home condition Archives - Real Estate News and Commentary

May 7, 2018November 23, 2021

Home inspections pointless?

I have heard an increasing voice of discontent over home inspections. Not just from home sellers and their agents, but from home buyers too! Home sellers often complain about the incorrect flagging of working components as being defective. Listing agents usually gripe that home inspectors scare buyers and interfere with their sale. But many home buyers are also growing dissatisfied with inspections and the subsequent property reports.

Inspection reports are becoming “matter of fact.” Even when an inspector flags a component or system, less information is given about it and what to do. Additionally, there is an increasing trend for recommendations to seek expert advice . Home inspectors have been known to make mistakes too. Some are starting to wonder why they should hire an inspector to tell them to hire an expert. Consumers can just hire experts to inspect the corresponding major systems and components from the start. Some are asking if home inspections are becoming irrelevant and pointless.

The home inspection, as we know it, began in the 1980’s. As the profession became standardized, it became a necessary part of the home buying process. The inspection used to be a straight forward examination of observable systems and components. But the home inspection has morphed from a once-over by a trained professional to the concept of getting a home perfect through remedying all of the home’s defects. The fact that home inspections have become a tool for many agents to renegotiate price is another sign the inspection may have jumped the shark.

All things considered, home buyers expect a thorough and exhaustive inspection. They are relying on the inspector to identify concealed and latent defects. They are relying on the inspection and report to help them determine the condition of the home and its systems/components before they move forward with their purchase.

According to Maryland’s home inspector licensing law (mdrules.elaws.us/comar/09.36.07), the home inspection is intended to “provide a client with objective information regarding the condition of the systems and components of a home at the time of the home inspection;” and provides an opinion of “visible defects and conditions that adversely affect the function or integrity of the items, components, and systems inspected, including those items or components near the end of their serviceable life.” However, there are limitations (COMAR 09.36.07.03).

According to COMAR, a home inspection is “not technically exhaustive,” and it may not identify a concealed condition or a latent defect. Among the list of items that the home inspector is not required to ascertain, includes the condition of systems that are not accessible, and the remaining life of any system or component.

Furthermore, an article that appeared in RealtorMag last year suggests that home inspectors are generalists and don’t know everything about a home (4 Things Home Inspectors Don’t Often Check; realtormag.realtor.org; July 05, 2017). Inspectors often defer to experts on foundations, fireplaces, chimneys, well/septic systems, and roofs. This is done because those components are not easily inspected and also requires specialized knowledge that is usually outside the scope of the inspection and/or beyond the expertise of the inspector.

However, in today’s real estate environment, home buyers are wanting and expecting more from the professionals they hire as well as the homes they buy. Buyers anticipate their home inspection with high expectations about the inspector’s opinion and conclusions. So, it’s not a surprise that many home buyers are voicing displeasure with their inspectors. Some complain that the inspector missed items and/or did not inspect a component. Additional complaints are about the inspection reports, that some feel are lacking in detailed information.

Have home inspections become irrelevant? Or is it just a case of the home inspectors having to educate the public what they do?

Home inspections are essential for most home buyers. But home buyers need to understand that inspectors are not the authoritative voice on all home systems and components. Instead, home inspectors bridge the knowledge gap between what the home buyer knows and what they should know about a home, especially the home they are buying.

By Dan Krell
Copyright © 2018.

Original published at https://dankrell.com/blog/2018/05/07/home-inspections-becoming-irrelevant/

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

March 18, 2017October 20, 2020

Misguided house makeover

Do you really need to spend money to make money? Deciding what renovations and updates to make prior to your home sale can be tormenting. It’s easy enough to say that your home needs a facelift; but, the repairs, updates, and painting costs money – and usually lots of it. The suggestion of making renovations and updates to your home before you sell is everywhere, it’s on TV, the internet, and magazines. And if you ask friends and real estate agents, they will also give you a list of “must do’s.” Regardless of how you decide to do a house makeover before the sale, chances are that you’re not doing it right.

There is no doubt that many home buyers are looking for a turn-key home. If your home is not “out of the box brand new,” you probably need to freshen it up, as well as make some repairs and updates. But before you embark on the house makeover by making those renovations, you need to ask yourself two important questions: “How much money can I realistically allot for a makeover?” and “How much am I expecting to net from my home sale?”

Does a house makeover really get you top dollar? Spending money on renovations will certainly make the home sell faster, but not necessarily make you more money. And there is no guarantee that the house makeover renovations you make are to home buyers’ tastes. So if you’re goal is to get top dollar, don’t look at the sale price. Instead keep your eye on your estimated net (the amount you’re left with after the sale minus total renovation costs).

Of course, the best way to maintain your home’s value is to perform regular maintenance. It would certainly make the home prep easier too! But the reality is that many home owners defer maintenance until they feel it’s absolutely necessary. Deferring maintenance can actually cost more in repairs down the line, and lower your home sale price. Spending money to correct all the years of neglected repairs and updates prior to the home sale won’t necessarily get you top dollar.

Not all buyers are looking for renovated homes. One of Stephen B. Billings conclusions in his recent research (Hedonic Amenity Valuation and Housing Renovations; Real Estate Economics; Fall 2015, 43:652-82) was that during the past “healthy” housing market, there was a balance between renovated and non-renovated homes that sold. However, he also found there was an increase in renovated home sales during the housing downturn of 2007.

Selling your home “as-is” would certainly decrease your sale price, but could net you the same or even more if weighed against extensive renovations of the house makeover. Consider that you would only recoup a fraction of the cost of a minor kitchen and bathroom remodel; which averages about $20,122 and $17,908 respectively (according to 2016 Cost vs Value Report; remodeling.hw.net).

Concentrate on the basics of decluttering first. Decluttering can make your home look different and feel larger. Decluttering can set the stage for fo you decide on renovations, and maybe even home staging.

If you decide on freshening up your home before the sale, start with the basics. Focus on deferred maintenance, and make necessary repairs. Consider a fresh coat of paint, and maybe new carpets. Wood floors don’t necessarily have to be replaced or sanded; flooring professionals use state of the art processes to “renew” wood floors.

If you decide on a house makeover, focus first on making repairs and freshening your home. Work out a budget and get several quotes from licensed contractors. Don’t automatically go for the cheapest quote, even if you’re on a tight budget. Focus on quality, even if it means limiting the scope of work. Poor workmanship can sabotage your home sale by making your home look shabby and in need of additional repairs and updates.

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October 28, 2016December 13, 2022

Home inspection surprises

The American Society of Home Inspectors (ASHI) often conducts surveys to measure home buyer satisfaction. Although most home buyers are typically satisfied with their home inspections, you should be prepared for home inspection surprises after you move into your new home.

A 2012 ASHI survey conducted by Harris Interactive indicated that home buyer confidence was boosted in eighty-eight percent of respondents who had a home inspection before buying. A 2011 ASHI survey revealed that about seventy-two percent of homeowner respondents indicated that their home inspection helped them avoid potential problems with their home.

Although the surveys suggest a majority of home buyers are usually satisfied with their home inspections, there are some that are not. It’s not unusual to read or hear about a home inspection that is not perfect. And sometimes the home inspection goes awry from the start. An agent once told me a story about a home inspector who flooded a condo because he wanted to check the fill rate of tub by closing the drain; he walked away and forgot about the quickly filling tub. Years ago, I witnessed how a home inspector almost caused a fire by turning on an oven – if the inspector first checked inside before turning the oven on, he would have noticed that is where the homeowner stored pans separated by paper towels.

There’s a lot going on during a home inspection to distract the inspector from their duties. And no one said home inspectors are supposed to super human or perfect; but there is an expectation that they are thorough. Not so much because they are paid professionals; but rather, they’re relied on for information about one of the highest cost purchases of a lifetime – your home.

When you first meet with your home inspector, they will tell you they are not perfect. However, they are supposed to follow “standards of practice.” Years before home inspectors were licensed, ASHI developed standards of practice as a means of establishing expectations placed on inspectors. Many of those standards have since been incorporated into state home inspector licensing laws.

Maryland’s home inspector licensing law (COMAR Title 9 Subtitle 36 Chapter 7) states that the inspector identify the scope of the inspection, and visually inspect “readily accessible areas” to determine it the items, components and systems are operating as intended, or are deficient. Further, to be in accord with the standards of practice, a home inspection: “Is intended to provide…objective information regarding the condition of the systems and components of a home at the time of the home inspection; Acts to identify visible defects and conditions that, in the judgment of the home inspector, adversely affect the function or integrity of the items, components, and systems inspected, including those items or components near the end of their serviceable life; May not be construed as compliance inspection…; Is not intended to be construed as a guarantee, warranty, or any form of insurance; Is not an express or implied warranty or a guarantee of the adequacy, performance, or useful life of any item, component, or system in, on, or about the inspected property…”

Given the limitations of the home inspection, home buyers are sometimes confronted with surprises about the condition of items that were not readily seen during the inspection, such as: the roof, chimney, foundation, and HVAC. However, you can limit subsequential issues by having a licensed contractor further examine those areas during the inspection period.

By Dan Krell
Copyright © 2016

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January 28, 2016July 8, 2019

After the blizzard home maintenance

The warm weather that occurred early in the season probably gave many of us a false sense of security, such that we may have put off the pre-winter inspection. The good news is that it’s not too late; and you should check out your home’s roof, gutters, and the surrounding grounds after the blizzard – even if you’ve already conducted a pre-winter inspection.

The blizzard of 2016 dumped a lot snow, and I’m sure you’ve heard about the collapsed roofs. Even if your roof survived, the stress of the accumulated snow may have caused damage that you won’t see unless you inspect the roofing system (including joists and beams). If your roof is already compromised, the amount of snow or ice it can handle is significantly reduced; and can push it toward failing when you need it the most. Don’t think that your home is immune from such damage; I have experienced home inspections that uncovered a cracked roof truss in an otherwise pristine home.

According to the Insurance Institute for Business & Home Safety (disastersafety.org), the average residential roof is designed to hold 20lbs per square foot of snow; beyond that, the roof system becomes “stressed.” Ten to twelve inches of fresh snow is estimated to apply about 5lbs of stress. And given the equation, the Institute says that an average roof in good condition should be able to withstand the stress of up to four feet of fresh snow. “Old” (compacted) snow and ice applies more force than fresh snow, and should be monitored closely in multiple snow events.

Another source of roof and gutter problems during and after a blizzard stem from ice dams. An “ice dam” is formed by the melting and refreezing of snow (or ice). When an ice dam forms on the roof and/or gutters, the expansion of the ice can loosen shingles as well as create gaps in gutters. Damage from ice dams formed during the blizzard has the potential for future damage from heavy spring rains. Loose shingles and gapped gutters can allow water to penetrate the home via ceilings and walls, in addition to allowing roof water runoff directly towards the home’s foundation.

Inspecting your home after a severe weather event can help identify maintenance issues and prevent future headaches; and in some situations, may uncover an urgent safety issue. FEMA’s 2013 Risk Management Series-Snow Load Safety Guide (fema.gov) lists warning signs of an “overstressed” roof to include (but is not limited to): any sagging of ceiling; sagging sprinkler lines or heads; popping, cracking, and creaking noises; sagging roof members; bowing truss members; doors and/or windows that can no longer be opened or closed; cracked or split wood members; cracks in walls; and/or severe roof leaks. If you observe any of these warning signs, FEMA recommends evacuating the home and consulting a structural engineer to inspect and assess the structural integrity of the home.

The amount of snow that a blizzard delivers can saturate the grounds surrounding your home; and if not drained properly, the ground can become supersaturated during spring showers (which can become a flood risk). Once the snow has melted, check the surrounding yard and remove any debris and downed trees that can impede proper drainage (which can also be a hazard during high winds). Make sure downspouts are secure and functional, so as to deposit water away from the home’s foundation.

By Dan Krell
Copyright © 2016

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June 12, 2015November 23, 2021

The cost of doing nothing – deferred maintenance and home values

If you want to have one of the faster home sales in the area, you’re probably going to have to wait until you die. According to a 2012 study, “estate sales” sell faster than other homes. Benefield, Rutherford, & Allen’s study compared time on market and price of estate sales to regular sales, and quantified what many ostensibly know: estate sales sell about 3.4% faster and about 3.6% less than other homes (Justin, D. Benefield, C. Rutherford Ronald, and T. Allen Marcus. “The Effects of Estate Sales of Residential Real Estate on Price and Marketing Time.” Journal of Real Estate Finance and Economics 45.4 (2012): 965-81).

Although the study is one of many recent studies raising awareness about real estate outcomes in our aging population, one of the main considerations for the rapid time frame and discounted sale price is deferred maintenance; and the issue of postponing home repairs and updates is prevalent among all age groups.

Before Kermit Baker wrote “The Return of Substandard Housing” for the Harvard Joint Center of Housing Studies, it was not quite known how much less home owners spent on home maintenance during and immediately after the Great Recession. However, the 2012 study indicated that “improvement spending” decreased 28% between 2007 and 2011, which essentially “erased” such spending during the housing boom (housingperspectives.blogspot.com).

And as the economy slowly improves and home prices increase, you might expect that home owners will reduce deferred maintenance and once again spend on home improvements. According to Craig Webb (Remodeling Activity Rose Again in 1Q, RRI Shows Nation remains on track to hit record remodeling pace this fall; May 18, 2015; remodeling.hw.net), the Residential Remodeling Index (RRI) increased 1.4% in the first quarter of 2015 compared to the previous quarter, indicating that improvement spending is indeed on the rise (albeit below the 2007 peak).

But what’s the cost of doing nothing? Deferred home maintenance is cumulative, and its effects can be wide ranging. For many, having put off home maintenance and repairs has impacted home sales in recent years, and may continue to be a factor in years to come. Although average home prices have increased, many home owners have found that a lack of home maintenance, repairs and updates over the years is an impediment to selling their homes at higher prices – or even at all.

A mindset exists among many home owners, and even real estate agents, that years of deferred maintenance can be overcome with some updating and minor repairs just before a home sale. And although improvements will certainly make your home more appealing to home buyers, it won’t necessarily increase your home’s value as much as you think (or as much as you’ve been told).

Before undergoing any project, crunch the numbers and determine the value of your repairs/updates, and how that might realistically affect your estimated sale price. Remodeling Magazine’s annual Cost vs. Value Report (costvsvalue.com) can give you an idea of the return-on-investment (ROI) for improvement projects. Getting back to your expectation of adding value – most improvement projects will only return a fraction of the cost in today’s market.

If you are making improvements, you should consider hiring reputable, licensed contractors who are familiar with the permitting process and building code requirements; because ROI is not always determined by the amount spent on the project, but on the quality of workmanship as well.

Original published at https://dankrell.com/blog/2015/06/12/the-cost-of-doing-nothing-deferred-maintenance-and-home-values/