Tim’s Two Cents: California, A Buyer Beware State!

California, A Buyer Beware State!

Buyers are bidding much higher than week old comparable sales! The current state of the $1.5M and under market is very healthy.  Multiple offers, short market times, combined with low inventory, are the most notable trends. Open House activity is robust. Alan Nevin, San Diego Economist, believes our market will continue to run for the next 2-3 years. A stable and diverse job market, a reduction in open space for new home development, and interest rates below 6% are what he cites as key factors. 

This month, I’d like to discuss the physical home inspection of a property.  It is one of the most important things a buyer can do during their due diligence phase of a purchase.  In my professional opinion, sellers should never have a physical home inspection conducted prior to listing their home.  The report would then become a required disclosure to present to the buying party. Additionally, the state of California is a “Buyer Beware” state.  The responsibility rests on the shoulders of the buyer to discover and verify all information for their purchase.  

There is no governing board that oversees, educates and regulates home inspectors. Those with prior building experience are the most qualified. Possessing an active contractor’s license, at any level, is an added bonus. 

During most foreclosure home purchases the buyers are not provided with the opportunity to conduct a home inspection. I have clients that think purchasing a foreclosure is a great opportunity. It can be, but you can also get stuck correcting a lot of costly problems with the home. Most people are not prepared to deal with this. 

My home inspector, Dan Roach, owner of Sentry of San Diego Home Inspection, & I have been working together on the majority of my inspections since 1995. He is honest and direct. I want my inspector to inform our clients about the property, and advise them on all issues.  I know we have saved countless buyers a lot of headaches and money with properties that have had major problems.  I would rather hit the streets in search of a different property than to have a client of mine purchase a property that has expensive issues to circumvent. Dan does not attempt to be the authority on all things.  He recommends experts be hired to investigate specific areas on the property.  The most common secondary inspections we see are roof, HVAC and plumbing. 

I attempt to set up the physical home inspection immediately after we receive the seller’s acceptance of my buyers’ offer.  If we locate something catastrophic enough that warrants walking away from the property we are able to cancel the escrow and have the buyer’s full deposit returned.  The only money they are not able to recoup is the money owed to the home inspector.  The inspectors render services to assist buyers. Paying them is not predicated on whether or not someone follows through with a purchase.  Another reason behind setting the general property inspection appointment quickly in a transaction is that if we do have to cancel, the buyers do not have the added expense of paying for an appraisal that they will not  be able to use. The buyers are the client of the appraisal company.  

Additional secondary inspections  to consider are electrical, termite and main sewer line (we have it scoped with a camera to make certain that the line is not cracked or impacted by tree roots). If the presence of water intrusion/mold,  foundation and window issues are found, it is good to consider having experts in those fields investigate further. At times we need engineers to help with structural issues, and I have a separate pool inspector, Rick English, a pool expert, evaluate the pool and spa if they are on the property.  I may personally spend more time guiding my clients through their due diligence. My clients may spend a little more money overall with secondary inspections. However, given the cost of housing in Southern California, I would rather see my clients spend an extra $500-$1000 making sure we attempt to discover all we can instead of taking on the cost and responsibility of remediating a bunch of issues once they own and move into their new home! 

Through being vigilant in our focused investigation of a property, we are better armed to go back to the sellers with the reports, invoices and work orders to aggressively negotiate a seller credit or repair for my clients prior to removing all of our contingencies.  Also, keep in mind, that any reports or work orders that a seller receives from the buying side of a transaction provide them with knowledge of issues that must be disclosed to future buyers if a transaction is canceled. This is called material fact disclosure.  It works on the premise that all items that would affect a buyer’s opinion of value or desirability must be disclosed.  I know that not all sellers and their agents disclose properly, but non-disclosure lawsuits rank as one of the top reasons that sellers find themselves litigating post close of escrow.  

So, the next time you are out looking at homes with us, take in the curb appeal, light and aesthetics of the property.  Don’t worry about flushing toilets, checking under sinks and testing appliances.  We have you covered. My arsenal of overly qualified, experienced professionals own their businesses and some have been with me for all 22 years of my career thus far.  Additionally, Kristine and I personally utilize their services at our own properties. 

Good reports and estimates of repair costs from qualified and licensed professionals may take a little longer to obtain and cost a little more, but in the long run our buyers will be better informed about any issues present at the property that they are purchasing. The other huge benefit to managing our due diligence in this fashion is that Kristine and I will be more successful in obtaining a credit to repair identified issues or get the sellers to make the necessary repairs prior to your close of escrow! Buying a home is a major investment. Let us help you or someone you know to insure that the discovery period of an escrow is handled with the utmost care! 

Feel free to engage with me about questions that you have on this topic.  I am always happy to hear from so many of you every month after we reach out in this newsletter!

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