. There was a case in New York where a seller was sued for not revealing that the house was haunted, and lost. Part of the case hinged on the fact that the seller published a story in Reader’s Digest about the haunted house, so that proved that the seller believed it.

How about a grisly crime, do you have to tell?

But if you take it a little further, there is something a little more serious that the Seller is not required to tell you in Georgia. That is if the home “was the site of a homicide or other felony (including rape) or the site of a suicide.” The argument behind this rule is that these types of events do not affect the physical condition of the property. The effect is more psychological. But here is the twist: The Seller or the listing agent does not have to reveal the information, but if the seller or the agent knows about such information, and is asked, he (or she) is required to answer truthfully. This is an important point. They are not required to reveal the information but are required to answer truthfully if asked.

What if there was a diseased person living in the house?

What else does the seller not have to tell you? Well if the home was occupied by someone with a disease “which has been determined by medical evidence as being highly unlikely to be transmitted through the occupancy of a dwelling” which includes aids, the seller or agent is not required to tell you about that either. Here is another twist: They are not allowed to tell you if the house was occupied by someone with aids. It falls within the jurisdiction of fair housing law, since aids has been ruled to be a handicap. How do they answer? They should tell you that they are not allowed to answer that question.

How about criminal activity in the neighborhood?

It goes on…. What about sexual predators or paedophiles in the neighbourhood? The lawyers that write the Realtor’s contracts in Georgia have actually added a paragraph warning the buyers that if they have concerns they have to go to the website and do their own research. If the seller doesn’t have to tell you about felonies committed in their own house they definitely don’t have to tell you about felonies committed by their neighbours in other parts of the world.

What does this mean to you, the prospective buyer?

What does this mean to the buyer? Do your own research. Call the local precinct and get the crime records for the area. Go to the web and search the sexual predator database. Talk to the neighbors. Find out if there are ghosts, noisy neighbors or suspected drug dealers on the street. Don’t wait until after you close on the house to find out why you might not want it!

Dan Connolly

RE/MAX OF BUCKHEAD

There has been a long time ongoing discussion about whether appraisal is an art or a science. I think most people assume that it is a science, but is it? Think about what a residential appraiser does. He (or she) is asked to find the value of a home.

To begin to find the value, an appraiser will gather up samples of sales of homes that are similar to the “subject property”, nearby and selling within a recent time period. In this market appraisers are looking only at sales for the last six months. The sale must be a normal sale, without any undue pressure (like impending foreclosure). The records of recent sales are “science” with hard numbers. But then the appraiser takes the scientific data and applies a subjective view. He must evaluate quality of the design, functional obsolescence, desirability of the area, style, décor, and more intangible qualities that make one home sell for more than another. That is where it becomes an art. Just picking which of the homes are most similar, is an art. There may be 20 homes that sold within the last 6 months within ½ mile of the subject, the appraiser may only use 3-6 of them. How does he pick which is most similar? It is important to remember, that the appraiser does not get inside the homes he is using as comparisons. It is very subjective.

But actually we need to go back further for the real first step in establishing value. It is necessary first to figure out who is asking and why are they asking. Why, you ask? Well, first because the appraiser has a fiduciary duty to their client, i.e. the one who pays for the appraisal. That doesn’t seem to make much sense now in the year of the foreclosure, but that is how it works.

There are several reasons why this is true. Value is an elusive thing. There are a number of ways to look at the value of a home. How much will the home sell for today? How much will the home sell for, given 4-6 months of excellent marketing? How much will it cost to replace it if it burns to the ground? How much is it worth to an investor? How much is it worth to a bank if it forecloses? All of these are part of the definition of value and they all paint a different picture. So the client gets to tell the appraiser how and why they want a definition of value.

Imagine a situation where there is a divorce. It could be a husband who has to pay his ex-wife half of the value of the house. If the court orders the appraisal and wants fair market value, the value may be different than if the husband orders it, simply to strengthen his case. The husband could ask the appraiser to look for low value comps. If the wife ordered it she could ask the appraiser for the highest reasonable price.

I took a state certified course in the early 90’s and this is how the instructor put it. It was legal for the appraiser to look out for the interest of the one who hired him. I think the recent mortgage meltdown may change how the end result is supposed to be determined, but the fact that there are subjective choices the appraiser is required to make, means that the answer is, in my opinion not very scientific.

So its important to understand how the process works, so that when a seller offers a home that is priced drastically below appraised value, you actually are entitled to roll your eyes.

Dan Connolly

Low flow fixtures are now required
for DeKalb County homeowners
who buy and close after Jun. 1, 2008

Due to the recent drought conditions that have plagued Georgia for over a year, a New Ordinance has been passed by the DeKalb County Commissioners. This requires that in all home purchases which occur after June 1st 2008, the plumbing fixtures have to be replaced in order for the new owners to get water in their name. The DeKalb County Department of Watershed Management is enforcing this rule. It applies to everyone who gets their water from DeKalb County. This excludes the parts of the City of Atlanta that fall within DeKalb County, as they get their water from the City of Atlanta.

• Basic Requirements:

  As June 1, 2008, when you buy a home in areas that get their water from DeKalb County Water, you will have to replace all of your plumbing fixtures with new low-flow fixtures before you can get water turned on in your name.

• Exceptions:

  There are some exceptions to this rule, 1)Homes built after 1993, 2) foreclosures, 3) Homes being sold to relatives, and 4) Homes that are sold which are going to be torn down.

• Incentives:

  There are some Rebates available to Homeowners (while they last) who change their fixtures to low flow, whether or not they are new homeowners. So if you just want to help save some water there is a $50 rebate for replacement with a toilet that uses 1.6 gallons per flush, and $100 if the toilet uses 1.28 gallons per flush.

• Procedure

  In order to get this approved, either a representative from DeKalb County Watershed Management has to come out and inspect the fixtues, or a licensed plumber or inspector (as in home inspectors who do standard inspections) can fill out this form and sign it. Then the settlement statement from the closing along with the compliance form must be submitted with the application for water.