ALL THROUGHOUT 2007, I WITNESSED SUBSTANTIAL REDUCTIONS IN HOME SALES PRICES THAT WERE HARD TO BELEIVE, BUT WERE REAL
In March of 2007, I inspected a brand new home that was never lived in that was built for $750,000 and my clients purchased it for $520,000. In November of 2007, I inspected a four year old home that cost $1,300,000 to build and my clients purchased it for $540,000. Both of these homes represent extremes in the reduction of prices but they were real. All throughout the remainder of 2007, I inspected many homes that were selling for less than the cost of materials to replace them. Everyone is now concerned as to how 2008 will fare and all that I can say is that there will be more of the same as last year and a prospective home buyer needs to be extremely careful and diligent in the purchase process - more than ever before.
After witnessing the first home price reductions in early 2007, and a glut of homes for sale and not enough buyers, I quickly realized that in addition to performing a really thorough and above average home inspection as I always have, one of my new tasks was to help my clients make sure they were purchasing a good home at a competitive and fair price. For every 50 homes available for sale, there were less than 10% that were in truly mint condition and very well maintained. If a home was not in this category, it didn't sell or it's purchase price was penalized.
I began writing the first paragraph in my home inspection report (which I call my Commentary) as a summary of further negotiation items that required a further and additional price reduction beyond what was agreed upon in the original sales agreement. As I took this approach, I found that my listed negotiation items were accepted by relocation companies, in bank repossessions, as well as by individual home sellers in the majority of cases. If a home had a roof that was close to the time for replacement, we asked for money to replace it and most of the time received either full compensation or a reasonable percentage of the cost. I have never seen a time like the current during my 35 year career and I know that my excellent analysis and negotiation skills provide a home inspection that isn't obtainable anywhere else.
I am listing a typical Commentary Section below so you can begin to realize the importance of my approach and how it can possibly benefit you in the purchase process for a new home. The Commentary I selected is for a condominium which typically doesn't have the many issues found in a free standing home. Still, the result of my Commentary negotiation section saved my clients thousands of dollars and allowed them to feel more comfortable purchasing a home during a down market. Everyone's concern right now is if they purchase a home, are they getting a good enough price to protect against any further market reductions in the future.
All that I can say is that you must buy your home with as much information as you can obtain after looking at many different homes and then you need to still reduce your offer price based upon the actual condition of the home as compared to the top 10% of what is available. If you don't bring yourself up to that 10% standard, you will easily end up overpaying. The only way you can truly do this is in conjunction with your home inspection. By background, I have done considerable real estate syndication and investing for financial planning clients and have many years of experience as an excellent real estate negotiator. As part of your home inspection process, I will be glad to provide this same approach if you desire. It easily adds another hour to my report writing process to establish and cross reference my Commentary paragraph, and I don't charge extra for this important benefit. At the end of every home inspection that I now perform, I outline how I will put the report together and work with my clients to agree upon the items that should be presented for further negotiation along with the normal deficiency concerns that have always been included as a seller paid for item.
COMMENTARY SECTION (from a recent condominium inspection report)
This is a 2100 square foot condo with an additional 1400 square feet of finished basement living space. It was built in 1992 and is in good condition. There are a number of deficiencies that were uncovered during the home inspection which are not normal maintenance issues and should be corrected at the seller's expense. These deficiencies are listed here and additional detail and photos are included in the appropriate sections of this report.
I have provided estimated costs for fixing these items but actual repair quotes should be obtained to get accurate repair amounts. The sum total of the repair cost for the repairs listed should be paid for by the seller as all of these items are considered deficiencies in today's real estate market:
1. There are a considerable number of window problems in this home. I estimate the potential cost for replacing all affected windows between $3,000 to $6,000. If repairs are possible, the cost will of course be much less but it may be impossible to repair windows with an inherent design flaw.
a. The two bronze colored aluminum nine foot wide sliding door windows leak cold air and are not acceptable. One is located in the dining room and the other in the master bedroom. The builder chose very poorly designed windows and the aluminum has bowed and no longer meets at the center of the door frame to create an acceptable air closure. Wind could actually be felt when holding a hand next to these door cracks in the bowed areas. Because of the design of the closure system, there is no way to effectively create a solid closure. Weather stripping is inadequate due to the fact that the aluminum bows and creates a gap toward the center were there is the least amount of support. I highly recommend that a window company examine both sliding doors units and if they cannot be adequately repaired (which is my opinion) that the seller pay for the purchase and installation of two new nine foot wide door wall units.
b. The lower fixed thermal pane panel to the right of the fireplace has lost its vacuum and water has condensed between both interior sides of the panes of glass. This window should be replaced and again is a deficiency that should be paid for by the seller.
c. There are two single hung wooden windows with vinyl tracks in both upstairs bedrooms and two single hung wooden window units with vinyl tracks in the first floor family room. All of the vinyl trim and weather seal has cracked and broken on all windows. If the original manufacture is no longer available and parts cannot be obtained to fix these windows, all six windows will need to be replaced with new ones.
2. The entry area tile floor has a short strip of tile just inside the door frame leading into the family room. The edge of this tile is unfinished and is very sharp and poses a safety issue for bare feet. In addition, over time, this edge will chip and the tiles become damaged. A proper wooden or marble threshold should have been originally installed. I recommend installing a threshold after removing the short strip of tile and a strip of carpeting. I estimate the cost for doing this to be around $200 and should be added to the handyman's deficiency list of things to do that the seller pays for. See section 11.1 for a picture that shows this entry hazard.
3. Much of the baseboard and other wooden trim around the house has open nail holes which have not been filled and painted. In addition, in many areas where baseboard meets the tile floors, caulk should have been applied to fill the very visible cracks and it has not. I recommend having a handyman go through the entire home, fill the nail holes, patch the cracks, touch up paint the surfaces and caulk all appropriate cracks and openings that should have been done by the builder or homeowner. This is a deficiency which typically would have been taken care of by the builder after the first homeowner's walk thru and creation of a punch list. This obviously has not been done or later repairs were made and not completed. I estimate that a handyman would charge around $350 to go through all of these areas and fix them. See section 11.6.
4. There is cracked tile in the kitchen where the wall meets the counter to the left of the kitchen sink and in the master bathroom between the top of the whirlpool deck and the tiles just below the front edge of the deck. I estimate the cost of replacing the bathroom tile with a new access panel to be around $500 and to repair the kitchen tile another $200 for a total of $700 in broken tile repair cost. An experienced tile contractor should be hired to repair both areas. See section 7.4 for the additional information and pictures regarding the bathroom tile problems.
5. There is a copper gas line coming from the interior of the home through the exterior rear wall and it is coiled up beneath the deck. This line was obviously used to hook up a barbeque unit on the top surface of the deck which is no longer there. It appears that there was a gas shut off valve in the interior room where the gas line is located but the room now has a drywall ceiling.
It is very odd that a drywall ceiling exists in this small room and the remainder of the basement has a metal grid drop in removable ceiling. From prior comments shared by my client's realtor, there was water damage somewhere in this basement area in the recent past. Currently, however, everything has been freshly painted and new carpet has been installed on the floor so prior water damage is no longer visible. It is very possible that the water damage may have occurred in this room and as part of the repair, a new drywall ceiling was installed. If that was the case, it would explain why the gas valve was covered over. If not, the valve was covered inadvertently by the prior owner. This is a serious safety concern and the current drywall ceiling should be removed, the gas valve located, and a new ceiling re-installed. It could easily cost $1,000 to gain the desired and necessary access to this interior ceiling area and the cost for doing this should be paid for by the seller. See section 7.5
6. The first floor 1/2 bathroom toilet is slightly loose at the floor and the two floor bolts should be tightened very carefully. Ideally, plumbers putty should have been installed between the toilet and floor to better stabilize the toilet so the bolts would better hold without having to be too tight and risk breaking the china toilet. I recommend that a handyman be hired to remove the toilet, install a new wax ring, add plumber's putty, and correctly re-attach the toilet to the floor. The cost for doing this will probably be between around $100. This can go on the handyman list. See section 7.4.
7. There are two blank plates screwed to two electrical boxes in the wall of the family room where it appears two wall sconces may have been originally attached. Two new lighting fixtures should be obtained to properly cover these outlets and gain access to the wall switch and lighting for this area. There is also an outlet cover with holes in it attached poorly to what appears to be an electrical outlet box on the other side of this same room. An electrical outlet and outlet plate should be installed in this box. Right now it is a potential safety hazard if children put their fingers in this outlet box which has bare wires connected using wire nuts. I would ask the seller to provide $350 to purchase new wall fixtures and to repair the outlet. This can go on the handyman list. See section 8.4
8. Both plastic trays inside the corner lazy Susan base cabinet in the kitchen are cracked and broken and need to be replaced. I estimate the cost for replacement to be around $150. This can go on the handyman list. See section 11.3.
9. The kitchen sink base cabinet has had water or other wet substances on the floor of the cabinet which have caused the vinyl surface to peel. I recommend that a handyman install square vinyl floor tile and use adhesive to anchor the new tiles. This will protect the floor of the base cabinet from getting wet in the future and possibly having the floor cave in and deteriorate from continued moisture on the bare particle board. The cost for this project if added to the handyman list would probably be around $100. See section 11.3.
CONCLUSION?
My client (as a result of the above home inspection commentary section and supporting information) received an additional $6,000 reduction in sales price.
In the years leading up to 2007, most home purchasers would have accepted the items listed above "as is" and lived with them. Today, these kinds of design flaws that are found in a large majority of our homes are not acceptable since there are easily 50 to 100 other homes that could be considered and maybe 10% of them will have everything in close to perfect order. There are so few qualified purchasers today that this new standard is being imposed on an informal basis by my clients as a result of my new approach. I do not know of any other way to go through this "one more round of negotiations" to get any home priced at its lowest possible current value. Combining a really detailed and thorough home inspection along with one more negotiation attempt is what is required.
I will be glad to discuss my home inspection approach and answer any questions that you might have. I can assure you of one thing - I will more than earn my fee if you select me to perform your home inspection. I might charge a few dollars more than other home inspectors but easily spend two to three times the amount of time they do in the inspection and report writing process, As a result of this extra care, diligence, and time, I end up saving my clients a considerable amount more through my very detailed process.
An average home inspection takes me 3 to 5 hours in the house, 1/2 to 2 hours driving time, plus another 3 hours minimum to write my report. That's a really long day. Other inspectors do 2 to 3 inspections in one day. Obviously, there is a very different result that occurs between their work and mine. In addition, I remain fully independent and don't work directly with realtors. Prospective and current homeowners are my only clients, and realtors are not. I look forward to the possibility of working with you.
Sincerely,
Richard Becker
Ann Arbor Home Inspection Inspector
P.O. Box 7300, Ann Arbor, Michigan 48107
Phone: (734)369-3003 • Email: richard@annarborhomeinspection.com
