Looks Can Be Deceiving -- Get Your House Thoroughly Inspected

Foregoing an inspection to save money is tempting, but extremely risky. Read why it's wise to have home inspections when buying, even if for purely informational and peace-of-mind purposes.
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By: Tara-Nicholle Nelson

One of my clients was house hunting in a particular, 100-year-old neighborhood in Oakland, Calif. Very stroll-to-the-local-produce-market-esque. We found this lovely little Spanish-style cottage with all the charming detail of the 1920s when it was built, but simply gleaming as though it was in brand-new condition. We walked inside and saw that the home had been fully remodeled: new flooring, working fireplace, granite slab countertops, brand new stainless steel kitchen appliances and -- get this -- two full bathrooms with fixtures so new the shower and bathtub still had the energy efficiency rating tags on them!

We quickly made our offer, received an acceptance and opened escrow. The seller's disclosures informed us that the place had been through a house fire during the prior tenant's occupancy and, thus, had been largely rebuilt from the wall framing out, with city permits. So the windows, roof, appliances -- all were still covered under their manufacturers' warranties. The sellers even "suggested" that we might save a few bucks by foregoing the usual inspections, as virtually "everything" was new or under warranty. Paperwork and conversations with the sellers also revealed that they were professional "flippers" -- a couple of guys who drive around town picking up distressed properties, then rehabilitating and reselling them for profit. My buyer wisely elected to move ahead with inspections, even if for purely informational purposes and peace of mind.

The home inspector came and went, saying that she thought the interior of the house looked great, but that there were some drainage issues she wanted us to have looked at by the structural pest (termite) inspector and a foundation engineer. The next day, the termite inspector came out and determined that, as the home inspector said, the interior of the home was virtually new. About 75 percent of the concrete foundation and wood framing under the house, however, was totally shot from 80 years' worth of poor drainage and standing water sitting on the foundation. Our structural pest inspector gave a whopping quote of over $80,000 (!!!) to remediate the damage.

"Let's not totally panic here," I advised my client, who was still seriously considering buying the property and doing the work. "Obviously, we'll try to get the seller to help out with the repair bill. But before our contingency period runs, let's also call the foundation engineers out so that they can give a competing bid. Foundations are all they do, so it might be less expensive to call them ourselves than it would be to pay the pest company to be the middleman. All the pest company will do is subcontract the job out to the foundation company, and then mark it up anyway." That sounded good in theory. When the foundation engineers arrived, they did indeed undercut the pest company's price per foot of foundation and framing that needed to be replaced. However, they deemed the entire foundation to be beyond repair. In fact, the engineer called me over to a particular spot in the crawl space under the house, grabbed my hand, and brushed it over the concrete foundation -- which literally crumbled into dust under my touch. YIKES! Their repair bid was over $110,000, plus an extra $12,000 for an under-house drainage system to prevent the problem from recurring.

Long story short, my client exercised her inspection contingency, backing out of the deal on grounds that she was not satisfied with the condition of the property per the inspection results. She lost nothing except approximately $1,000 in inspectors' fees, which she felt was a very small price to pay to save herself from the $122,000 "surprise" she would have had if she had closed escrow before realizing the extent of the foundation damage. Within a month she had closed escrow on another property, which was less showy, but in far superior fundamental condition. The sellers not only understood, but were more than a little horrified themselves. I kept in touch with them and, last I checked, they still hadn't (over a year later!) been able to find a buyer who would take the property in this condition. (Now that the sellers know about the foundation issues, they are legally required to disclose it up front to all prospective buyers.)

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