Presale Inspections for California Home Buyers
This article discusses the common inspections that are performed before/during a California residential real estate transaction.
CustomIt is customary for a home buyer to spend approximately $600 for inspections prior to purchasing a home (this happens during the escrow period, usually in the first 17-days after signing a home purchase contract). Even when the Seller provides a copy of a recent inspection report, most buyers like to hire their own independent inspection companies.
The two most common inspections (that most buyers perform) are not required by law. Here they are: (A) General Home Inspection, and (B) Wood Destroying Organisms and Pest Report.
(A) General Home InspectionThis is often just called a Home Inspection. The average cost is between $350 and $600. A contractor visits the home for approximately 2-5 hours, inspects everything (except the roof and crawl spaces unless the buyer specifically requests), and takes lots of photos. Within approximately 48 hours, the contractor will email an approximately 30-page inspection report to the buyer.
Tip 1: The best home inspectors are often retired general contractors who no longer build homes (often because of knee or back pain). These guys know the building codes very well, and their practical experience makes them well suited to explaining things to buyers (even giving casual estimates verbally for what it would cost to fix certain issues). Most inspection contractors will return your phone call within 24-hours and be able to schedule an appointment to inspect the home within 72-hours.
Tip 2: To find a reliable home inspection company near you, I recommend using Yelp.com (in the search section of Yelp, type 'home inspection' and the name of your town, county, or area). Generally, the companies that offer a combined report (Home Inspection + Termite Inspection) are not the best choice because their inspectors are not always thorough. The best companies are usually sole proprietor businesses operated by just one man, the experienced contractor who will be performing the inspection.
(B) Wood Destroying Organisms and Pest ReportThis is often called a Termite Inspection, even though the inspector looks for anything that destroys wood (i.e., termites, mold, dry rot). The average cost is $175. To find a reliable pest inspection company near you, I recommend using Yelp.com (in the search section of Yelp, type 'termite inspection' and the name of your town, county or area).
Tip 1: Choose a contractor that regularly performs termite inspections for home sales. It should be the primary business of the contractor - performing termite inspections.
Tip 2: The Inspection Report will categorize issues (i.e., termite damage) into two categories: Section 1 and Section 2. Section 1 means the inspector recommends the issue should be repaired promptly (within a month or year or so) because it is a safety hazard or otherwise will cause continuing damage to the home if not repaired promptly. Section 2 refers to issues that are not urgent (they are recommended for repair basically anytime in the future). Most home sales are "as-is", so the Buyer is responsible for any repairs if they choose to purchase the home (or the buyer can cancel based on an inspection contingency). Sometimes the parties will negotiate to perform repairs prior to close of escrow, or more commonly negotiate for the Seller to give Buyer a $ credit to perform some/all of the repair work after close of escrow.
Tip 3: For FHA loans and VA loans, the lender requires that Section 1 work be completed before close of escrow (and sometimes (though rarely) section 2 work also). If the buyer cannot afford to pay for the lender's requested repairs, then often the buyer will ask the seller to pay for the repairs. If the seller declines (which the seller is free to do, because all sales are as-is unless agreed otherwise in writing), then the Buyer usually cancels the contract for a full refund during the buyer's inspection contingency period (i.e. 17-days after signing the contract).
Inspections/Reports Required by LawThe only inspections/reports required by law are when the home is in a City or County that requires a special presale inspection/report. These are usually minor things, and easy to accomplish. Most cities and counties in California do not require presale inspections or reports. But here are some examples of cities that do:
3R report - this is a report ordered online (seller pays $150) that shows the property's building permit history
Water & Energy Inspection - this is an inspection where a special licensed inspector visits the property and checks for things like low-flow toilets. If the property is not in full compliance, the inspector will not certify the sale (but will offer to complete the repairs/upgrades immediately), so typically the seller will pay to bring the property into compliance. In my experience, most homes & condos pass the inspection, and any required repairs are usually under $500 and handled very quickly during the escrow period. At the conclusion of this inspection, the inspector files a RECO compliance report with the City of San Francisco.
Oakland: Lots of homes in Oakland are within a water district called EBMUD, where the seller is required to hire a special contractor to inspect the sewer lateral. If the sewer lateral is damaged, it needs to be fixed prior to the close of escrow, and typically the seller pays for it. In the old days, these inspections and repairs were more expensive, but today with remote cameras and trenchless sewer lateral repairs, costs are pretty reasonable. Notably, homes with a recent certification of compliance are exempt from this ordinance.
Berkeley: In addition to sewer lateral inspections, Berkeley has a RECO program for energy conservation inspections.
Within the Natural Hazard Zone Disclosure Report, the Seller must complete a form for trees in the front yard. This is technically a disclosure rather than an inspection or report, but I wanted to highlight it as an example because it shows that each city is unique and nuanced, and so it helps to work with a professional (like myself) if you are considering FSBO.
Mill Valley: This city has a presale inspection that requires sign-off by the public works department
Northern & Southern California - several other cities in both Northern and Southern California require presale inspections. Call me with questions for a free consultation: 925-642-6651.