What is the difference between a home inspection and a property inspection?
In this article, we are going to explore the differences between home inspections and property inspections. First, we will begin with an explanation of what home inspections are, what you can expect from a home inspection, when you might have your home inspected and how much you can expect to pay to have your home inspected.
This is also a brief overview of what home inspectors are looking for, and why home inspections are important. This is followed by an explanation of property inspections, what they are when you can expect to have a property inspection, who does property inspections, and how they are different from home inspections.
What is a home inspection?
The American Society of Home Inspectors defines home inspections as “an objective visual examination of the physical structure and systems of a house, from the roof to the foundation.” A home inspection constitutes the visual examination of a home’s present condition; therefore, a home cannot pass or fail an inspection.
A home cannot fail a home inspection, but a home inspector is merely making a visual observation and reporting on their observations. Home inspectors are charged with describing and reporting on a home’s current physical condition and indicating which components, parts, and systems might need major repairs or might need to be replaced altogether.
A home inspection is different than a city or municipal inspection that is intended to determine whether or not home complies with local housing and building codes. A home inspection is also not meant to determine a home’s fair market value, this is what appraisals are for [Differences Between a Home Appraisal and a Current Market Assessment in Ontario].
When might have your home inspected?
One instance when you might have your home inspected is when you are looking to sell your home before you list your home for sale. You can have your home inspected while you are getting your home ready to sell before listing your home, to learn about any potential problems it might have when you are in negotiations with buyers.
Armed with a home inspector’s report before listing your home for sale means you can decide whether or not you can make repairs before putting your home on the market for sale or leave the repairs for the buyers. Having your home inspected before putting it on the market sale will allow you to gain greater insight into the condition your home is in and will give you a better idea of what types of repair requests buyers might be submitting.
This way when the time comes to negotiate with potential buyers over price and repair requests, you will have a better idea of what to expect when negotiating with potential buyers [What are some negotiation tactics you can use to sell your home?].
Another instance of when you might have your home inspected is when you are looking to buy a new home before you officially sign the paperwork to close on your home. You can have the real estate agent or broker representing you as the buyer submit an offer to the seller with contingency clauses for a home inspection [Inspection Checklist when buying a home in Toronto]. You might be wondering what is a contingency clause, why is it important, and how they are related to home inspections?
Contingency clauses for home inspections in real estate contracts
A contingency clause in a real estate contract specifies a condition or action that needs to be met in order for a real estate contract to become legally binding. In this scenario, a contingency will become part of a legally binding sales contract when both parties, the seller and buyer, agree to the terms of the contract and sign the contract.
When you are signing a real estate contract, you must understand what a contingency clause is, how it could affect you as the buyer or the seller, and why it is important. Simply put, a contingency clause in a real estate transaction provides the involved parties with the right to back out under specific circumstances outlined in the contract. These circumstances that will allow you to back out of the transaction will be negotiated between the buyer and the seller.
In this case, a home inspection or due diligence contingency clause will provide the buyer with the right to have the home inspected by a professional home inspector within a time period that is specified within the contract, this could be five to seven days or longer. A home inspection or due diligence contingency clause will protect the buyer in the event they decide to back out of the transaction based on a home inspector’s report or if a buyer wants to negotiate with the seller about repairs and the home’s sale price based on the home inspector’s report.
Or if a cost-of-repair contingency clause is included in addition to the home inspection or due diligence contingency clause, this clause will specify the maximum amount of money required to perform necessary repairs. If a home inspector’s report indicates that repairs for the home will cost more than this dollar amount, the buyer can choose to cancel their contract to buy this home. Frequently the cost-of-repair contingency will be based on a specific percentage of a home’s sale price, such as 1% to 2% of the home’s sale price.
When you receive a home inspector’s report, depending on how the terms of your contingency are written, you have four options:
- They can acknowledge their approval of the home inspector’s report and the transaction will move forward
- They can acknowledge their disapproval of the home inspector’s report and have their earnest money returned
- Request that the seller provides them with additional time for additional inspections if the inspector uncovered something that needs to be further inspected.
- Request repairs or a concession. If the seller agrees to the buyer’s to repair request(s) or concession, the transaction will move forward. If the seller refuses the buyer’s repair request(s), the buyer will be able to back out of the deal and their earnest money will be returned.
In other words, if a home inspection report digs up new information that mean your potential new home that changes your mind about living in your home, depending on how your offer is written and if there are certain contingencies you might be able to back out and get any earnest money you put up as a deposit to show the seller that you are serious about buying their home back.
You might get your home inspected before having your home professionally appraised and then depending on the home inspector’s and appraiser’s reports officially close on the home. Or you might have your appraised and then have it professionally inspected before closing on your home.
Why you should have any home you are looking to purchase inspected before you close on the home?
Upon first glance, your home might appear to be in amazing shape, but you will soon learn that since no home is perfect, chances are that you will find that there are things that you will need to have repaired. You can think of a home inspection is a safety measure before moving into your new home since it can help to uncover previously unknown issues with your home and help you avoid dealing with nasty surprises that end up costing you a bundle down the road.
A thorough and meticulous home inspector can help you learn about your home and can help you learn about things that could be expensive to repair. It is better to spend the money now and hire a home inspector and have them inspect your home, so you learn about your home’s deficiencies and can hopefully avoid spending thousands on repairs for deficiencies that a home inspection would have uncovered. If you learn about major deficiencies in your home, you could try negotiating with the seller and see if they will fix them or give you the money to fix them before closing on your home and moving in.
You should have your home inspected no matter the age of your home, whether you are buying a home that has been around for centuries or a newly built home, you should always have your home inspected by a professional home inspector before you close on it. This cannot be said enough. If you do not have your home inspected before you close on your home, you might run the risk of later finding out that your home has some huge expensive issues.
You might not be able to negotiate with the sellers to have them discount your home’s sale price to cover the cost of having these repairs done or being able to walk out of a deal when you learn that you might be potentially buying a money pit. To learn more about the importance of home inspections you can read our article which provides an overview of what home inspections are and why they are important [The Importance of Doing a Home Inspection]
To learn more about what home inspectors are looking for, you can read our article which provides a home inspection checklist and explanation of what home inspectors are looking for when they are inspecting your home [Inspection Checklist when buying a home in Toronto]
Who does home inspections and why you need to hire a professional home inspector to inspect your home?
You should only hire an independent, professional home inspector to inspect your home, ideally, someone who is a certified or licensed home inspector in the region, state(s), and/or province(s) they are working in if such certification is available. If there is no such certification available wherever you are located, the home inspector you choose to work with should be a member of the local or national Home Inspector’s trade association.
What can you expect from a home inspection?
What does a standard, general home inspection typically include?
A standard home inspection and a general home inspector’s report will usually cover the visual condition of a home’s interior and exterior. A standard home inspector’s report should include the following: a description of the home’s exterior condition, it’s structural integrity, whether or not the appliances work, the Heating, Ventilation and Air Conditioning (HVAC) Systems do they work and what conditions they are in since they will be tested depending on the time of year and temperature. An inspector will also be checking the interior plumbing, the home’s electrical systems, the roof, attic and visible insulation, ceilings, walls, floors, windows, and doors, the foundation, basement, crawl spaces, interior and exterior drainage, structural, and safety components.
What are the things that are not typically included in a standard, general home inspection?
You must understand that home inspection and what is included in a general home inspection will vary from city to city, province to province, and country to country. What your home inspection looks like and what it will include and not include will depend on the person who is inspecting your home, the procedures and methodology they are following depending on the organization and/or licensing bodies which they are a part of.
While there might be a general lack of continuity regarding what is included in a standard home inspection, there are some things that are generally not a part of your standard, general home inspection. Most general home inspectors will not be checking for: asbestos, radon, methane, radiation, wood-destroying organisms, mould, mildew and fungi, pests, rodents, or lead. Furthermore, if you want to learn more about the condition your roof is in, such as a roof certification from the roofing company or some type of guarantee about the condition the roof is in, this will be something separate. Additionally, most general home inspectors are not inspecting sewer systems, septic systems, or waste systems.
If you are buying an older home, it is recommended that you pay for separate sewer inspection and for a separate roof inspection. A sewer inspection might run you approximately $325, and while this might be expensive, it could provide you with valuable information about the pipes used in your house, i.e. if they are older and might need to be replaced.
Furthermore, most home inspections and home inspectors are not looking at the property surrounding your home. Chances are that a general home inspector is not going to be looking at spots in the yard or garden which may have drainage issues or grading issues. Also, if you need to have your property surveyed, you will need to work with a surveyor.
While some general home inspectors might have the training and credentials to perform additional home inspections that would be in addition to a regular home inspection, if you want or need to have additional inspections done, you will probably end up hiring additional professionals to do these inspections for you.
How much does it cost to get your home inspected?
How much you will end up paying for a home inspector to inspect your home, will depend on a variety of factors such as the type of dwelling being inspected i.e. detached single-family home, condo, apartment, townhouse, etc. where you are located geographically, and the cost of living. A home inspector’s fees in a given area will vary depending on the type of home, a home’s age and any optional services you might have them perform such as septic testing, well testing, or radon testing.
On average you can expect to pay at least $325 to $350 or more for a general home inspection. You can expect to spend anywhere from $275 to $500 or even more depending on whether or not you are paying for a professional to do additional inspections.
If you have a general home whose inspector recommends that you need to hire more professionals to come and inspect your home or property, you could end up spending even more on additional specialized inspections for your home. If cost is a concern, you can always ask for people to provide you with estimates for the costs of their services before hiring them.
What are home inspectors looking at when they are inspecting your home?
When home inspectors are checking out your home, they will be looking at the following areas at the following things [Inspection Checklist when buying a home in Toronto]:
Exterior inspection (an inspector will be looking at these areas)
- Exterior Walls
- Garage or carport (if applicable)
- Roof, attic, and chimney(s) (if applicable)
- Exterior water drainage and water disbursement
- Waste systems as applicable (septic systems in a rural area or have an older home)
- Porches, decks, and patios
- Yard/Garden as applicable
- Wall Coverings
- Electrical system
- Heating, Ventilation, and Air Conditioning systems (HVAC)
- Kitchen appliances
- Fire safety
- Lead paint
- Interior water drainage and water disbursement
- Flooring quality
- Noxious gases
- Windows and doors
- Basements and crawl spaces
For a more detailed home inspector’s checklist and to learn more about home inspections you can check out our article, which provides an overview and in-depth checklist of what home inspectors are looking for when they are performing home inspections [buying a home in Toronto].
What are property inspections?
Property inspections are usually only done if you are in default on your mortgage payments, your lender might order monthly property inspections to ensure that you are taking care of your home. Property inspections are different from a home inspection that you might have had done to buy your home.
Defaulting on your mortgage
There are different ways to default on your mortgage. For example, if you fail to abide by the terms of the promissory note or mortgage (or deed of trust) you signed when you applied for your mortgage, you will be considered to be in “default”.
The most frequent way for people to be in default of their mortgage happens when they might be falling behind with making their mortgage payments on time. However, if you are in breach of the other terms of the loan as specified in the loan contract. For example, you will likely be in default if:
- You are not paying your property taxes
- You are not paying your homeowner’s insurance bills.
- You allow for your home or property to deteriorate or cause damage that lowers your home’s value.
- You transfer the deed to your property to another person without first getting permission from your lender.
Who does property inspections?
Property inspections might be conducted by someone from their lender contracts to do property inspections or another individual. No one needs to have any special type of certification or licensing in order to perform a property inspection.
What can you expect from a property inspection?
Depending on where you are, your lender, the terms, and conditions of your loan, you might be expected to pay a small fee for property inspections between $10-$30 for each inspection and this fee will be added to your mortgage debt.
Property inspections usually happen automatically when a loan goes into default. Someone doing a property inspection for a home that is in foreclosure is checking to see whether or not your home is occupied and properly maintained.
If a home is in foreclosure, especially if an unoccupied home is in foreclosure, the home might sustain certain damage, stemming from vandalism or thieves, improper winterization, and storm damage. Performing regular property inspections when a loan is in default and home is in foreclosure will allow a lender and the company servicing a loan to keep track of what is happening to a property.
While adding less than $50 to your total mortgage might not seem like a lot, in some cases, property inspections might be performed more than once a month, so these fees could easily add up and become expensive over time. Most property inspections involve someone driving by your property, while home inspections are much more involved and thorough.
Why do lenders perform property inspections when you default on your mortgage?
Lenders often perform property inspections to ensure that they are protecting their interest in a property to figure out whether or not if a home is in default is still being occupied and being maintained in a manner that will maintain its market value.
How are property inspections different home inspections?
Property inspections are different from home inspections in that they are usually only done when you are in default on your mortgage and these often involve someone driving by your home to see if whether or not it is occupied and in good condition. You would usually not have a property inspection done before you buy your home, or you might have done before you list your home for sale. Property inspections are much less comprehensive than home inspections since the person doing the inspection might only drive by your home or visit for a little while to ensure that you are taking care of your home properly.
Property inspections are usually are connected to being in default on your mortgage and/or having your home go into foreclosure because your home is going into foreclosure. It is important to note that it is not uncommon for mortgage and deed contracts to provide the lender with the right to take any necessary steps to protect their interests if you default on your loan. In other words, if you are late with your payments or violate the terms of your mortgage or deed contract, your mortgage contract might allow for the institution servicing your loan to hire an individual to conduct property inspections.
Home inspections are most commonly done whenever you are buying a home, either or before or after your home has been professionally appraised before you officially close on your home. Home inspections are meant to help you learn more about your home and the condition it’s in and learn about any potential nasty surprises before you agree to buy it.
Hopefully, after reading this article, you now know the difference between property inspections and home inspections, know when you should expect to hire a home inspector and when you might have your property inspected.
Home inspections are an incredibly important part of a real estate transaction so you should do your best to be present if at all possible, at your home inspection. Home inspections are meant to help you learn about your home and the condition it is in, while property inspections usually only happen when you are in default for your mortgage. Home inspections should be something you should look forward to and property inspections because you are in default for your mortgage are something that you want to avoid happening at all costs.
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