A Cautionary Tale

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I am on a tear about home inspections. Buying or selling a house without one is foolish behavior. I don’t care whether you’re a buyer in a bloody bidding war for the most perfect house in the world or a seller with 22 desperate buyers willing to do anything at all to win your house. Having said that, an awful lot of buyers have decided to forego this little consumer protection in countless transactions over the past few years. And many sellers chose offers without them, thinking no inspection means no hassle. Not so.

Here is a tale of woe I encountered this week.

In July of 2004, a woman bought a totally adorable house in Alexandria. She was in a bidding war. To make her offer more attractive to the seller, she not only offered to pay more than the asking price, but she left off the contingency allowing her to get a home inspection. Last week, it was time for her to move on, and the house went back on the market – still totally adorable, and an apparently perfect place for my favorite cousin (ok, I have about 70 favorite cousins) and his wife. Once again, there was a bidding war. The other buyers, like the seller two years ago, were willing to up their price and forego an inspection. We were willing to up the price, but had a 2-day inspection contingency.

Our offer won, and Thursday morning, we showed up with John Vaughan, of At Home Inspections. This seemingly perfect house had many of the minor house dings the typical inspection turns up. But there were also some major issues, including a bathroom with, among other flaws, the toilet just below the breaker box. Then, the real elephant in the living room tuned out to be huge, though not totally obvious to a non-expert. There was a beautiful, not to mention gigantic (we’re talking 6 foot diameter trunk here), tree in the back yard, just a few feet from the house. The root system was pressing hard against the basement wall, creating a big crack in the foundation from the outside wall all the way through to the interior, and pushing the basement wall in and the upper wall out. And it didn’t look like something that had happened in the very recent past. Not good. Not good at all.

Let’s just say that the other buyers had gotten the house without the benefit of an inspection contingency. Being a Virginia property, the seller opted to sign a property disclaimer that says basically, “If you want to know about the house, get an inspection.” So, these buyers would be purchasing with no expert information, either from the person who has most recently inhabited and maintained the property or from a professional inspector.

The contingency period allows the buyers to back out of the contract if there is something they cannot live with, and with an inspection clause, there is always that risk. But without this contingency, there is other language that would allow the buyers to do a pre-settlement “walk through” of the property on their way to the closing. At this time, they most certainly can bring a home inspector with them. Armed with the list of undisclosed flaws, they could try to renegotiate the deal at the settlement table, a time when the seller has little leverage.

In cases where there are no serious problems, this may not be a huge deal, and it might cost the seller a few hundred dollars to fix dead disposal or a broken toilet seal. But the best time to find a huge structural flaw, say Mr. Tree’s roots pushing the foundation in, might be within a couple of days of contract ratification. Otherwise, unless the sellers knew of and clearly disclosed the problem at issue, the buyers could try to hold them up for tens of thousands of dollars at the settlement table.

And, if you are the buyers, you could go to settlement totally ignorant of a condition that could cost you a bundle after settlement. Even if you do bring an inspector to your walk through, it isn’t always certain that you will be able to negotiate with the sellers to pay for repairs for undisclosed flaws – big or small. This is especially true if you signed an “as is” contract or if the issues involve the structure of the house – the foundation, roof, siding or beams.

And ignorance is certainly not bliss, at least not when you wind up paying for the problems you find after settlement, or worse, paying for problems your buyers find a few years from now when it’s time for you to sell.

If you find yourself in a bidding war situation, you can always get the house “pre-inspected” before you submit your offer instead of during a contingency period that begins after it is accepted. It’s expensive, but when you are buying a house for hundreds of thousands of dollars, it’s money well spent.

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