How to buy a house
As part of the home search process, after looking at many houses, you may find one that that you like. How do you determine objectively whether you should make an offer and how much to offer? How do you know what kind of offer makes sense? The answers to these questions will be a mix of careful study, professional support, and your own subjective concerns. In this article, we will consider how to evaluate the condition of the house, in light of considering making an offer to purchase a residential property.
When you walk through the house, if there are significant problems, these will often present themselves if you pay attention. For example, if the floors seem uneven, you should suspect that there might be foundation issues. If you see rust stains in the sink, there may be deteriorated galvanized piping. If you notice 2-prong outlets, you can be pretty sure that the electrical system is antiquated.
We do not suggest that a homebuyer try to develop the trained eye of a professional property inspector, but your real estate professional should be able to help you locate an experienced one for you. But the more carefully you look, the more likely you are to see issues to which you can direct your attention when reading the disclosure reports that will be provided by the seller. In a complete set of disclosures, in addition to the disclosures that are mandated by law (such as those concerning water heaters, smoke detectors, etc., and the transfer disclosure statement and its supplements) you will typically find reports that give you a good general picture of the condition of the house. The most common ones are structural pest control reports (or termite reports) and general property inspections (which typically includes all the major elements of the house structure, inspected in general depths). For those who want to cover additional grounds, they may get other inspections such as structural (typically foundation and the structural integrity-related issues), structural pest (termite report), roof, chimney, soils, septic system, water quality (for wells), and others, especially when you suspect there may be something wrong with a specific part of the property.
The inspection reports, coupled with what the seller discloses about the defects of the house in the transfer disclosure and its supplements are very valuable information. The seller is required by law to disclose to you what they know about any material defects the property has. As a practical matter, you should not expect a lot of detail in the transfer disclosure, so carefully note any faults that are indicated, and consider the potential implications. If you learn to interpret the information from the seller and the inspectors, which your real estate agent can guide you with, you can often gain a pretty clear understanding of the physical condition of the property. Not always, though. Frequently, the most important inspection reports are absent, either because the seller doesn’t want to pay for the reports, or because the seller believes a better price may be achieved if the defects of the house are not too explicitly defined. It is good real estate practice for sellers to fully disclose any defects they know, so they can avoid future liabilities. Where full disclosures are not available, we strongly suggest that buyers either enlist the help of their own inspectors or take extreme care when bidding on such properties, especially in overheated markets where non-contingent offers are common. You could be acquiring problems that are not explicitly known to the seller (who therefore cannot be held at fault for not telling you). Whatever it takes, in most situations you need to have a clear sense of the magnitude of the defects in the house you are buying and what it will cost to fix them.
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